Q2 2026 Once Upon A Farm PBC Earnings Call

August 6, 2026

Operator 3: Greetings, welcome to the Once Upon a Farm's Second Quarter Fiscal 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Brian Holland, Vice President of Investor Relations. Thank you. You may begin.

Operator: Greetings, and welcome to the Once Upon a Farm's Q2 Fiscal 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Brian Holland, Vice President of Investor Relations. Thank you. You may begin.

Speaker #1: Greetings, and welcome to the Once Upon a Farm's second quarter fiscal 2026 earnings conference call. At this time, all participants are in listen-only mode.

Speaker #1: A question-and-answer session will follow the prepared remarks. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Brian Holland, Vice President of Investor Relations.

Speaker #1: Thank you. You may begin.

Brian Holland: Thank you, welcome to the Once Upon a Farm Q2 2026 Earnings Conference Call. With us on the call today are John Foraker, Chief Executive Officer and Co-founder, and Larry Waldman, President and Chief Financial Officer. By now, everyone should have access to the earnings press release that was issued earlier this afternoon and is available on the investor relations section of Once Upon a Farm's website at www.onceuponafarmorganics.com. This call is also being webcast, and a replay will be available shortly after the call concludes. Before we begin, please note certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker #2: Thank you, and welcome to the Once Upon a Farm second quarter 2026 earnings conference call. With us on the call today are John Forker, Chief Executive Officer and Co-Founder, and Larry Waldman, President and Chief Financial Officer.

Speaker #2: By now, everyone should have access to the earnings press release that was issued earlier this afternoon and is available on the Investor Relations section of Once Upon a Farm's website at www.onceuponafarmorganics.com.

Speaker #2: This call is also being webcast and a replay will be available shortly after the call concludes. Before we begin, please note certain comments made on this call include forward-looking statements, which are subject to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Brian Holland: These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. We do not undertake any obligation to update any forward-looking statements to reflect events or circumstances after the date of this call, except as required by law. During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filings, as well as the earnings press release, provide reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures.

Speaker #2: These forward-looking statements are based on management's current expectations and beliefs several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements.

Speaker #2: Please refer to today's press release and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Speaker #2: We do not undertake any obligation to update any forward-looking statements to reflect events or circumstances after the date of this call, except as required by law.

Speaker #2: During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filings, as well as the earnings press release, provide reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures.

Brian Holland: Now, I will turn the call over to John to begin.

Speaker #2: And now I will turn the call over to John to begin.

John Foraker: Thanks, Brian. Good afternoon, everyone, and thank you for joining us today. We delivered another Q2 of high-quality, volume-led growth, with net sales increasing 42.3% year-over-year. Our portfolio continued to drive category growth for our retail partners, rooted in strong velocities, expanding distribution, and stronger assortments in all our key categories from highly incremental innovation. In the Q2, we also executed a very successful national program at a major retailer. Consumer demand remained resilient across our channels with household penetration, repeat, and buy rate all improving year-over-year. Our 100% certified organic portfolio is well-positioned against durable health and wellness trends, and consumers continue to recognize the differentiated value that our brand and products provide. Our business has significant momentum with consumers and retailers alike in the current economic climate.

Speaker #3: Thanks, Brian. Good afternoon, everyone, and thank you for joining us today. We delivered another quarter of high-quality volume-led growth with net sales increasing 42.3% year over year.

Speaker #3: drive category growth for our retail partners, rooted in strong velocities, expanding distribution, and stronger assortments in all our key Our portfolio continued to categories, from highly incremental innovation.

Speaker #3: In the second quarter, we also executed a very successful national program at a major retailer. Consumer demand remained resilient across our channels, with household penetration repeat and buy rate all improving year over year.

Speaker #3: Our 100% certified organic portfolio is well positioned against durable health and wellness trends, and consumers continue to recognize the differentiated value that our brand and products provide.

Speaker #3: Our business has significant momentum with consumers and retailers alike in the current economic climate. Based on our second quarter performance and current outlook, we are again raising our full-year net sales guidance to $335 million, or approximately $36 to $39%, while increasing our adjusted EBITDA guidance to a range of $3 million to $4.5 million.

John Foraker: Based on our Q2 performance and current outlook, we are again raising our full-year net sales guidance to $327 million to 335 million, or approximately 36% to 39%, while increasing our adjusted EBITDA guidance to a range of $3 million to 4.5 million. Larry will provide more details on this revised outlook shortly. Consumption remained in the low to mid 30% range during the Q2, and trends continue to be strong across our core metrics. We remain the fastest-growing brand in baby and toddler snacks by dollar share, and we continue to gain share in baby and toddler pouches as well by bringing new incremental consumers to the category and by taking share directly from larger, established conventional competitors. Our brand is a key driver of growth across the baby category for all our key retailers.

Speaker #3: Larry will provide more details on this revised outlook shortly. Consumption remained in the low to mid 30% range during the second quarter, and trends continue to be strong across our core metrics.

Speaker #3: We remain the fastest-growing brand in baby and toddler snacks by dollar share, and we continue to gain share in baby and toddler pouches as well, by bringing new incremental consumers to the category and by taking share directly from larger established conventional competitors.

Speaker #3: Our brand is a key driver of growth across the baby category for all our key retailers. The difference between net sales growth of 42.3% and consumption growth in the low- to mid-30% range primarily reflects favorable cooler slotting versus Q2 last year, and significant distribution gains during the quarter, including strong initial shipments of our protein-positioned innovation in both baby and kid.

John Foraker: The difference between net sales growth of 42.3% and consumption growth in the low to mid 30% range primarily reflects favorable cooler slotting versus Q2 last year and significant distribution gains during the quarter, including the strong initial shipments of our protein pouch innovation in both baby and kid. Underlying base consumption remained strong throughout the quarter. Our effective and modern marketing, as well as our broadening distribution footprint, continue to amplify the compelling promise of our mission to drive systemic improvements in childhood nutrition for a healthier, happier, and more equitable world. Household penetration grew to 6.2% at the end of June compared to 5% a year ago. Despite that significant increase in households, our buy rate continued to grow.

Speaker #3: Underlying base consumption remains strong throughout the quarter. Our effective and modern marketing, as well as our broadening distribution footprint, continue to amplify the compelling promise of our mission.

Speaker #3: To drive systemic improvements in childhood nutrition, for a healthier, happier, and more equitable world. Household penetration grew to 6.2% at the end of June, compared to 5% a year ago, and despite that significant increase in households, our buy rate continued to grow.

John Foraker: Drilling down, our repeat rate among households with kids increased 351 basis points compared to a year ago to 52.1%. New families are repeating at even higher rates, reflecting the success of our strategy to build the brand from baby through kid. As the brand scales, we continue gaining share across our portfolio in pouches and snacks from baby through kid. This is exactly the kind of high-quality growth we expect to deliver. Our funnel is widening. We are increasing retention and growing spend per household all at the same time. Looking at Q2 sales in more detail. Growth was again led by our baby business, where net sales increased 73% year-over-year to $41.5 million, with pouches and snacks increasing at similar rates. Velocities remained strong. We added over 85,000 points of distribution in baby during Q2 at existing and new retailers.

Speaker #3: Drilling down, our repeat rate among households with kids increased 351 basis points compared to a year ago, to 52.1%, and new families are repeating at even higher rates, reflecting the success of our strategy to build the brand from baby through kid.

Speaker #3: As the brand scales, we continue gaining share across our portfolio in pouches and snacks, from baby through kid. This is exactly the kind of high-quality growth we expect to deliver.

Speaker #3: Our funnel is widening, and we are increasing retention and growing spend per household all at the same time. Looking at second quarter sales in more detail.

Speaker #3: Growth was again led by our baby business, where net sales increased 73% year over year to 41.5 million, with pouches and snacks increasing at similar rates.

Speaker #3: Velocities remained strong. We added over 85,000 points of distribution in baby during Q2 at existing and new retailers. Innovation was a key driver of our baby pouch growth during the quarter.

John Foraker: Innovation was a key driver of our baby pouch growth during the quarter. We are very pleased with the performance of our meat and legume protein pouches we launched in March. They have been 61% incremental to Once Upon a Farm and 63% incremental to the total baby category at certain retailers. We are just getting started. Expanded distribution fueled baby snack sales, creating a long tail for growth, given baby snacks are a very critical entry point to the brand for new Once Upon a Farm consumers. Turning to our kid business, as expected, net sales growth re-accelerated to 22% year-over-year to $43.9 million. Snacks grew at a slightly faster rate, reflecting innovation impact from both successful launch of Power Wheels with protein in kid bar sets and protein and probiotic pouches into kid dairy sets.

Speaker #3: We are very pleased with the performance of our meat and legume protein pouches we launched in March. They have been 61% incremental to Opharm and 63% incremental to the total baby category at certain retailers, and we are just getting started.

Speaker #3: Expanded distribution, fueled baby snack sales, creating a long tail for growth given baby snacks are a very critical entry point to the brand for new Opharm consumers.

