Freshpet, Inc.FRPT
Freshpet, Inc. Stock Compensation Disclosure
Equity Incentive Plans and Equity (in thousands, except share data):
Total compensation cost for share-based payments recognized in 2025, 2024 and 2023 was approximately $13,883, $49,779 and $19,774, respectively, of which $3,078, $5,734, $5,833, respectively, was recorded to cost of goods sold with the remainder recorded to selling, general and administrative expense. The share-based compensation cost includes an adjustment related to the reassessment of the probability of achieving performance conditions related to certain outstanding share-based awards.
Omnibus Incentive Plans—In October 2024, the Company's stockholders approved the 2024 Equity Incentive Plan (the “2024 Plan”) under which 1,450,000 shares of common stock may be issued or used for reference purposes as awards granted under the 2024 Plan, for grants on or after October 1, 2024. Concurrently with the adoption of the 2024 Plan, the issuance of new awards under the 2014 Omnibus Incentive Plan (the "2014 Plan") was frozen. Awards issued pursuant to the plans may be in the form of stock options, stock appreciation rights, restricted stock, as well as other stock-based and cash-based awards. During 2025, the awards granted were time-based (cliff vest over three years for employees and over one year for non-employee directors), performance-based (vest when specified targets are met), or market based (vest when specified targets are met) restricted stock units.
At December 31, 2025, there were 1,009,368 shares of common stock available to be issued or used for reference purposes under the 2024 Plan.
NASDAQ Marketplace Rules Inducement Award—During 2024, as an inducement under the NASDAQ Marketplace Rules, and therefore outside of any Plan, 17,150 restricted stock units were granted to the Company’s COO.
Under the terms of the applicable agreement, the grant is governed as if issued under the 2014 Plan. The awards granted are time-based (cliff vest over three years).
Service Period Restricted Stock Units—The following table includes activity related to outstanding service period restricted stock units in 2025.
| Shares | Weighted-Average Grant-Date Fair Value Per Unit | ||||||||||
| (in thousands) | |||||||||||
| Outstanding at December 31, 2024 | 405 | $ | 94.65 | ||||||||
| Granted | 352 | 70.52 | |||||||||
| Vested | (115) | 91.74 | |||||||||
| Forfeited | (40) | 79.47 | |||||||||
| Expired | — | — | |||||||||
| Outstanding at December 31, 2025 | 602 | $ | 82.11 | ||||||||
As of December 31, 2025, there was approximately $27,735 of total unrecognized compensation costs related to service period restricted stock units, of which $16,180 will be incurred in 2026, $8,964 will be incurred in 2027, $2,422 will be incurred in 2028, and $169 will be incurred in 2029.
Performance Based Restricted Stock Units—The following table includes activity related to outstanding performance based restricted stock units in 2025.
| Shares | Weighted-Average Grant-Date Fair Value Per Unit | ||||||||||
| (in thousands) | |||||||||||
| Outstanding at December 31, 2024 | 223 | $ | 84.61 | ||||||||
| Granted | 14 | 63.17 | |||||||||
| Issued Upon Vesting | — | — | |||||||||
| Forfeited | (2) | 136.77 | |||||||||
| Expired | — | — | |||||||||
| Outstanding at December 31, 2025 | 235 | $ | 82.97 | ||||||||
As of December 31, 2025, there was approximately $3,932 of total unrecognized compensation costs related to performance-based restricted stock units for which the achievement of the vesting criteria is considered probable, of which $1,958 will be incurred in 2026, $1,958 will be incurred in 2027, and $16 will be incurred in 2028.
Market Based Restricted Stock Units—The following table includes activity related to outstanding performance based restricted stock units with a market condition (total shareholder return) in 2025.
| Shares | Weighted-Average Grant-Date Fair Value Per Unit | ||||||||||
| (in thousands) | |||||||||||
| Outstanding at December 31, 2024 | $ | — | $ | — | |||||||
| Granted | 40 | 87.51 | |||||||||
| Issued Upon Vesting | — | — | |||||||||
| Forfeited | (5) | 87.51 | |||||||||
| Expired | — | — | |||||||||
| Outstanding at December 31, 2025 | 35 | $ | 87.51 | ||||||||
As of December 31, 2025, there was approximately $1,116 of total unrecognized compensation costs related to market based restricted stock units for which the achievement of the vesting criteria is considered probable, of which $509 will be incurred in 2026, $509 will be incurred in 2027, and $98 will be incurred in 2028.
