Once Upon a Farm, PBC (OFRM) June 2026 Conference Transcript

all set all right thank you everybody for joining this morning my name is john anderson i'm the research analyst at william blair that covers consumer packaged goods and more specific once upon a farm very excited to have once upon a farm with us today to my right is ceo co-founder and ceo john foraker and to his right yes his right is cfo larry waldman once upon a farm is a leading is excuse me is leading a transformation in the childhood nutrition market companies offering genuine organic farm fresh food made with no added sugar no preservatives and nothing artificial once upon a farm actually pioneered fresh refrigerated baby food in pouches several years ago which it makes by blending fresh and IQF fruits and vegetables and processing them using cold pressure, locking in nutrients and preserving enough shelf life for refrigerated distribution to stores nationwide. Today the company's portfolio offers parents a variety of Better for You products that serve a range of needs from baby's first bites to kids' school-ready snacks. And by doing so, it's become the number one brand driving growth in its categories. it's surpassed annual sales of 300 million dollars at retail growing strong double digits and many of its customers are now rolling out dedicated coolers in the baby aisle first refrigerated coolers in the baby aisle to sort the company's products and serve modern parent consumer needs before handing it over to management a couple of quick housekeeping items immediately Immediately following the presentation, there's going to be a breakout session in the Adler So please, please join us for that. It will be very interesting. Last, just to inform you, a complete list of research disclosures and potential conflicts of interest can be found on the William Blair website. So with that, I'm going to toss it over to John to get us started.

Good morning, everyone. Okay. Let's dive right in. I'm going to go through this presentation, I'm not going to hit on, there's a lot of information on these slides. the slides are available to you later I believe online right John so we'll make sure you have them but I'll try to I'll try to update you with some of the narratives just from our recent performance and the like as we go to so there's the disclaimers so Larry and I both worked have worked together for many many years we worked together at Annie's I actually laughed because I pulled this shirt out of this morning I realized I had Annie's logo I didn't realize that was there but anyway that experience was really incredible for us because we took that company public in 2012 sold the generals in 2014 and as a young fast emerging growth brand there are a lot of lessons you learn about like how to how to be prepared to be public how to run an effective public company how to grow a business in this space and we've applied now now almost nine years, Larry and I and Jen have been working here, and we've applied all these great lessons to the business to prepare us to go public, and we've been executing really The headline I'd give you on all of this stuff, the single most important thing to me that will drive our success is just how effectively we execute, and we'll talk about the brand and all that other stuff, but it really comes down to execution, and we really pride ourselves on doing a great job with that the the macro kid market is very big you'll see that in the TAM slide in a second the problem is that historically a lot of the products are all shelf stable there's in kid products in particular is way too much sugar it's just a significant opportunity to clean things up and line them up with where modern consumers are looking for things to go we created a fresh baby food category in the United States really positioned and anchored our equity in this brand around Fresh, but we've broadened that out, as we'll talk about more in a minute. The most important point on this slide is we're the first brand to build a baby through kid brand. If you think about it historically in this space, there's been baby brands, there's been kid brands. We're the first one that's doing both. And it's hard to do that, actually. It requires really sophisticated marketing messaging because the things that a parent is looking for before their baby starts eating first foods or a five-year-old is looking for, it's a little different. And so it's a little nuanced, but we're trying to build a brand that's trusted. People come in through Baby. They stay with us as the kids age, and we've been really successful doing that. We're a public benefit corporation. This is our mission. Jen Garner and I joined Ari and Cassandra in September of 2017, and the very first thing we did was sit down and write this mission statement. And it's really hard to overstate how important this has been to literally every single business decision that we've made. And it's really a foundation of, there's a deep foundation of things that are going on in this business that support the trust and equity of the brand. And we think it's very important for people to understand that. It's one of our real superpowers, I think. The TAM in KID is really big. It's about $57 billion. we