Speaker #3: Turning to our kid business, as expected, net sales growth re-accelerated to 22% year over year, to 43.9 million. Snacks grew at a slightly faster rate, reflecting innovation impact from both successful launch of Power Wheels with protein in kid bar sets and protein and probiotic pouches into kid dairy sets.

John Foraker: This innovation contributed to the addition of over 15,000 new points of distribution during the quarter in our kid portfolio. In kid pouches, growth was driven by the success of a national club program. Packaging refreshes have also proven to be a very key accelerator in kid pouches. The packaging updates we implemented to our Dairy-Free Smoothies line this past spring are driving immediate 10% to 15% average velocity increases on same distribution. We'll continue to drive packaging improvements across our total kid pouch portfolio through the rest of this year as we see excellent opportunities to both increase on-shelf impact and to further sharpen our consumer value proposition. We'll also be introducing a new sub-line of functional kid pouches with several key customers in the coming weeks. The performance of the national club program we ran in May was exceptional, driving velocity and volume that met our high expectations.

Speaker #3: This innovation contributed to the addition of over 15,000 new points of distribution during the quarter in our kid portfolio. In kid pouches, growth was driven by the success of a national club program.

Speaker #3: Packaging refreshes have also proven to be a very key accelerator in kid pouches. The packaging updates we implemented to our dairy-free smoothies line this past spring are driving immediate 10 to 15 percent average velocity increases on same distribution.

Speaker #3: We'll continue to drive packaging improvements across our total kid pouch portfolio through the rest of this year, as we see excellent opportunities to both increase on-shelf impact and to further sharpen our consumer value proposition.

Speaker #3: We'll also be introducing a new subline of functional kid pouches with several key customers in the coming weeks. The performance of the national club program we ran in May was exceptional.

Speaker #3: Driving velocity and volume that met our high expectations. This program's successfully exposed the brand and these products to millions of new households, which was the primary objective.

John Foraker: This program successfully exposed the brand and these products to millions of new households, which was the primary objective. Household penetration in our Immunity Blends portfolio is up over 20% versus April, confirming that we've brought new incremental consumers into the offering. We'll be adding another national program, albeit somewhat smaller in scope, at the same customer during Q3, focusing on our best-selling Tractor Wheels toddler snack products. We think this program will drive incremental consumer purchase activity, deeper household penetration, and increased awareness, which should accelerate our momentum across all channels. Turning to our baby coolers, productivity per cooler continues to increase, reflecting broader consumer awareness as well as our expanding assortment.

Speaker #3: Household penetration in our immunity-blend portfolio is up over 20% versus April, confirming that we've brought new incremental consumers into the offering. We'll be adding another national program, albeit somewhat smaller in scope, at the same customer during Q3, focusing on our best-selling tractor wheels, toddler snack products.

Speaker #3: We think this program will drive incremental consumer purchase activity, deeper household penetration, and increased awareness, which should accelerate our momentum across all channels. Turning to our baby coolers.

Speaker #3: Productivity per cooler continues to increase, reflecting broader consumer awareness as well as our expanding assortment. For example, at one of our larger customers, our cooler velocity increased by over 30% in the quarter compared to last quarter, driven by the addition of our new meat and legume protein pouches and our oat bar minis, which we've also begun placing in coolers.

John Foraker: For example, at one of our larger customers, our cooler velocity increased by over 30% in the quarter compared to last quarter. Driven by the addition of our new Meat and Legume protein pouches and our Oat Bar Minis, which we've also begun placing in coolers. Importantly, the majority of this increase was incremental to Once Upon a Farm and to the category. We expect cooler productivity to continue trending higher for the foreseeable future. We remain on track for approximately 5,000 coolers in 2026, 8,000 in 2027, and at least 15,000 coolers over time. Our proof of concept is resulting in further and deeper engagement with additional major retailers. During the quarter, we implemented a targeted price increase on selected items, effective in late September, to offset specific inflationary pressures. Retailers have broadly accepted the increase.

Speaker #3: Importantly, the majority of this increase was incremental to O'Farm and to the category. We expect cooler productivity to continue trending higher for the foreseeable future.

Speaker #3: We remain on track for approximately 5,000 coolers in 2026, 8,000 in 2027, and at least 15,000 coolers over time. Our proof of concept is resulting in further and deeper engagement with additional major retailers.

Speaker #3: During the quarter, we implemented a targeted price increase on selected items, effective in late September, to offset specific inflationary pressures. Retailers have broadly accepted the increase.

John Foraker: We designed the action to preserve our consumer value proposition and based on historical elasticity and current demand trends, we expect a limited impact on units. Before I turn it over to Larry, I want to spend a minute on something we are really excited about for the future of this business. Our growth trajectory is increasing our confidence in the ultimate scale of this platform, and we are building the supply chain required to support that opportunity. Working with our co-manufacturing partners, we are advancing new targeted automation and productivity initiatives across our highest volume platforms. These projects are designed to increase capacity, improve service, and reduce costs, particularly labor-related costs. We expect some initial benefits in 2027 and a larger incremental contribution in 2028 as the projects reach their fuller utilization.

Speaker #3: We designed the action to preserve our consumer value proposition and, based on historical elasticity and current demand trends, we expect a limited impact on units.

Speaker #3: Before I turn it over to Larry, I want to spend a minute on something we are really excited about for the future of this business.

Speaker #3: Our growth trajectory is increasing our confidence in the ultimate scale of this platform, and we are building the supply chain required to support that opportunity.

Speaker #3: Working with our co-manufacturing partners, we are advancing new targeted automation and productivity initiatives across our highest volume platforms. These projects are designed to increase capacity, improve service, and reduce costs, particularly labor-related costs.

Speaker #3: We expect some initial benefits in 2027 and a larger incremental contribution in 2028 as the projects reach their fuller utilization. It's important to point out that our expectation for meaningful profitability expansion in 2027 does not depend on receiving the full benefit of these productivity initiatives.

John Foraker: It's important to point out that our expectation for meaningful profitability expansion in 2027 does not depend on receiving the full benefit of these productivity initiatives. We expect improvement next year to be supported by continued growth, operating leverage, and initial supply chain productivity benefits. These productivity initiatives just further strengthen our confidence in our long-term profit path. It's still early, and we don't want to get ahead of ourselves on precise metrics today, but we did want to send a clear signal about the opportunity and the importance of these new initiatives. We look forward to sharing many more details over the coming quarters. With that, I'll turn the call over to Larry to walk through the financial details.

Speaker #3: We expect improvement next year to be supported by continued growth, operating leverage, and initial supply chain productivity benefits. These productivity initiatives just further strengthen our confidence in our long-term profit path.

Speaker #3: It's still early, and we don't want to get ahead of ourselves on precise metrics today, but we did want to send a clear signal about the opportunity and the importance of these new initiatives.

Speaker #3: We look forward to sharing many more details over the coming quarters. With that, I'll turn the call over to Larry to walk through the financial details.

Larry Waldman: Thank you, John, good afternoon, everyone. I will now provide you with some additional details on the Q2 financial results, along with an update on our outlook. Net sales in the Q2 increased 42.3% to $85.4 million, compared to $60 million a year ago, driven primarily by volume. As we expected, gross margin was 35.9%, down 485 basis points versus prior year period. The primary drivers were trade spend, including the National Club program, product mix as we grow our snacks business, the impact of fuel and tariff costs, partially offset by pricing and lower cooler slotting. SG&A expenses increased $11.9 million to $36.3 million. As a percentage of net sales, SG&A was 42.5%, up 179 basis points. Marketing was higher, primarily due to increased advertising. Labor and employee-related costs were higher due to planned increases in headcount to support our growth.

Speaker #2: Thank you, John, and good afternoon, everyone. I will now provide you with some additional details on the second quarter financial results, along with an update on our outlook.

Speaker #2: Net sales in the second quarter increased 42.3% to 85.4 million. Compared to 60 million a year ago. Driven primarily by volume. As we expected, gross margin was 35.9%, down 485 basis points versus prior year period.

Speaker #2: The primary drivers were trade spend, including the national club program, product mix, as we grow our snacks business, and the impact of fuel and tariff costs.

Speaker #2: Partially offset by pricing and lower cooler slotting. SG&A expenses increased 11.9 million, to 36.3 million. As a percentage of net sales, SG&A was 42.5%, up 179 basis points.

Speaker #2: Marketing was higher, primarily due to increased advertising. Labor and employee-related costs were higher due to planned increases in headcount to support our growth. Selling expense was flat, and logistics costs were lower reflecting leverage as we scale.

Larry Waldman: Selling expense was flat, logistics costs were lower, reflecting leverage as we scale. Approximately $3.5 million of SG&A in the Q2 was attributable to stock-based compensation and performance payments related to our IPO. While SG&A increased as a percent of net sales this quarter, we do not view the Q2 rate as representative of our long-term operating model. The infrastructure and capabilities we have added are designed to support a substantially larger revenue base, we expect increasing leverage as the business continues to scale. Net loss for the Q2 improved to $5 million from a net loss of $9 million a year ago. Adjusted EBITDA loss for the Q2 was $1.7 million, compared to adjusted EBITDA of $2 million in the prior year period, primarily reflecting the increase in SG&A dollars.