Grant Date Fair Value of Market Based Restricted Stock Units— The weighted-average grant date fair value of awards granted in 2025 was $87.51 per share.
Expected Volatility—Expected volatility was based on the historical volatility of the Company’s common stock.
Expected Term—The Company determined the expected term based on the award agreement.
Risk-Free Interest Rate—The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the awards at the time of the grant.
Expected Dividend Yield—The Company has not historically declared dividends, and no future dividends are expected to be available to benefit option holders. Accordingly, the Company used an expected dividend yield of zero in the valuation model.
Stock Price—The stock price is the closing price of our common stock on the valuation date.
| Year Ended December 31, | |||||
| 2025 | |||||
| Expected volatility | 50.0% | ||||
| Expected term | 3.0 | ||||
| Risk-free interest rate | 3.8% | ||||
| Expected dividend yield | 0.0% | ||||
| Stock Price | 83.78 | ||||
Service Period Stock Options—A summary of service period stock options outstanding and changes under the plans during the year ended December 31, 2025 are presented below:
| Options | Shares | Weighted Average Exercise Price | Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||||||
| (in thousands) | (in thousands) | ||||||||||||||||||||||
| Outstanding at December 31, 2024 | 993 | $ | 51.76 | ||||||||||||||||||||
| Granted | — | — | |||||||||||||||||||||
| Exercised | (16) | 70.44 | |||||||||||||||||||||
| Forfeited | (23) | 92.26 | |||||||||||||||||||||
| Expired | (27) | 67.02 | |||||||||||||||||||||
| Outstanding at December 31, 2025 | 927 | $ | 50.09 | 2.3 | $ | 30,414 | |||||||||||||||||
| Exercisable at December 31, 2025 | 927 | $ | 50.09 | 2.3 | $ | 30,414 | |||||||||||||||||
Of the options exercisable at the end of December 31, 2025, 622 options were in-the-money, which account for the entire aggregate intrinsic value.
As of December 31, 2025, there were no unrecognized compensation costs related to non-vested service period options.
Performance Based Options—Performance based option vesting is contingent upon the Company achieving certain annual Net Sales and/or Adjusted EBITDA goals. A summary of performance-based stock options outstanding and changes under the plans during the year ended December 31, 2025 are presented below:
| Options | Shares | Weighted Average Exercise Price | Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||||||
| (in thousands) | (in thousands) | ||||||||||||||||||||||
| Outstanding at December 31, 2024 | 1,685 | $ | 75.69 | ||||||||||||||||||||
| Granted | — | — | |||||||||||||||||||||
| Exercised | (172) | 57.22 | |||||||||||||||||||||
| Forfeited | (110) | 135.17 | |||||||||||||||||||||
| Expired | — | — | |||||||||||||||||||||
| Outstanding at December 31, 2025 | 1,403 | $ | 79.58 | 3.3 | $ | 29,503 | |||||||||||||||||
| Exercisable at December 31, 2025 | 1,351 | $ | 80.10 | 3.1 | $ | 29,503 | |||||||||||||||||
Of the options exercisable at the end of December 31, 2025, 679 options were in-the-money, which account for the entire aggregate intrinsic value.
As of December 31, 2025, there were no unrecognized compensation costs related to performance-based awards for which the achievement of the vesting criteria is considered probable.
Grant Date Fair Value of Options—There were no options granted in 2025 and 2024. The weighted average grant date fair value of options (service period options and performance based options) granted in 2023 was $35.81 per share.
Expected Volatility—Expected volatility was based on the historical volatility of the Company’s common stock.
Weighted Average Expected Term—The Company determined the expected term based on the “shortcut method” described in ASC 718, Compensation—Stock Compensation (an expected term based on the midpoint between the vesting date and the end of the contractual term).
Risk-Free Interest Rate—The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant.
Expected Dividend Yield—The Company has not historically declared dividends, and no future dividends are expected to be available to benefit option holders. Accordingly, the Company used an expected dividend yield of zero in the valuation model.
| Year Ended December 31, | |||||
| 2023 | |||||
| Weighted average exercise price of options granted | $64.05 | ||||
| Expected volatility | 51.8% | ||||
| Average expected terms in years | 6.4 | ||||
| Risk-free interest rate | 4.5% | ||||
| Expected dividend yield | 0.0% | ||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.