participate in a subset of the categories right now that are about 11 billion there's a lot of opportunity to grow there's a lot of white space most of these categories in baby and kid have not seen significant innovation in decades and we're looking to take our brand into these spaces in a really effective way over the coming years it's no surprise natural and organic has been growing faster than total food for many many years I joined Annie's in 1998 and I can I was saying the exact same thing every year in that run too although things have sped up excuse me things have sped up and it's really accelerating now and it's very much driven by the change in households that are buying these products millennial consumers Gen Z consumers care more about organic you You can see on the right-hand side of the page, one of the most important transformational moments for a household and their organic consumption is when a baby is coming into it and comes into it. Organic adoption for families like that is significantly higher, as you would expect. We think organic is just a foundational piece. It's kind of table stakes in the space we play in. These are competitive strengths. I won't hit on all of them. They'll come up in the later slides, but we're really building a modern brand that appeals to baby through kid. We've built this business very carefully with incredible products, which I will talk about in a second. We have really strong innovation pipeline. We'll be taking this brand into multiple new categories as we grow, really leveraging the lessons that Larry and I learned at Annie's, but doing it a lot better and much more effectively and bigger. we have really strong consumers and we've built an incredible supply chain too that Larry will talk about that is really in fresh is a really a really big moat and we're excited to talk about that and then we have a very strong team Larry and I obviously have a lot of experience in these running and growing these kinds of companies once upon a farm was a million dollar a year business when we got here and we just guided to 313 to 323 uh for the rest of this year um and um it's but the the other most important thing to understand is like the next 25 to 35 people down in this business are literally the best talent in all of cpg like we have an incredibly deep organization not just my leadership team but the team down below that and below that And we've intentionally done that to position ourselves to be able to, again, execute really well as we scale. It really started first with the first product. This is one of our original pouches here. This is the green kale and apple product. And our consumers love these products and they think that we deliver against, you know, clean and healthy and best nutrition for kids. Cassandra Curtis created these products first in her kitchen because what she found in the grocery store didn't meet her nutritional standards and she said hey let's build a company around it what's important to know about these pouches is we use a different we don't use the heat processing method to make them we take great fruits and vegetables and other important ingredients for kid and baby nutrition we put them into a big blender basically like you would do in your kitchen except that commercial scale then we put them through high pressure processing which uses pressure instead of heat to give you some shelf life never gets over 40 degrees and then it's transported through cold chain and what's amazing about these products is you know two three months later it tastes like you just made it it looks the colors vibrant the nutrition is vibrant, the taste is amazing, and it's very differentiated from what's in the category. Our consumers really trust our brand. If you talk to, back to the baby through kid point, if you ask parents whether they want one brand that will carry through that phase, 65% of them say they strongly value that. They really want a brand they can trust, and why? Because there's a lot of anxiety with parenting you know with being a new parent and then people are busy they they love a brand that they can trust when we when we were running Annie's it was very similar kind of brand but we would ask consumers what they love about it and they'd say I trust this brand so much that I see a new product I barely even look at the nutrition statement or the ingredients because I trust you're gonna do the right thing that's the kind of trust that we're building with this brand as well and and we also appeal to a really strong core consumer they're digitally savvy this is a consumer these new households forming that retailers really really want to develop relationships with that's a big change at US retail for two or three decades prior to ten years ago most retailers were really kind of looking past the baby space they were cutting shelf space They were cutting sections down, they didn't think it was very strategic, but they've come around to understand that this consumer is one of the most important consumers they need to win, because if you have a loyal shopper who you're serving the needs for their baby purchases really well, you're going to get most of their important trips and their big baskets. So, as a result, this category