Speaker #2: Approximately 3.5 million of SG&A in the second quarter was attributable to stock-based compensation and performance payments related to our IPO. While SG&A increased as a percent of net sales, this quarter, we do not view the second quarter rate as representative of our long-term operating model.

Speaker #2: The infrastructure and capabilities we have added are designed to support a substantially larger revenue base and we expect increasing leverage as the business continues to scale.

Speaker #2: Net loss for the second quarter improved to 5 million, from a net loss of 9 million a year ago. Adjusted EBITDA loss for the second quarter was 1.7 million, compared to adjusted EBITDA of 2 million in the prior year period.

Speaker #2: Primarily reflecting the increase in SG&A dollars. Relative to plan, second quarter adjusted EBITDA benefited from stronger net sales and the timing of around $3 million in marketing that shifted from Q2 to Q3.

Larry Waldman: Relative to plan, Q2 Adjusted EBITDA benefited from stronger net sales and the timing of around $3 million in marketing that shifted from Q2 to Q3. That spending has not been eliminated and is fully reflected in our updated full year outlook. It was intentionally shifted to align more closely with our important back-to-school promotion and merchandising events, which should drive better program efficiency and continued household penetration growth across our key product lines. Turning to our balance sheet, we ended the quarter with approximately $93.5 million in cash and no debt. Inventory of $51.9 million was up 47.6% versus a year ago, reflected continuing growth across our business. We expect inventory to remain elevated through Q3 as we support back-to-school demand and the added National Club program before beginning to moderate in Q4.

Speaker #2: That spending has not been eliminated and is fully reflected in our updated full-year outlook. It was intentionally shifted to align more closely with our important back-to-school promotion and merchandising events, which should drive better program efficiency and continued household penetration growth across our key product lines.

Speaker #2: Turning to our balance sheet, we ended the quarter with approximately 93.5 million in cash and no debt. Inventory of 51.9 million was up 47.6% versus a year ago.

Speaker #2: Reflected continuing growth across our business. We expect inventory to remain elevated through Q3 as we support back-to-school demand and the added national club program, before beginning to moderate in Q4.

Larry Waldman: We are also actively managing tariff and sourcing risks through supplier diversification, forward planning, qualifying alternative sources where feasible. Turning to our outlook. As John indicated, we are raising our outlook for both net sales and Adjusted EBITDA to reflect our Q2 performance and the strong underlying trends across our customers and consumers. We now expect net sales of $327 million to $335 million for 2026, growth of 36% to 39% versus 2025. This is up from our previous guidance of $313 million to $323 million. We expect net sales growth to be fairly balanced across Q3 and Q4. The revised outlook reflects continued strong underlying consumption, incremental growth from new distribution, the timing of cooler placements, and the contribution from the National Club program.

Speaker #2: We are also actively managing tariff and sourcing risk through supplier diversification, forward planning, and qualifying alternative sources where feasible. Turning to our outlook. As John indicated, we are raising our outlook for both net sales and adjusted EBITDA to reflect our Q2 performance, and a strong underlying trends across our customers and consumers.

Speaker #2: We now expect net sales of 327 million to 335 million for 2026, growth of 36% to 39% versus 2025. This is up from our previous guidance of 313 million to 323 million.

Speaker #2: We expect net sales growth to be fairly balanced across Q3 and Q4. The revised outlook reflects continued strong underlying consumption incremental growth from new distribution, the timing of cooler placements, and the contribution from the national club program.

Larry Waldman: We now expect adjusted EBITDA of $3 million to $4.5 million, up from $2 million to $4 million, reflecting our stronger net sales expectations while reserving flexibility to reinvest selectively over the balance of the year. Turning to gross margin, with the continued strong performance in our snacks business and the incremental National Club program in Q3, we now anticipate full year 2026 gross margin to be around 40%, which is close to 100 basis points lower than our prior outlook. This assumes fuel costs remain in line with recent levels and tariff rates consistent with those currently in effect. Gross margin continues to be impacted by the faster growth of baby snacks, which currently carry a lower margin profile than pouches, as well as the incremental Q3 Club program trade investment.

Speaker #2: We now expect adjusted EBITDA of 3 million to 4.5 million, up from 2 million to 4 million, reflecting our stronger net sales expectations while preserving flexibility to reinvest selectively over the balance of the year.

Speaker #2: Turning to gross margin, with the continued strong performance in our snacks business and the incremental national club program in Q3, we now anticipate full-year 2026 gross margin to be around 40%, which is close to 100 basis points lower than our prior outlook.

Speaker #2: This assumes fuel costs remain in line with recent levels and tariff rates consistent with those currently in effect. Gross margin continues to be impacted by the faster growth of baby snacks, which currently carry a lower margin profile than pouches.

Speaker #2: As well as the incremental Q3 club program trade investment. These mixed dynamics will also affect adjusted EBITDA in the quarter, even as strong velocities expanded distribution and innovation continue to support household penetration and long-term growth.

Larry Waldman: These mixed dynamics will also affect adjusted EBITDA in the quarter, even as strong velocities, expanded distribution, and innovation continue to support household penetration and long-term growth. As John discussed, the supply chain productivity and automation initiatives are expected to benefit both our pouch and snack platforms. Over time, these should improve the margin profile of snacks in particular and reinforce our confidence in the long-term gross margin and adjusted EBITDA framework. From a cadence standpoint, the Q3 gross margin should be similar to what we reported in Q2. We expect gross margin to improve in Q4 as the Club program concludes and the September price action begins to contribute. Looking beyond 2026, our principal gross margin drivers remain intact. Scale benefits, price realization, supply chain productivity initiatives, and logistics efficiencies.

Speaker #2: As John discussed, the supply chain productivity and automation initiatives are expected to benefit both our pouch and snack platforms. Over time, these should improve the margin profile of snacks in particular and reinforce our confidence in the long-term gross margin and adjusted EBITDA framework.

Speaker #2: From a cadence standpoint, the Q3 gross margin should be similar to what we reported in Q2. We expect gross margin to improve in the fourth quarter as the club program concludes and the September price action begins to contribute.

Speaker #2: Looking beyond 2026, our principal gross margin drivers remain intact. Scale benefits, price realization, supply chain productivity initiatives, and logistics efficiencies. Within SG&A, in the third quarter, we will increase marketing support around the national club program and back-to-school to maximize awareness, trial, household penetration, and retention.

Larry Waldman: Within SG&A in Q3, we will increase marketing support around the National Club program and back to school to maximize awareness, trial, household penetration, and retention. Given the change in our gross margin expectations, as well as some shift in the timing of marketing spend, we anticipate our Q3 adjusted EBITDA loss will be slightly below Q2. Consistent with the normal seasonality of our business, profitability is weighted in Q4, which we expect to drive full year adjusted EBITDA within our guided range. We remain confident in our ability to drive profitability improvement over time as the quality of our net sales builds. Where trial drives adoption, repeat, and ultimately higher buy rate, we expect that to support gross margin improvement, disciplined marketing and trade investment, and fixed cost absorption as we scale.

Speaker #2: Given the change in our gross margin expectations, as well as some shift in the timing of marketing spend, we anticipate our third quarter adjusted EBITDA loss will be slightly below the second quarter.

Speaker #2: Consistent with the normal seasonality of our business, profitability is weighted in the fourth quarter which we expect to drive full-year adjusted EBITDA within our guided range.

Speaker #2: We remain confident our ability to drive profitability improvement over time. As the quality of our net sales builds. Where trial drives adoption, repeat, and ultimately higher buy rate, we expect that to support gross margin improvement, disciplined marketing, and trade investment, and fixed cost absorption as we scale.

Larry Waldman: Importantly, that expectation does not depend on realizing the full benefits of the larger automation projects. We expect initial benefits in 2027, with more substantial contribution beginning in 2028. That includes our prepared remarks. Operator, please open the call for questions.

Speaker #2: Importantly, that expectation does not depend on realizing the full benefits of the larger automation projects. We expect initial benefits in 2027 with more substantial contribution beginning in 2028.

Speaker #2: That concludes our prepared remarks. Operator, please open the call for questions.

Operator 3: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Your first question comes from Thomas Palmer with J.P. Morgan.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Your first question comes from Thomas Palmer with J.P. Morgan.

Speaker #1: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys.

Speaker #1: To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Your first question comes from Thomas Palmer with JPMorgan.

Thomas Palmer: Good morning. Sorry. Good afternoon, and thanks for the question. Maybe just to start off, a little bit of added clarity on the pricing actions that are planned later this year, just in terms of the types of products and just how impactful that it might ultimately be, as we think about kind of the size and gross margin flow through.

Speaker #3: Good morning. Or sorry, good afternoon. And thanks for the question. Maybe just to start off, a little bit of added clarity on the pricing actions that are planned later this year, just in terms of the types of products and just how impactful that it might ultimately be as we think about kind of the size and gross margin flow-through.

John Foraker: Hey, Tom. It's John Foraker here. We focus those on a selective part of our business, more on our snacking business and kind of low single digit kinds of numbers. Those will go into effect in September, as we mentioned during the opening remarks, and we'll begin to get the benefit of them. Obviously, the full benefit will be coming next year.

