Once Upon a Farm Reports Q2 Sales Growth, Raises 2026 Guidance

Once Upon a Farm (NYSE: OFRM ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This content is powered APIs. 3% increase in net sales year-over-year, driven by strong volume growth, expanded distribution, and successful innovation in baby and toddler products.

5 million, indicating confidence in sustained growth. 2%, strong repeat rates, and substantial gains in distribution, especially in the baby snack and kid segments. Future initiatives focus on expanding cooler deployments, with targets of 5,000 coolers in 2026 and 8,000 in 2027, and launching new functional product lines. Management highlighted ongoing supply chain and productivity improvements aiming for long-term profitability, supported by automation and increased capacity projects.

Full Transcript OPERATOR Greetings and welcome to the Once Upon a Farm 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. Brian Holland, Vice President of Investor Relations Thank you and welcome to the Once Upon a Farm second quarter 2026 earnings conference call.

With us on the call today are John Foraker, Co-Founder and Chief Executive Officer, 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. 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.

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. And now I will turn the call over to John to begin.

John Foraker, Co-Founder & CEO Thanks, Brian. Good afternoon, everyone, and thank you for joining us. 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 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. 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.

5 million. 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. 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. 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-positioned innovation in both baby and kid. 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 to drive systemic improvements in childhood nutrition for a healthier, happier, and more equitable world.

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. 1%, and 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 and we are increasing retention and growing spend per household all at the same time. 5 million, with pouches and snacks increasing at similar rates. Velocities remain 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. 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, and 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.

9 million. Snacks grew at a slightly faster rate reflecting innovation impact from both the successful launch of power wheels with protein in kid bar sets and protein and probiotic pouches into kid dairy sets. 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. This program successfully exposed the brand and these products to millions of new households, which was the primary objective. Household penetration in our Immunity Blend portfolio is up over 20% versus April, confirming that we 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 assortments. 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. 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.

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. Larry Waldman, President and CFO 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.

4 million compared to 60 million a year ago, driven primarily by volume, as we expected. 9%, down 485 basis points versus the prior-year period. 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, partially offset by pricing and lower cooler slotting. 3 million.

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. Selling expense was flat and logistics costs were lower, reflecting leverage as we scale.

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. 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. Net loss for the second quarter improved to 5 million from a net loss of 9 million a year ago.

7 million compared to adjusted EBITDA of 2 million in the prior-year period, primarily reflecting the increase in SG&A dollars relative to plan. Second quarter adjusted EBITDA benefited from stronger net sales and a 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.

5 million in cash and no debt. 6% versus a year ago, reflecting 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. We are also actively managing tariff and sourcing risks 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 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. 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. These mix 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 the fourth quarter 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.

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. 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, 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.

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. Importantly, that expectation does not depend on realizing the full benefits of the larger automation projects.