is very strategic for big retailers now, and we're benefiting from that as our other baby companies as well. retailers love our brand and this is very surprising the incrementality levels on this brand are very significant you can see on the slide here 69% and 73% in bars and the cooler when the cooler goes into the baby out 61% incremental to the baby food category even our snacks which you would think like hey there's plenty of snacks that have been out there forever ours are significantly incremental to the category and if you ask yourself why it shouldn't be that surprising because we're filling a white space with the original refrigerated products but we're bringing them into the category and retailers see that we have really strong data around that and it's one of the reasons why we've been so successful expanding the business and why retailers are so interested in doing it. So when we walk into those retailers, we have a few different businesses that are real important. Our original business are our kid position pouches that are positioned over in kid dairy. So think of like adjacent to Stonyfield in a kid yogurt section in a grocery store on the perimeter. That was our original business. We then started developing in the baby aisle. The items that are in the baby aisle are a very specific different product set than what's in the dairy set, they're positioned with a baby nutrition facts panel, they say baby on them, they're designed for the parent, for the nutritional needs of a baby and things parents are looking for when they're walking down the baby aisle and they're sold in a cooler only in the baby aisle or on our DTC site. We also introduced dry baby snacking products, I mentioned those earlier, those are in that same aisle and what we're now doing is we're starting to build out in the lunchbox aisle with bars. We launched those last year. They're doing really well. We just launched some innovation on top of those. Our strategy over time will be to build this brand across the store in all these categories that are relevant to the households that have babies through kids up to about age 12. And retailers are very excited about that mission. On the coolers, this is one of our real exciting opportunities. The disruption a cooler brings to the baby aisle is no different than when Fresh Pet started putting coolers in the pet aisle. It changes the frame of the consumer understanding of what's available to them in the category and it's very disruptive and it's also very significantly important to the retailer because when we put a cooler in the baby aisle, the entire baby aisle lifts by about 10 points. It's not just the fact that our stuff comes in and sells really well and highly incrementally which is true but what also happens is consumers have to come down the aisle more frequently because we're selling a fresh product and so they can't they can't come down and load up on sale and then come back six months later for their shelf stable patches they've got to come down more frequently so everything in the aisle lifts and we have a lot of research around that we know how how where our products are out in retail, and this $48 million retail sales number is basically us. That's our run rate out there right now in stuff that's just coming out of a cooler. We know that the opportunity is very large. We have 3,700 coolers out there right now as of the end of the first quarter. We expect to be at about 5,000 by the end of this year and over 8,000 next year. We've talked about it, and it was in the S1, that we think there can be 15,000 coolers that's a very conservative number there's 15,000 doors what we really meant by that is where the cooler would work if we put it in tomorrow so this is not like we're like chasing where the consumer is going to be if we could put a cooler in a store the 15,000 would work tomorrow and we have a lot of experience launching across all kinds of customers so we think the number of coolers is going to be very large we think the average productivity of cooler which is running a run rate retail right now across all our coolers of 13,000 right now is going to be significantly higher. We talked about in our Q1 earnings call that we saw an 11 percent increase in productivity of coolers in Q1 versus Q4 and then 26 or 27 percent versus the same quarter last year. Our coolers are becoming more productive as we put more of them out there, as we work on filling the assortments out. All the same things happened with Fresh Pet at the beginning. the same consumer things happen we expect those coolers are going to continue to become more and more productive and as that happens though the retailers are even more motivated to put them in and we're right now either in big distribution with retailers rolling out coolers with retailers or in tests to about to roll out or discussions to roll into a test with pretty much every retailer in the US now that's that's meaningful all the big national players all the big super regionals, all the important regional retailers. So anyway, significant opportunity for us to grow distribution with that. And then I'm going to pass it over to Larry, who's built this incredible supply chain to support all this. So go for it, Larry.