Speaker #4: Hey, Tom. It's John Foraker here. We focus those on selective part of our business, more on our stacking business, and kind of low single-digit kinds of numbers.

Speaker #4: Those will go into effect in September, as we mentioned. During the opening remarks and they'll we'll begin to get the benefit of them. Obviously, the full benefit will be coming next year.

Thomas Palmer: Okay. Thanks for that. I did just want to ask on the input cost environment, obviously, you noted some incremental costs there. If I do look at the outbound freight that you guys provide in the queue, it didn't look like it really stepped up very much, especially relative to Q1. Maybe just an update with kind of what you're seeing on that front and how you're mitigating it beyond the pricing actions. Thank you.

Speaker #3: Okay, thanks for that. And then I just wanted to ask about the input cost environment. Obviously, you noted some incremental costs there. If I look at the outbound freight that you provided in the Q, it didn't look like it really stepped up very much, especially relative to Q1.

Speaker #3: So maybe just an update with kind of what you're seeing on that front and how you're mitigating it beyond the pricing actions. Thank you.

Larry Waldman: On the outbound freight, there's a couple of reasons. One, most of our stack business is customer pickup. It didn't impact us on freight costs going to the customer. We also have, on the refrigerated side, we have contracts in effect where the base cost isn't impacted, even though there was a shortage of assets available during Q2, which drove up prices. We also have negotiated lower surcharges as part of our contract. We are feeling and having some impact on our costs, but the costs that we're experiencing on freight are more on inbound freight of materials coming in versus outbound freight to customers.

Speaker #4: Yeah. So on the outbound freight, there are a couple of reasons. One, most of our snack business is customer pickup, so it didn't impact us on freight costs going to the customer.

Speaker #4: We also have on the refrigerated side, we have contracts in effect where the base cost isn't impacted, even though there was a shortage of assets available during the second quarter, which drove up prices.

Speaker #4: And then we also have negotiated lower surcharges as part of our contracts. So we are filling and having some impact on our costs, but the costs that we're experiencing on freight are more on inbound freight of materials coming in versus outbound freight to customers.

Thomas Palmer: Got it. Thank you.

Speaker #3: Got it. Thank you.

Larry Waldman: Thanks, Tom.

Speaker #4: Thanks, Tom.

Operator 3: Your next question comes from Leah Jordan with Goldman Sachs.

Operator: Your next question comes from Leah Jordan with Goldman Sachs.

Speaker #1: Your next question comes from Leah Jordan with Goldman Sachs.

Leah Jordan: Thank you. Hi, John and Larry. Nice job on the quarter. Obviously, really nice sales beat here. I just had one question on that. Hopefully, it's not too nitpicky, but we did have baby pouches sales come in a little bit lower than we were expecting. It was a deceleration from Q1 as well. Just curious, is that a timing factor or any color there? What led to that deceleration? Just trying to square that result with the commentary around, hey, improved cooler productivity and the innovation is working in those comments. Thank you.

Speaker #5: Thank you. Hi, John and Larry. Nice job on the quarter. And obviously, really nice sales beat here. I just had one question on that.

Speaker #5: Hopefully, it's not too nitpicky, but we did have baby pouches sales come in a little bit lower than we were expecting. So just it was a deceleration from the first quarter as well.

Speaker #5: So just curious, is that a timing factor or any color there? What led to that deceleration? And just trying to square that result with the commentary around, hey, improved cooler productivity in the innovation is working in those comments.

Speaker #5: Thank you.

John Foraker: Yeah, Leah, it would just be timing and the phasing of new coolers into the business. We expect quite a few new coolers coming in in Q3. It's going to be a really big quarter for new distribution there. The underlying consumer consumption trends on our core baby pouch assortment remain really strong, as we've indicated, and the new innovation in that assortment has been highly incremental as well. That business is really healthy and doing well. It's just about the timing of adding the distribution, which is coming in a big way this quarter.

Speaker #4: Yeah, Leah, it was just the timing and the phasing of new coolers into the business. We expect quite a few new coolers coming in in Q3.

Speaker #4: It's going to be a really big quarter for new distribution there. The underlying consumer consumption trends on our core baby pouch assortment remain really strong as we've indicated.

Speaker #4: And the new innovation in that assortment has been highly incremental as well. So, that business is really healthy and doing well.

Speaker #4: It's just about the timing of adding the distribution, which is coming in a big way this quarter.

Larry Waldman: Leah, if you look at it, Q2 is where most of the resets for the coolers are taking place. Then as we bring in the new products and swap it out with the existing assortment and do some other changes, there's usually an impact during the quarter where you have the resets taking place. It's a short-term impact of resetting the coolers, but we're anticipating that you'll see a significant increase in Q3.

Speaker #6: And Leah, if you look at it, Q2 is where most of the resets for the coolers are taking place. And then as we bring in the new products and swap it out with the existing assortment and do some other changes, there's usually an impact during the quarter where you have the resets taking place.

Speaker #6: It's a short-term impact of resetting the coolers. But we're anticipating that the you'll see a significant increase in Q3.

Leah Jordan: Okay, that's very helpful. We'll look forward to that. Then maybe just kind of going to the competitive environment overall, what are you seeing from smaller players and larger players just in this consumer backdrop? Maybe some more color around the market share trends that sounded really constructive, but just the cadence out there. Thank you.

Speaker #5: Okay. That's very helpful. We'll look forward to that. And then maybe just kind of going to the competitive environment overall, what are you seeing from smaller players and larger players just in this consumer backdrop?

Speaker #5: Maybe some more color around the market share trends—that sounded really constructive—but just the cadence out there. Thank you.

John Foraker: Yeah, we're gaining share in pretty much everything that we're doing. The overall competitive environment really hasn't changed materially since last quarter. We're competing against private label, and have been for a long time, pretty much across our business, and have been performing extremely well relative to all those and see no change there either. The premium segment of the baby category is doing well. Pretty much everybody's doing well there, and we're doing extremely well also. No real change in the overall competitive environment of note.

Speaker #4: Yeah, we're gaining share in pretty much everything that we're doing. The overall competitive environment really hasn't changed materially since last quarter. We're competing against private label and have been for a long time, pretty much across our business.

Speaker #4: And it's been performing extremely well relative to all those and see no change there either. The premium segment of the baby category is doing well, pretty much everybody's doing well there.

Speaker #4: And we're doing extremely well, also. So, no real change in the overall competitive environment of note.

Leah Jordan: That's very helpful. Thank you. I'll pass it on.

Speaker #5: That's very helpful. Thank you. I'll pass it on.

John Foraker: Okay. Thanks, Leah.

Speaker #4: You bet. Thanks, Leah.

Operator 3: Your next question comes from Jon Andersen with William Blair.

Operator: Your next question comes from Jon Andersen with William Blair.

Speaker #1: Your next question comes from John Anderson with William Blair.

Jon Andersen: Hi. Good afternoon, and thank you for the questions. I was wondering if you could talk a little bit more about the cooler deployment, both the productivity that you're seeing as you place more coolers in or reset existing coolers with some of the innovation you described. I don't know how much visibility you have into the phasing of new cooler placements, but if you have any and can talk to that both in 2026 and how you might see that kind of playing out as you work your way towards 8,000 coolers in 2027, that would be helpful. Thanks.

Speaker #2: Oh, hi. Good afternoon and thank you for the questions. I was wondering if you could talk a little bit more about the cooler deployment, both the productivity that you're seeing as you place more coolers and/or reset existing coolers with the some of the innovation you described.

Speaker #2: And I don't know how much visibility you have into the phasing of new cooler placements, but if you have any and can talk to that, both in 2026 and how you might see that kind of playing out as you work your way towards 8,000 coolers in 2027, that would be helpful.

Speaker #2: Thanks.

John Foraker: Okay. Thanks, John. We continue to see coolers becoming more productive year-over-year and sequentially quarter-over-quarter. There can be variations in the way that productivity plays out depending on the specific retailers rolling out coolers and the timing of them, because there are big differences in productivity between one retailer's cooler and another's. If you look at just the sequential productivity on a retailer-by-retailer basis of our coolers, we have a long track record of knowing that when we put those coolers in, it takes two or three quarters for it to start to get seasoned, and then the productivity just continues to increase. We continue to see that across our business. We mentioned the launch of our new innovation. Last quarter has done really well and is highly incremental, so we feel really strong about that. Q3 will be a significant cooler quarter.

Speaker #4: Okay, thanks, John. Yeah, so we continue to see coolers becoming more productive year over year and sequentially, quarter over quarter. There can be variations in the way that productivity plays out depending on the specific retailers rolling out coolers and the timing of them, because there are big differences in productivity between one retailer's cooler and another.

Speaker #4: But if you look at just the sequential productivity on a retailer by retailer basis of our coolers, we have a long track record of knowing that when we put those coolers in, it takes two or three quarters for it to start to get seasoned.

Speaker #4: And then the productivity just continues to increase. We continue to see that across our business. We mentioned the launch of our new innovation last quarter has done really well and is highly incremental.

