Once Upon a Farm outlines fiscal 2027 net sales of at least $330M and adjusted EBITDA of at least breakeven following Tractor Wheels recall

• CEO John Foraker framed the quarter around the voluntary recall, saying, "We took decisive action to address a potential safety concern on the Tractor Wheels product lines" and "we sincerely believe that we will emerge as a stronger company and a stronger brand." He also said, "Tractor Wheels are an important part of our business, but when it comes to consumer safety, our priorities are clear."
• Foraker said Q3 performance remained strong, including, "In the third quarter, net sales increased 34.9% to $89.1 million," and added that "Channel-wide consumption increased 32% in Q3" while "the delta between shipments and consumption narrowed from last quarter." He also said, "Year-to-date, Tractor Wheels accounted for 18% of net sales and was a meaningful contributor to growth."
• Foraker emphasized brand and share metrics, including, "Household penetration grew to 6.5% at the end of September compared to 5.4% a year ago" and "our repeat rate among households with kids remains very healthy at 52.1%." He also said, "we have become the #2 brand overall and the #1 organic brand within 3 years of entering the market," and "In bars alone, we have amassed a 40% share."
• CFO Lawrence Waldman said, "Third quarter net sales increased 34.9% to $89.1 million" and "Gross margin was 36.1% down 600 basis points year-over-year." He added, "We finished Q3 with $106.4 million in cash and no debt" and "We currently expect to incur up to $30 million of costs related to the Tractor Wheels recall in fiscal 2026."

Outlook

• Waldman updated fiscal 2026 guidance: "We now expect net sales of $290 million to $300 million and an adjusted EBITDA loss of $4.5 million to $7 million," and said, "The net sales range reflects no Tractor Wheels sales after the recall date" and "we believe it is prudent to assume some drag on base velocities across the rest of the portfolio."
• Waldman provided an initial fiscal 2027 framework: "Based on our current assumptions, we expect net sales of at least $330 million and adjusted EBITDA of at least breakeven," while noting it "takes into account a range of potential outcomes, both in the timing of Tractor Wheels' potential return and the recall's possible effect on velocities across the broader portfolio."

Financial Results

• Waldman said Q3 profitability reflected margin pressure and cost leverage: "Gross margin was 36.1%" and "SG&A expenses increased by $8 million to $36.8 million," while "SG&A as a percent of net sales declined approximately 230 basis points to 41.3%."
• Waldman reported bottom-line metrics and recall timing: "Net loss improved to $3.8 million from $11.3 million in the prior year period" and "The Tractor Wheels recall was initiated after the quarter ended and thus had no effect on our Q3 results."

Q&A

• Leah Jordan, Goldman Sachs: asked about "retaining customers amid the recall"; CEO Foraker answered, "we've talked to thousands and thousands of consumers over the last couple of weeks" and "we've seen no negative impact on the rest of our portfolio" outside Tractor Wheels.
• Jordan, Goldman Sachs: asked about visibility on "cooler expansion" and "SKU expansion" into 2027; Foraker said, "the momentum we have with retailers on coolers remains very strong" and "we know what the resets look like for the first quarter, and those are locked down."
• Jon Andersen, William Blair: asked if events affected 2027 plans; Foraker said, "there are no changes" to plans outside Tractor Wheels, while "we have to reevaluate the timing" of Tractor Wheels-related capital projects.
• Robert Moskow, TD Cowen: pressed on Q4 sales components and recall costs; Waldman said, "the majority of the impact is related to the recall," and added, "pulling all that off the shelf, disposing of that product is the majority of the cost that's hitting net sales."
• Moskow, TD Cowen: asked about regaining shelf space; Foraker said, "We do assume that we will get it back in market" and "we are very confident that we'll get a significant majority of the distribution back."
• David Palmer, Evercore ISI: asked about relaunch goals and timeline; Foraker said, "We engaged outside third-party experts" and "We want to balance the speed of it with the excellence of it."
• Andrew Lazar, Barclays: asked about EBITDA step-up expectations excluding Tractor Wheels; Waldman said, "we still are looking at a step-up" and reiterated the goal of "a minimum of a breakeven EBITDA" in 2027.
• Yasmine Deswandhy, BofA Securities: asked about incremental QA costs and co-manufacturers; Waldman said, "We are not anticipating additional headcount requirements" but "we are reallocating some of the plant's headcount" and described "a good partnership" with the co-manufacturer.

Sentiment Analysis

• Analysts’ tone was slightly negative to pressing, focusing on recall duration, sales call-down components, and shelf-space recovery, including Moskow’s repeated attempts to isolate recall costs and Lazar’s questions on whether EBITDA would have faced pressure outside Tractor Wheels.
• Management’s tone was confident in brand resilience but cautious on near-term modeling, with Foraker saying, "we've seen no negative impact on the rest of our portfolio" while also stating, "it's early," and Waldman emphasizing prudence around "some drag on base velocities."
• Versus the prior quarter’s more uniformly upbeat posture around raised guidance, the current call’s tone shifted toward risk management and containment around the recall, while reiterating, per Foraker, "there has been no change to our long-term strategy or objectives."

Quarter-over-Quarter Comparison

• In Q2, Foraker said, "we are again raising our full year net sales guidance to $327 million to $335 million" and Waldman guided "adjusted EBITDA...$3 million to $4.5 million"; in Q3, Foraker said, "we are now guiding fiscal '26 net sales to a range of $290 million to $300 million and adjusted EBITDA loss in the range of $4.5 million to $7 million."
• In Q2, Foraker signaled an additional Q3 club program "focusing on our best-selling tractor wheels"; in Q3, Foraker said the company initiated the recall "within 24 hours of receiving 3 reports of a potential choking hazard from the FDA" and expects the assessment process "to take 8 to 10 weeks."

Risks and Concerns

• Foraker described the core issue as "3 reports of a potential choking hazard" and said potential fixes include "product reformulation and design changes" with independent experts conducting an assessment.
• Waldman highlighted uncertainty around recoveries and near-term costs: "We are pursuing potential insurance recoveries but cannot yet predict their timing or amount," and said 2026 costs could be "up to $30 million" related to the recall.

Final Takeaway

Management centered the quarter on rapid execution of a Tractor Wheels voluntary recall and its financial fallout, while emphasizing continued strength in brand adoption and non–Tractor Wheels consumption. The company reset fiscal 2026 guidance to $290 million to $300 million in net sales and an adjusted EBITDA loss of $4.5 million to $7 million, and introduced a fiscal 2027 planning framework of at least $330 million in net sales and at least breakeven adjusted EBITDA, with timing of Tractor Wheels’ return and potential broader velocity impacts as key swing factors.

Read the full Earnings Call Transcript

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