First on coolers, I want to kind of talk about the capital investment on coolers. There's three ways that we really put coolers in stores. The thing that really has been the biggest growth mechanism for us is where the retailer has seen the opportunity for the coolers. They want the cooler to be in the baby aisle, but they want to be able to continue to control the cooler and control the assortment. About 50% of our coolers are this type of cooler where the retailer owns the cooler. They provide the cooler to us at no cost. We represent about 90 to 100 percent of what's in the cooler. If you go into a Walmart, you'll see the cooler, very similar to what's there in the picture, where it's wrapped with our branding. We will be the majority of the cooler as long as we perform within the cooler. We also have coolers that we provide similar to Fresh Pet, where we buy the cooler. We put it in the aisle. We install the cooler. we have a hundred percent exclusivity for that cooler it's our cooler it goes as a capital asset it's depreciated and there's no impact on the p l except for the appreciation this is the it's about a third of our coolers but it's it's the slowest growing it it really it takes a lot longer because you have to integrate and work with the engineering teams of the retailer to be able to do the resets of the aisle to be able to run electrical and be able to set it up there always will be retailers that want to do this and we will support it if that's what their request is we where we see the probably the biggest growth in coolers and we're seeing it with some of the bigger retailers is where we incent the retailer to put the cooler into the aisle by paying a one-time slotting fee that slotting fee gives us a level of exclusivity within that cooler That exclusivity could run three to five years, depending on negotiations with the retailer. And it really allows us to make sure that we pay back the slotting fee based upon the performance of the cooler. We'll, you know, the idea is that we want to be able to offset some of the cost about it. We share with the retailer the cost of putting the cooler in. skin, we both have skin in the game, and what it does is it incenses the retailer to move faster in the cooler aisle. On the supply chain, we are 100% co-manufactured, but we co-manufacture a little differently than other people. What we've done is we've partnered with our co-manufacturers, working with them. We've actually, on our pouch business, we've actually built processing plants attached to inside the plants of the HPP providers and what this is they run the facility for us but it's a lot of it is our equipment but it allows us to understand the cost it allows us understand throughput it allows us to continually add capacity as needed to be able to support the growth of the business and it allows us to be able to drive out costs as we grow as a business One of the things that we're doing right now is we are looking and working with our co-manufacturers to really automate the process of producing our products. And what we've done is we started this business with one pouching machine that was running about 18,000 pouches every two weeks. We're currently running anywhere between three to three and a half million per week. And when you do that and you're gradually building the capacity up, even though you are driving cost efficiencies as you drive it up, you're just increasing and bolting on new capacity. What we're doing is we're green-filling all our manufacturing and looking at if you were building a plant that was doing three and a half to five million pouches a week, how would you build a plant versus how we built it today? And so we're working on that. It's going to be a significant increase in margin on these products. And this project will be in place by the end of 27, early 28. We did the exact same thing. We went into snacks. The manufacturer, bar manufacturer, we started on a shared line. But when we saw the growth of this business, we built a line in their plant to be able to satisfy the growth of the business. Good thing, not good thing, is that we just outgrew our growth very quickly and the line that we put in. So we've added more capacity in that plant and we're in process of building a new line within their facility. fully automated most of the our highest cost is labor this takes most of the labor out of the process again significant increase and in margin on these products and on this line will be up running by in the 27 early 28 financial highlights but first thing on the margins we are looking and we're continuing to grow. If you look at what we've put into our guidance for this year, so we're looking at about guiding to about a 41% gross margin for the year. That gross margin includes 100 basis points of tariff expense. It also includes 100 basis points of fuel-related expenses that weren't built into the model at the very beginning. We're still looking to get back to the 41%. We have some additional projects that will be coming in this year that will be offsetting some of those expenses. We also are working on a trade efficiency project where we're looking at all our trade spend. We're not looking to cut our trade spend, we're just looking to make sure that our trade spend is being spent at the highest return on investment and and then so we're looking at that now one of the things that we do we talked about on the coolers we the coolers that have the slotting fee we've built in eight to ten million dollars in cooler slotting fee which is a contra to sales so that's impacting our gross margin this year we were also built in about