Speaker #4: So we feel really strong about that. Q3 will be a significant cooler quarter. We have a lot of coolers coming online. We still expect to end the year right around 5,000.

John Foraker: We have a lot of coolers coming online. We still expect to end the year right around 5,000. Obviously, we expect a big step up in coolers next year, too. Most of those conversations, if not all of them, are very much dialed in. It's a little early for us to call the exact sequencing of the coolers for 2027, obviously a little too early for that. We do expect Q2 and Q3 generally are the biggest cooler quarters in terms of installation. Next year might be a little bit heavier in Q1, but that's what I'd be able to say right now. Larry, you want to add anything to that?

Speaker #4: And obviously, we expect to be a step up in coolers next year too. Most of those conversations, if not all of them, are very much dialed in.

Speaker #4: It's a little early for us to call the exact sequencing of the coolers for '27. Obviously, a little too early for that. But we do expect Q2 and Q3 generally are the biggest cooler quarters in terms of installation.

Speaker #4: Next year might be a little bit heavier in Q1, but that's what I'd be able to say right now. Larry, you want to add anything to that?

Larry Waldman: No.

John Foraker: Okay.

Speaker #6: No.

Speaker #4: Okay.

Jon Andersen: Great. That's helpful. Thank you. Two others. There's been a lot of innovation this year. You talked about the meat and legume pouches. You've talked about some of the innovation in protein and probiotic smoothies with the kids. If you could give us a sense for just overall, is this a bigger year than you would anticipate? Do you have a similar level of new products that you anticipate launching in 2027? I just want to get a sense for the cadence. Are you evaluating whole new categories as well? Should we be thinking about that?

Speaker #2: Great. That's helpful. Thank you. Two others there's been a lot of innovation this year. You talked about kind of the meat and legume pouches.

Speaker #2: You've talked about some of the innovation in protein and probiotic smoothies with kids. In these, I guess if you could kind of give us a sense for just overall— is this a bigger year than you would anticipate?

Speaker #2: Do you have kind of a similar level of new products that you anticipate launching in 2027? I just want to get a sense for kind of the cadence and are you evaluating whole new categories as well?

Speaker #2: Should we be thinking about that?

John Foraker: Yeah. We talked about through our IPO process and in all our communications since that you should expect every 12 to 18 months, we'll expand the brand into an incremental new category. All the innovation that we've been doing this year is very focused on our existing categories and just broadening the assortment, driving for better productivity in our current sets as we reset those with retailers. Next year, you can expect at least one new category. We're not calling out the specific timing of that yet, but that's something that we've been consistently saying for the last couple of quarters, and we're well on track for that. It's very important for us to keep our assortments fresh. It's very important for us to continue to bring really cool new innovation that we know our consumers are looking for to our existing portfolios and our existing categories.

Speaker #4: Yeah. We talked about on through our IPO process and in all our communications since that you should expect every 12 to 18 months we'll expand the brand into an incremental new category.

Speaker #4: All the innovation that we've been doing this year is very focused on our existing categories, just broadening the assortment and driving for better productivity in our current sets as we reset those with retailers.

Speaker #4: Next year, you can expect at least one new category. We're not calling out the specific timing of that yet, but that's something that we've been consistently saying for the last couple of quarters.

Speaker #4: And we're well on track for that. But it's very important for us to keep our assortments fresh. It's very important for us to continue to bring really cool, new innovation that we know our consumers are looking for to our existing portfolios and our existing categories.

John Foraker: We won't talk about the exact product that is coming. For example, we have another functional offering in pouches coming that will start showing up here in a few weeks in some retailers. We'll do a release on that in mid-September, so you can find out more about that. It's very important to keep our assortments fresh and to keep new, cool innovation in front of our retailers and our consumers to just build that loyalty and excitement as we grow.

Speaker #4: We won't talk about the exact product that is coming, but for example, we have another functional offering in pouches coming that will start showing up here in a few weeks in some retailers.

Speaker #4: We'll do a release on that in mid-September so you can find out more about that. But it's very important to keep our assortments fresh and to keep new cool innovation in front of our retailers and our consumers to just build that loyalty and excitement as we grow.

Jon Andersen: Okay. One more and I'll pass it on.

Speaker #2: Okay. One more and I'll pass it on.

John Foraker: John, just what I would say is that if you look at it on the amount of innovation we've done based upon the size of the company, it would be considered a lot of innovation compared to prior years. Based upon the size of the company, it's in line with the amount of innovation that we do on an annual basis and the amount of net sales that we're trying to drive from innovation. As we grow and as we scale the business, our innovation will probably stay at this level, but will continue to grow with the top side of the company. As a percent of total sales, it will continue to grow. I mean, stay the same, but would grow as a total number of categories or total number of items that we go out on an annual basis.

Speaker #6: No, that's what I'm saying. If you look at it on the amount of innovation we've done, based upon the size of the company, it would be considered a lot of innovation compared to prior years.

Speaker #6: But based upon the size of the company, it's in line with the amount of innovation that we do on an annual basis, and the amount of net sales that we're trying to drive from innovation.

Speaker #6: But as we grow and as we scale the business, our innovation will probably stay as at this level, but we'll continue to grow with this top tier of the company.

Speaker #6: So as a percent of total sales, it will continue to grow I mean, stay the same, but it would grow as a total number of categories or total number of items that we go out on an annual basis.

Speaker #6: So it would be larger in comparison against prior years, but in line as percent of sales. Do what we've done in the past.

Jon Andersen: Okay.

John Foraker: It would be larger in comparison against prior years, but in line as % of sales to what we've done in the past.

Jon Andersen: Makes sense. Okay, I'll leave it there. Thank you very much.

Speaker #2: Makes sense. Okay. I'll leave it there. Thank you very much.

John Foraker: Great. Thanks, John.

Speaker #4: Thanks, John.

Operator 3: Your next question comes from Rupesh Parikh with Oppenheimer.

Operator: Your next question comes from Rupesh Parikh with Oppenheimer.

Speaker #1: Your next question comes from Rupesh Packer with Oppenheimer.

Rupesh Parikh: Good afternoon. Thanks for taking my question. Just going back to your comment during back to school, are you doing anything differently from a marketing awareness perspective for back to school?

Speaker #5: Good afternoon. Thanks for taking my question. Just going back to your commentary on back-to-school, are you doing anything differently for marketing awareness perspective for back-to-school?

John Foraker: As we've gotten bigger, Rupesh, we've gotten more and more effective in building the size and scale of our merchandising during back to school with our retailers because we've broadened our assortment and broadened our categories over time. We're doing more full brand line ads with our big retailers and just broadening the awareness of those. We talked about moving some marketing from Q2 into Q3. We've very intentionally done that to put more top of funnel over the top of that back to school period because we've done some marketing mix analysis and analytics that have shown us that that's a very effective way to drive better efficiency on everything that we're doing. We're super excited about that. We're expecting this back to school season to be in line with what we've done in the past. Probably more effective and bigger.

Speaker #4: So as we've gotten bigger, Rupesh, we've gotten more and more effective in building the size and scale of our merchandising during back-to-school with our retailers.

Speaker #4: Because we've broadened our assortment and broadened our categories over time, we're doing more full brand line ads with our big retailers and just broadening the awareness of those.

Speaker #4: We talked about moving some marketing from Q2 into Q3. We've very intentionally done that to put more top-of-funnel over the top of that back-to-school period, because we've done some marketing mix analysis and analytics that have shown us that that's a very effective way to drive better efficiency on everything that we're doing.

Speaker #4: And so, we're super excited about that. We're expecting this back-to-school season to be in line with what we've done in the past, but probably more effective and bigger.

Rupesh Parikh: Great. In the club channel, I think you guys typically have rotating assortments of products. Do you see an opportunity longer term maybe to get something more permanent, or do you just expect rotations continuing?

Speaker #5: Great. And then in the club channel, I think you guys typically have rotating assortments of products. Do you see an opportunity in the longer term, maybe to get something more permanent, or do you just expect rotations to continue?

John Foraker: No, we do have items that are permanent in certain regions. Typically, when we now do a national program, we're really just broadening the distribution for a period of time while that goes national with the belief that if we continue to build velocities on our club business, which is what we've consistently done on a day-to-day velocity basis over the last few years, that we'll continue earning the right to be represented on an ongoing basis in more and more regions. That's the expectation. These national programs for a brand of ours that's at 6.2 household penetration, most consumers with kids still don't have us in the house. We're just really doing those to really drive awareness, broaden trial, and with the repeat rates that we have on these items, we would expect a number of consumers to stick.

Speaker #4: No, we do have items that are permanent in certain regions. And typically, when we now do a national program, we're really just broadening the distribution for a period of time while that goes national.

Speaker #4: With the belief that if we continue to build velocities on our club business, which is what we've consistently done, on a day-to-day velocity basis over the last few years, that we'll continue earning the right to be represented on an ongoing basis in more and more regions.

Speaker #4: And that's the expectation. These national programs for a brand of ours that's at 6.2 household penetration most consumers with kids still don't have us in the house.

Speaker #4: We're just really doing those to really drive awareness, broaden trial, and with the repeat rates that we have on these items, we would expect a number of consumers to stick.

John Foraker: They'll come back to the big national retailer if the product is in distribution there, but if they can't find it there, they'll certainly find it in other places that they also shop.

Speaker #4: They'll come back to the big national retailer if the product is in distribution there, but if they can't find it there, they'll certainly find it in other places that they also shop.

Rupesh Parikh: Great. Thank you, Apostola.

Speaker #5: Great. Thank you. I'll pass it along.

John Foraker: Thanks, Rupesh.

Speaker #4: Thanks, Rupesh.

Operator 3: Your next question comes from Yasmine Bazilandi with Bank of America.

Operator: Your next question comes from Yasmine Bazilandi with Bank of America.

Speaker #1: Your next question comes from Yasmin Baswandi with Bank of America.

Yasmine Bazilandi: Hey, guys. Hey, John, Larry. Thanks for the questions.

Yasmine Deswandhy: Hey, guys. Hey, John, Larry. Thanks for the questions.

Speaker #6: Hey, guys. Hey, John, Larry. Thanks for the questions. Just while we're talking about those national club events, I was just wondering whether the consumers that you've acquired through that promotion are engaging with the brand through other product categories or other channels.

John Foraker: Hi.

Yasmine Bazilandi: Just while we're talking about those national club events, I was just wondering whether the consumers that you've acquired through that promotion are engaging with the brand through other product categories or other channels. As you're executing against another national program in Q3, what are the things that you did well in this Q2 event, or what are the things that you want to do differently for when you do execute in Q3?

Yasmine Deswandhy: Just while we're talking about those national club events, I was just wondering whether the consumers that you've acquired through that promotion are engaging with the brand through other product categories or other channels. As you're executing against another national program in Q3, what are the things that you did well in this Q2 event, or what are the things that you want to do differently for when you do execute in Q3?

Speaker #6: And as you're executing against another national program in Q3, what are the things that you did well in this Q2 event or what are the things that you want to do differently for when you do execute in Q3?

John Foraker: Yeah. The most important thing in these big national events is to make sure that we can service it in full and service the entire event and make sure the products look great on their palette. We were able to do that, and as a result, we were able to drive velocity increases in line with our expectations and our retailers' expectations. It's all about just getting the product out there, doing a lot of sampling, and getting them the opportunity to repeat. We know that consumers shop that channel, and they shop all our other channels as well, and we fully expect that some of those consumers will broaden their consumption into other channels. It does benefit us pretty significantly to have these two platforms back-to-back. Kid Pouch in this event we just ran, and we just mentioned that we're going to be doing this Tractor Wheels item.

Speaker #4: Yeah. The most important thing in these big national events is to make sure that we can service it in full and service the entire event, and make sure the products look great on their pallet.

Speaker #4: We were able to do that. And as a result, we were able to drive velocity increases in line with our expectations and our retailers' expectations.

Speaker #4: It's all about just getting the product out there, doing a lot of sampling, and getting them the opportunity to repeat. We know that consumers shop that channel and they shop all our other channels as well.

Speaker #4: And we fully expect that some of those consumers will broaden their consumption into other channels. It does benefit us pretty significantly to have these two platforms back-to-back.

Speaker #4: So Kid Pouch in this event, we just ran and we just mentioned that we're going to be doing this toddler wheels item. That's fantastic for us because those consumers that saw us in pouches will now see us through this program as well.

John Foraker: That's fantastic for us because those consumers that saw us in pouches will now see us through this program as well, and it just brings them and crosses them over. We know that when we get consumers that are buying us in multiple categories, we know the size of that basket increases significantly, as does the pace of their consumption. It's just a great thing for us from a brand-building standpoint.

Speaker #4: And it just brings them and crosses them over. And we know that when we get consumers that are buying us in multiple categories, we know the size of that basket increases significantly as does the pace of their consumption.

Speaker #4: So it's just a great thing for us from a brand-building standpoint.

Yasmine Bazilandi: Okay, great. That's helpful. Larry, I just had a quick modeling question for you. With the functional Kid Pouches line that's launching in the coming weeks, how incremental do you expect that to be? Given in the Kid Pouches segment, the compare is a little bit harder in Q3, with this line launching, should growth in H2 be kind of similar across the quarters as this launch would help?

Yasmine Deswandhy: Okay, great. That's helpful. Larry, I just had a quick modeling question for you. With the functional Kid Pouches line that's launching in the coming weeks, how incremental do you expect that to be? Given in the Kid Pouches segment, the compare is a little bit harder in Q3, with this line launching, should growth in H2 be kind of similar across the quarters as this launch would help?

Speaker #6: Okay. Great. That's helpful. And then, Larry, I just had a quick modeling question for you. With the functional Kid Pouch's line that's launching in expect that to be?

Speaker #6: And given in the Kid Pouch's segment, the compare is a little bit harder in the third quarter. Should this line launching, should growth in the back half be kind of similar across the quarters as this launch would help?

Larry Waldman: No, I mean.

Yasmine Bazilandi: With Kid Pouches. Sorry.

Yasmine Deswandhy: With Kid Pouches. Sorry.

Speaker #4: No. I mean, with what this is, it's highly incremental. It's going into very select customers where we can drive it and ensure the incrementality of the product line and then after we've and then after we've gone we've put it out, then we'll continue to expand distribution of it because we've proved out the incrementality of it and that won't be affecting our business.

Larry Waldman: it's highly incremental. It's going into very select customers where we can drive it and ensure the incrementality of the product line. After we've put it out, we'll continue to expand distribution of it because we proved out the incrementality of it and that won't be affecting our business. If you look at the Kids Pouches, in total, we're looking at a growth rate of mid-teens for the year. Part of that growth rate is adding these new innovation items into the line, but it's also the club promotion that we just went through in Q2, the continued growth in regions that we're in within club, the additional distribution that we're getting in filling out the assortments and the existing customers that we're in.

Speaker #4: If you look at the Kids Pouches, in total, we're looking at a growth rate of mid-teens for the year. Part of that growth rate is adding these new innovation items into the line, but it's also the club promotion that we just went through in Q2, the continued growth in regions that we're in within club, and the additional distribution that we're getting in, filling out the assortments in the existing customers that we're in.

Larry Waldman: It's a combination of multiple factors, but this is one of the key things that's going to be driving this mid-teens growth for the full year.

Speaker #4: So it's a combination of multiple factors, but this is one of the key things that's going to be driving this mid-teens growth for the full year.

Yasmine Bazilandi: Okay, great. Thanks, guys.

Yasmine Deswandhy: Okay, great. Thanks, guys.

Speaker #6: Okay. Great. Thanks, guys.

John Foraker: Thank you.

Speaker #4: Thank you.

Operator 3: Your next question comes from Robert Moskow with TD Cowen.

Operator: Your next question comes from Robert Moskow with TD Cowen.

Speaker #1: Your next question comes from Robert Moscow with TD Callan.

Robert Moskow: Thanks. I was intrigued by the price increase and you have a pretty confident elasticity assumption. I think you said you don't expect any volume impact. Sounds great. I was wondering, is the confidence based on your prior experience raising price and it pretty much passes through without much of a volume impact? What gives you confidence that it would be the same right now?

Speaker #7: Hey, thanks. I was intrigued by the price increase, and you have a pretty confident elasticity assumption. I think you said you don't expect any volume impact.

Speaker #7: So it sounds great. And I was wondering, is the confidence based on your prior experience raising price and it pretty much passes through without much of a volume impact.

Speaker #7: And are there any what gives you confidence that it would be the same right now?

John Foraker: Yeah. Great question. It's all analytically driven. The elasticities on our products are pretty high, especially for the scope of the increase that we are talking about is kind of low single digits, Rob, it's not as significant. There will mathematically be some impact on units, my point in a prepared remarks was basically it'll be nominal, and we expect the price increase to flow mostly through. We've taken price over time, and we've got good analytics on velocity impacts of price and the like, and we feel very comfortable with that comment.

Speaker #4: Yeah. Great question. It's all analytically driven. The elasticity is on our products are pretty high, especially for the scope of the increase that we are talking about is kind of low single digits, Rob.

Speaker #4: So it's not a significant there will mathematically be some impact on units, but my point in a prepared remarks was basically it'll be nominal.

Speaker #4: And we expect the price to increase to flow mostly through. But we've taken price over time and we've got good analytics on velocity impacts of price and the like.

Speaker #4: And we feel very comfortable with that comment.

Robert Moskow: Okay. All right. Thank you.

Speaker #7: Okay. All right. Thank you.

John Foraker: Thank you.

Speaker #4: Thank you.

Operator 3: Your next question comes from Andrew Lazar with Barclays.

Operator: Your next question comes from Andrew Lazar with Barclays.

Speaker #1: Your next question comes from Andrew Lazar with Barclays.

Andrew Lazar: Thanks so much. Good afternoon, everyone.

Speaker #5: Thanks so much. Good afternoon, everyone.

John Foraker: Andrew.