one to two million dollars in capital cooler spend that's going to be hitting on the capex and be depreciated so if you look in and first quarter highlights we ended up at 73 million in net sales for the first quarter 44% growth over year over year we gross profit we did increase gross profit both as a percent and as a dollar by 55 percent. I'm going to come over here because I can't see it. So EBITDA, we've been running the business on about a breakeven EBITDA for the last couple of years. What we want to do is we want to invest in the growth of the business. So we're not trying to drive positive EBITDA at this point. As positive EBITDA comes in, we've been taking that money, investing in marketing, investing in trade, investing in other areas that would offset that. We ended up, first quarter, we ended up a $3 million EBITDA loss compared to $7 million in Q1 of 25. Household penetration, less household penetration was 5.8%, continuing to grow. We were at 4.5% a year ago. Repeat rate, 50%. Cooler productivity, as John talked about, quarter over quarter, 11% growth rate, year over year, about 26%, 27%. One of the big things that you look in coolers and why coolers become more productive, we did not have the innovation and we did not have the skew alignment in the coolers to be able to support the size of the cooler that we're putting into the in the store one of the big things that we learned is you want to put in the cooler that you want in the store then grow your assortment to be able to fit the cooler and so we are now at a point where we've grown our assortment we had a lot of innovation coming in at the end of q1 that went on shelf in early q2 And with that, we're seeing an acceleration of the productivity in the cooler. Net sales by category, the one thing I want to explain is that we did not have a snacking business in the first quarter of 24. So we were completely pouched, we did have a small refrigerated bar line, but in 24 we We rolled out our baby snacking and our kid snacks. So you can see that the mix between kid and baby. So first baby includes both snacking and in coolers. And then you can see the growth both in the acceleration of the efficiency of the coolers and the growth of snacks in the baby aisle. So, we're heading towards a, you know, a mix of about, between kid and baby, about 50%. And then, and that's mainly because that we've been focusing our innovation on the baby aisle for the last two years, although we have, we're looking at adding a significant innovation center store going forward into, for both kid and baby. The year growth Q1, you can see that the continued growth in the snacks and the coolers as we go to about 50-50 on the 73 million that we came in for the year, for the quarter. For pouches and snacks, as I said, it didn't exist in early 24, but we built it up from from 29 million in 24 to 88 million in 25. For the first quarter, you can see the continued growth of the snack business, and as I said, we're projecting that eventually it's going to be about a 50-50 mix between refrigerated pouches and snacks. Our guidance that we came out at the end of the first quarter, we did increase our guidance top line to $313 to $323, or about a 34% growth rate year over year. We did hold our adjusted EBITDA at $2 to $4 million. We are expecting to be positive adjusted EBITDA, but we are continuing to, we've made the decision as a leadership team to invest any additional EBITDA into growth of the business to be prepared for $27. If we overdrive adjusted EBITDA, then we will increase our guidance on adjusted EBITDA. But at this point, we're just looking to increase marketing and other spend in other categories. Cooler count, we're still on at about $5,000 for the end of the year. $8,000 for next year, although there's definitely a lot of potential upside in the cooler numbers. Long-term algorithm, we are looking at, this is where we're looking at four to five years out, continuing sales, net sales growth of 20%. We are looking at a 45% gross margin. Definitely with these projects that we talked about, there's a lot of opportunities to overdrive this margin, but what we also are looking to do, to use any overdrive of margin, the potential work with keeping our AUP in a spot and driving top-line sales and expanding our customer base. Adjusted EBITDA, we're looking at high teens to potential 20.

But again, what we're also looking at is driving AUP at the same time so okay just wrapping up here real quick so Larry already mentioned the 5.8 percent of household pen we think there's an opportunity to triple a household pen as we grow in categories and as we broaden the business out we've been adding millions of households a year and we're going to continue to do that in a very efficient way we have deep relationships with our retailers we're going to continue to leverage those we've got strong innovation coming and then we're just going to drive strong profitable growth. I'll leave it with one last point. The business will be cash flow positive in the second half of this year and adjusted EBITDA positive. There will be a significant ramp in adjusted EBITDA in 27. We're not guiding at this point, but we will over the coming quarters. We're very, very confident in two things. One, this will be a much bigger business than people think or understand, and then also it will be a much more profitable business than people think. and we're executing our plans really, really effectively and we're excited to just follow along this journey and hope you have some good questions for us as we get into Q&A. Okay, thank you very much, everyone. Appreciate it.