Andrew Lazar: This is probably a little silly just given how early you are in the cooler rollout journey, but maybe in those retailers where you've been with coolers longer and you see the productivity accelerating the way you have and the fact that you now have a greater number of offerings right in the refrigerated side, with the protein pouches and such. I guess, is there any thought being given to maybe in certain retailers, there's a need for secondary coolers? Am I just getting so far ahead of myself that that's kind of silly?

Speaker #4: Andrew.

Speaker #5: This is probably a little silly, just given how early you are in the cooler sort of rollout journey, but maybe in those retailers where you've been with coolers longer and you've seen the productivity accelerating the way you have, and the fact that you now have a greater number of offerings, right, in the refrigerated side, with the protein pouches and such—I guess, is there any thought being given to maybe, in certain retailers, there's a need for secondary coolers?

Speaker #5: Or am I just getting so far ahead of myself that that's kind of silly?

John Foraker: No, you're not getting ahead of yourself at all. It's actually already happening in some retailers that have been around for a long time. They're adding second coolers. Some retailers have been talking to us about adding bigger coolers. Some of the retailers that we're in right now have added some larger coolers in certain stores. We would expect that to happen, just given the productivity of these items, the incrementality of the refrigerated tentpole to the category, and the growth opportunity to modernize the baby category is pretty significant, and I think a lot of retailers see that. Once they get into coolers for a while and they recognize the potential of them and the compounding impact of that, it's a super positive thing.

Speaker #4: No, you're not getting ahead of yourself at all. It's actually already happening. In some retailers that have been around for a long time, they're adding second coolers.

Speaker #4: Some retailers have been talking to us about adding bigger coolers. Some of the retailers that we're in right now have added some larger coolers in certain stores.

Speaker #4: So we would expect that to happen. Just given the productivity of these items, the incrementality of the refrigerated temp state to the category, and the growth opportunity to be to modernize the baby category is pretty significant.

Speaker #4: And I think a lot of retailers see that. And once they get into coolers for a while and they recognize the potential of them, and the compounding impact of that, it's a super positive thing.

John Foraker: The question then is, how do we position ourselves to broaden out the assortment to make sure that we've got enough holding capacity in the cooler to handle the high velocities that we have in some of these retailers? Those are all considerations that go into that conversation.

Speaker #4: And so the question then is, how do we broaden—how do we position ourselves to broaden out the assortment to make sure that we've got enough holding capacity in the cooler to handle the high velocities that we have in some of these retailers?

Speaker #4: And those are all considerations that go into that conversation.

Andrew Lazar: Got it. I know you don't want to get, obviously, into too much of the details yet around some of the supply chain work that you've identified. Maybe just what are some of the key core buckets of opportunity? Is it primarily automation as you talked about? Is it, I don't know, demand planning and forecasting? What are some of the key buckets where maybe the richest amount of opportunity might ultimately be? Thank you.

Speaker #5: Got it. And I know you don't want to get obviously into too much of the details yet around some of the supply chain work that you've identified.

Speaker #5: But maybe just what are some of the sort of the key core buckets of opportunity? Is it primarily automation as you talked about? Is it, I don't know, demand planning and forecasting?

Speaker #5: What are some of the key buckets where maybe the richest amount of opportunity might ultimately be? Thank you.

Larry Waldman: Well, there's two groups of buckets. Some of it is where, as you were talking about, better forecasting. Better forecasting allows us to drive fill rate. It allows us to reduce obsolescence. It allows us to really maintain and control our inventory, especially with the growth of the business and really drive that part of the business. We're working on that right now with utilizing statistical modeling and other methods to be able to improve that in those areas.

Speaker #4: Well, there's two groups of buckets. Some of it is where as you were talking about better forecasting allows us to drive fill rate allows us to reduce obsolescence.

Speaker #4: It allows us to really maintain and control our inventory, especially with the growth of the business, and really drive that part of the business.

Speaker #4: We're working on that right now with utilizing statistical modeling and other methods to be able to improve that and in those areas. So there's a lot of things internally that we're doing just to be better and have better ways of being able to grow inventory and ensure that we can support our customers and make sure that we're looking far enough ahead to be able to ensure that we have supply of materials and even drive into materials and how we source them because we're working into vertical integration and other things contracting directly to farmers to be able to ensure supply and to be able to manage our costs, especially for materials as higher demand and other issues take place that would potentially increase our costs.

Larry Waldman: There's a lot of things internally that we're doing just to be better and have better ways of being able to grow inventory and ensure that we can support our customers and make sure that we're looking far enough ahead to be able to ensure that we have supply of materials and even driving the materials, and how we source them because we're working into vertical integration and other things, contracting directly to farmers, to be able to ensure supply and to be able to manage our costs, especially for materials as higher demand and other issues take place that would potentially increase our cost. Where we're really looking at is when we're talking about these productivity projects, it's looking at the manufacturing, the processing lines, and understanding where we've been and where we're going.

Speaker #4: But where we're really looking at is when we're talking about these productivity projects, it's looking at the manufacturing and processing lines and understanding where we've been and where we're going.

Larry Waldman: A lot of the lines that we built were based on a smaller company, a smaller level of production, and although we were able to maintain and control and be able to service the growth of the business, we had to do it in a way that was not always the most efficient way of doing it. What we're doing is we're looking at all our manufacturing bases and suppliers and looking at how we're producing it, where we can drive out costs, whether it's improving throughput for improving usage, reducing costs. The biggest thing that's really going to be driving these productivity projects is really reducing labor on the lines. Through that is looking at building lines that are built for bigger productions and then also taking people off the line. One of the projects reduces staffing by 75%.

Speaker #4: So a lot of the lines that we've built were based on a smaller company. Smaller level of production. And although we were able to maintain and control and be able to service the growth of the business, we had to do it in a way that was not always the most efficient way of doing it.

Speaker #4: So, what we're doing is we're looking at all our manufacturing bases and suppliers, and looking at how we're producing it and where we can drive our costs—whether it's improving throughput, improving usage, or reducing costs.

Speaker #4: But the biggest thing that's really going to be driving these productivity projects is really reducing labor on the line. And so through that is looking at building lines that are built for bigger production and then also taking people off the line one of the projects reduces staffing by 75%.

Larry Waldman: Those are the things that we're looking at to be able to drive out costs because labor is our largest single cost as part of our cost of goods.

Speaker #4: So it's one of those are the things that we're looking at to be able to drive our costs because labor is our largest single cost as part of our cost of goods.

Andrew Lazar: Got it. As part of that, would there be a significant capital investment necessary, or does the co-man pick up a lot of that? Anyway, just more clarity there. Thanks so much.

Speaker #5: Got it. And as part of that, would there be a significant capital investment necessary or is the command pick up a lot of that?

Speaker #5: Anyway, just more clarity there. Thanks so much.

Larry Waldman: It depends on the project itself. There is some capital investment. We've been talking about somewhere between a $25 to 35 million capital investment over the next two to three years to be able to drive and buy the equipment to be able to put this in place. We are also partnering with some of our manufacturers where they are also investing in the line to be able to drive and maintain our capacity and our throughput that they need to do. Also, they're getting benefit of investing in the line and on new equipment. It's a combination of both. We're putting out the largest part of the investment, we are getting the manufacturers to also invest in these lines to be able to make sure that we have the capacity and we're hitting the throughput that we're looking to do.

Speaker #4: It depends on the project itself. There is some capital investment. We've been talking about somewhere between a 25 to 35 million dollar capital investment over the next two to three years.

Speaker #4: To be able to drive and buy the equipment to go to be able to put this in place, we are also partnering with some of our manufacturers where they are also investing in the line to be able to drive and maintain our capacity and our throughput that they need to do.

Speaker #4: Also, they're getting benefit of investing in the line and on a new equipment. So it's a combination of both. We're putting out the largest part of the investment, but we are getting the manufacturers to also invest in these lines to be able to make sure that we have the capacity and we're hitting the throughput that we're looking to do, so.

John Foraker: Andrew, one thing I'd just add to that, we will be talking about that over the next couple of quarters. We do expect that the ROI on those investments will be very high.

Speaker #6: Andrew, one thing I'd just add to that. We will be talking about that over the next couple of quarters. We do expect that the ROI on those investments will be very high.

Andrew Lazar: Yeah.

John Foraker: We'll be talking about the profile of those investments and the returns over the next two or three quarters.

Speaker #6: And we'll be talking about the profile of those investments and the returns over the next two or three quarters.

Andrew Lazar: Yep. Great. Thank you.

Speaker #5: Yep. Great. Thank you.

John Foraker: Thank you.

Speaker #6: Thank you.

Operator 3: Your next question comes from David Palmer with Evercore ISI.

Operator: Your next question comes from David Palmer with Evercore ISI.

Speaker #7: Your next question comes from David Palmer with Evercore ISI.

David Palmer: Thanks.

John Foraker: David.

David Palmer: Good evening. I just wanted to ask you about snacks, the very strong results that we're seeing in the scanner data there, wondering, you probably have more in-depth views into the repeat levels on new products there than we do, any sort of things that are convincing you that certain products are better drill sites than others, that they might be becoming more platform-ish than others? I also wanted to ask you about the coolers. Actually, I'll just make that in a follow-up and I'll let you talk on snacks first.

Speaker #8: Thanks. Just good evening. I just wanted to ask you about snacks. Very strong results we're seeing in the scanner datas there. Wondering you probably have more in-depth views into the repeat levels on new products there than we do.

Speaker #8: And any sort of things that are convincing you that certain products are better drill sites than others that there may be becoming more platform-ish than others?

Speaker #8: And then I also wanted to ask you about the coolers. Actually, I'll just make that in a follow-up and let you talk on snacks first.

John Foraker: Okay. Yeah, our snack products, particularly our toddler snack products, Tractor Wheels, has very high repeat rates. The products are delicious. Consumers tell us that. The price-value relationship is in an extremely good spot. They're very high velocity everywhere, in every channel, at every customer. We really do think that is a significant platform that we're going to continue to build out. We're excited about the future. We'll continue to innovate around the edges of that, too. We just launched some products that are very similar to that, focused to a little older kids with protein. We're excited about that platform and think it's a big growth opportunity for us in the future.

Speaker #4: Okay. Yeah. Our snack products particularly are toddler snack products. Tractor wheels. Has very high repeat rates. The products are delicious, consumers tell us that.

Speaker #4: It's a good spot. And they're seeing very high velocity everywhere—in every channel, at every customer. So we really do think that is a significant platform that we're going to continue to build out.

Speaker #4: And we're excited about the future. We'll continue to innovate around the edges of that, too. We just launched some products that are very similar to that, focused on slightly older kids with protein.

Speaker #4: So we're excited about that platform and think it's a big growth opportunity for us in the future.

David Palmer: I was looking at our model and how we have the coolers as a percent of sales. It feels like it's growing 3%, 4%, 5% a year. I could be lowballing you. You can correct me if I'm wrong as to how you're thinking about it. In that respect, it almost seems like it's not the main character in this whole growth algorithm. In some sense, it might be bigger than that, given that it's a great brand representation. It might have other benefits, and obviously, it has a good moat to it. You have a physical representation there in a different way. I don't know. I just wanted to maybe have you give a thought on my thought there.

Speaker #8: Just I was looking at our model and how we have the coolers as a percent of sales. It feels like it's growing three, four, five percent a year I could be lowballing you.

Speaker #8: You can correct me if I'm wrong about how you're thinking about it. In that respect, it almost seems like it's not the main character in this whole growth algorithm.

Speaker #8: But in some sense, it might be bigger than that. It's a great brand representation. It might have other benefits, and obviously, it has a good moat to it.

Speaker #8: You have a physical representation there in a different way. So, I don't know, I just wanted to maybe have you give a thought on my thought there.

John Foraker: I think that's an interesting observation. I agree with it. The cooler business and our baby pouches in the cooler are not our biggest business right now. They're growing very fast. There's a very long runway for growth on them. They are super important to us and are going to become a bigger and bigger business. They're super important to us, though, because even now as they're smaller, they are a real entry point into the brand. When a consumer walks down the baby aisle, and they run into a fresh baby cooler, it's a very jarring experience. It reframes and reshapes their whole context of the category.

Speaker #4: Yeah, I think that's an interesting observation, and I agree with it. The cooler business and our baby pouches in the cooler are not our biggest business right now.

Speaker #4: They're growing very fast. There's a very long runway for growth for them. They are super important to us and are going to become a bigger and bigger business.

Speaker #4: They're super important to us, though, even now as they're smaller, because they are a real entry point into the brand. When a consumer walks down the baby aisle and they run into a fresh baby cooler, it's a very jarring experience.

Speaker #4: It reframes and reshapes their whole context of the category. And we know that when we bring consumers in through our baby pouch business and also obviously our baby snacking business, that there's a very high probability that they're going to repeat on the brand and they're also going to continue to grow with the brand as we extend the brand up into kids as we've been doing.

John Foraker: We know that when we bring consumers in through our baby pouch business and also, obviously, our baby snacking business, that there's a very high probability that they're going to repeat on the brand, and they're also going to continue to grow with the brand as we extend the brand up into kids as we've been doing. Strategically, very important business for us. You're right, it's not the biggest part of our business. I think it's a strategically extremely important one for the reasons I just laid out.

Speaker #4: So strategically very important business for us, but you're right. It's not the biggest part of our business. But I think it's a strategically extremely important one for the reasons I just laid out.

Larry Waldman: If you look at it does look small right now, and even if you look at the growth of it's small. What we're looking at is we're only having 4,000 doors where we have coolers right now. We're just getting to the point this year where we have the right assortment in the coolers, and therefore, we're seeing the productivity growth in the coolers themselves. There's a big variance as to retailers as to the level of productivity that you get, which depends on what the retailer is and where it's going. You have anywhere between $8,000 to 50,000 in cooler productivity. It varies a lot based upon retailer. As we grow, it's going to be a significant growth pattern for the company.

Speaker #8: Yeah. And if you look at it, it does look small right now. And even with the if you look at the growth of it, it's small, but what we're looking at is it's we're only having 4,000 doors where we have coolers right now.

Speaker #8: We're just getting to the point where this year where we have to write assortment in the coolers and therefore we're seeing the productivity growth in the coolers themselves.

Speaker #8: There's a big variance as to retailers, as to the level of productivity that you get. It depends on what the retailer is and where it's going.

Speaker #8: So you have anywhere between $8,000 to $50,000 in cooler productivity. So it varies a lot based upon retailer. And but as we grow, it’s going to be a significant growth pattern for the company.

Larry Waldman: You're going to see it as we get into the higher numbers on the coolers, as we get into the 8,000 or the 15,000 on the coolers becoming a bigger and bigger part. The biggest thing that you have to look at is that every cooler represents somewhere between 45 to 50 facings of product. The sheer number of facings, the growth of the business, getting over the point where the customer has the expectation that the cooler is in the aisle, the impact of the coolers on the total aisle itself, plus the impact of the cooler on driving baby snacks that are in the aisle also. Then it's just really getting the customer into our brand at a lot earlier stage than they would be as if we weren't in the baby aisle.

Speaker #8: You're going to see it as we get into the higher numbers on the coolers— as we get into the 8,000 and the 15,000— on the coolers becoming a bigger and bigger part.

Speaker #8: And the biggest thing that you have to look at is that every cooler represents somewhere between 45 to 50 facings of product. And so the sheer number of facings, the growth of the business, the getting over to the point where we're where the customer has the expectation that the cooler is in the aisle, the impact of the coolers on the total aisle itself, plus the impact of the cooler on driving baby snacks that are in the aisle also.

Speaker #8: And then it's just really getting the customer into our brand at a much earlier stage than they would be if we weren't in the baby aisle.

Larry Waldman: Even though it's small now, it represents a significant amount of growth for the future, and then it continues that growth because of how it gets the customer into the brand. As our brand ages and we get into other products for kids, then that customer will continue the path from baby into kids and into the new products that we're developing right now.

Speaker #8: So even though it's small now, it represents a significant amount of growth for the future. And then it continues that growth because of how it gets the customer into the brand.

Speaker #8: And as our brand ages and we get into other products in the and for kids, that then that customer will continue the path from baby into kids and into the new products that we're developing right now.

David Palmer: That's great. Thank you.

Speaker #8: That's great. Thank you.

John Foraker: Thanks, David.

Speaker #4: Thanks, David.

Operator 3: This concludes our question and answer session. I would like to turn the conference back over to John Foraker for any closing remarks.

Operator: This concludes our question and answer session. I would like to turn the conference back over to John Foraker for any closing remarks.

Speaker #1: This concludes our question-and-answer session. I would now like to turn the conference back over to John Foraker for any closing remarks.

John Foraker: Okay. Thank you. In closing, our Q2 results give us even more confidence that the Once Upon a Farm model is working and getting stronger as we scale. We are reaching more families, increasing repeat and buy rate, gaining share, and improving retail productivity while building the foundation for meaningful operating leverage and structurally higher margins. We're still in the very early innings of building this highly disruptive baby through kid nutrition brand. The opportunity ahead is significant. We remain focused on executing with discipline, staying true to our PBC mission, making our consumers' lives better, and building a company that drives substantial long-term value for all involved. I want to thank our incredible team, our retail partners, and our shareholders for their continued belief and support. Thank you very much, everyone, for joining.

Speaker #4: Okay. Thank you. In closing, our second quarter results give us even more confidence that the Once Upon a Farm model is working and getting stronger as we scale.

Speaker #4: We are reaching more families. Increasing repeat and buy rate. Gaining share and improving retail productivity. While building the foundation for meaningful operating leverage and structurally higher margins.

Speaker #4: We're still in the very early innings of building this highly disruptive baby-through-kid nutrition brand. The opportunity ahead is significant. We remain focused on executing with discipline, staying true to our PBC mission, making our consumers' lives better, and building a company that drives substantial long-term value for all involved.

Speaker #4: I want to thank our incredible team, our retail partners, and our shareholders for their continued belief and support. Thank you very much, everyone, for joining.

Operator 3: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Q2 2026 Once Upon A Farm PBC Earnings Call

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