Slide 1: Q2 2022 Earnings Presentation
pets. people. planet. Q2 2022 Earnings Presentation August 8, 2022 1
Slide 2: Forward Looking Statements & Non-GAAP Measures
Forward Looking Statements & Non-GAAP Measures Forward-Looking Statements Certain statements in this presentation by Freshpet, Inc. (the “Company”) constitute “forward-looking” statements, which include any statements related to the novel coronavirus ("COVID-19"), the Freshpet Kitchens Expansion, ou
Slide 3: Forward Looking Statements & Non-GAAP Measures (cont.)
Forward Looking Statements & Non-GAAP Measures (cont.) Freshpet defines Adjusted Gross Profit as gross profit before depreciation expense, plant start-up expense, COVID-19 expenses and non-cash share-based compensation, and Adjusted SG&A as SG&A expenses before depreciation and amortization expense,
Slide 4: Nourishing Pets, People and Planet
Nourishing Pets, People and Planet Freshpet strengthens the bond between people and our pets so that we both live longer, healthier and happier lives -- while being kind to the planet 4
Slide 5: Q2 2022 Results
freshpet Q2 2022 Results
Slide 6: Strong net sales growth offset by inflation and operating challenges
Strong net sales growth offset by inflation and operating challenges Net Sales Freshpet Q2 2022 Financial Results Adj. EBITDA $160 $146.0 $14 $140 +34% $12 $120 $10.9 $108.6 $100 -3% $10 +36% $8 $80 $6 $60 $3.9 $4 $40 -65% $20 $2 $0 $0 Q2 2021 Q2 2022 Net Sales ($ millions) Adj. EBITDA ($ millions)
Slide 7: Net Sales growth driven by volume/mix, pricing and partially offset by trade inventory re-fill
Net Sales growth driven by volume/mix, pricing and partially offset by trade inventory re-fill in the YA 7 Source: Nielsen consumption data thru 7/2/22 and internal sales data
Slide 8: Q2 Adj. EBITDA impacted by timing, inflation and operational issues
Q2 Adj. EBITDA impacted by timing, inflation and operational issues Price increase to offset these costs in Q4 Higher cost diesel, lane rates, fill rates & start- Increased up of new disposals, warehouse processing and earlier than testing due to planned June quality issue; non- Increased 1st half r
Slide 9: Decline in Adj. Gross Margin due to quality issue and inflation
Decline in Adj. Gross Margin due to quality issue and inflation Q2 2022 Adj. Gross Margin Progress 46.1% 43.8% Estimated impact of quality issue Reported Adj. 42.4% Gross Margin Q2 2021 Q2 2022 39.7% 35.0% Gross Margin (GAAP) 9 Freshpet defines Adjusted Gross Profit as gross profit before depreciati
Slide 10: Price increase gains partially offset by inflation, quality issue and other minor issues
Price increase gains partially offset by inflation, quality issue and other minor issues 10 Freshpet defines Adjusted Gross Profit as gross profit before depreciation expense, plant start-up expense, non-cash share-based compensation and COVID-19 expenses
Slide 11: Strong production rates continue
Strong production rates continue Year-on-Year Production Performance Comparison Omicron: ERP Rolling 7-Day Average Pounds Produced 800,000 Shut down 1 Conversion line 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 1/1/2022 2/1/2022 3/1/2022 4/1/2022 5/1/2022 6/1/2022 7/1/2022 8/1/2022 9/1
Slide 12: Pulled media forward to sell our way through the price increase
Pulled media forward to sell our way through the price increase Q2 2022 Adj. SG&A Leverage 39.7% 36.1% Freight costs: +50 bps 16.3% 12.3% 12.9% 11.9% +340 bps Q2 2021 Q2 2022 Adj. SG&A % Excluding Media & Logistics Media % Total Adj. SG&A % 45.6% 47.4% SG&A (GAAP) Freshpet defines Adjusted SG&A as S
Slide 13: Diesel costs increased dramatically in the past 4 months, but recent trends show some relief
$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 Sep 13, 2021 Sep 20, 2021 Sep 27, 2021 Oct 04, 2021 Oct 11, 2021 Oct 18, 2021 Oct 25, 2021 Nov 01, 2021 Nov 08, 2021 Nov 15, 2021 Nov 22, 2021 Nov 29, 2021 Dec 06, 2021 Dec 13, 2021 2022 Guidance Assumption Dec 20, 2021 Source: US Energy Information Ad
Slide 14: Year-to-Date 2022 Results Thru Q2
Year-to-Date 2022 Results Thru Q2 14
Slide 15: First half results impacted by Q2 challenges
First half results impacted by Q2 challenges Net Sales Freshpet YTD Financial Results (June 30) Adj. EBITDA $300 $20 $18.6 $278.2 $18 +10% +38% $250 $16 $202.0 $14 $200 +35% $12 $150 $9.0 $10 -52% $8 $100 $6 $4 $50 $2 $0 $0 2021 2022 Net Sales ($ millions) Adj. EBITDA ($ millions) 15
Slide 16: YTD decline in Adj. Gross Margin due to quality issue and inflation
YTD decline in Adj. Gross Margin due to quality issue and inflation YTD Adj. Gross Margin Progress 46.4% 42.1% 2021 2022 39.3% 34.5% Gross Margin (GAAP) 16 Freshpet defines Adjusted Gross Profit as gross profit before depreciation expense, plant start-up expense, non-cash share-based compensation an
Slide 17: First half media investment increased to reflect better in-stocks and offset higher pricing
First half media investment increased to reflect better in- stocks and to offset higher pricing YTD Q2 2022 Adj. SG&A Leverage 39.0% 37.2% Freight costs: -50 bps 16.3% 13.4% 12.5% 11.9% +380 bps FY 2021 FY 2022 Adj. SG&A % Excluding Media & Logistics Media % Total Adj. SG&A % 47.3% 46.7% SG&A (GAAP)
Slide 18: 2022 Guidance
freshpet 2022 Guidance
Slide 19: Updating Adj. EBITDA guidance to reflect timing mismatch on pricing/inflation and quality issue
Updating Adj. EBITDA guidance to reflect timing mismatch on pricing/inflation and quality issue Net Sales Freshpet Financial Projections Adj. EBITDA $100 $700 $90 $600 $575.0 $575.0 $80 +35% +35% • Re-affirming Net Sales guidance $70 $500 • Adj. EBITDA guidance reduced to account for: $55.0 $60 • Co
Slide 20: Timing mismatch on costs and pricing have cost ~$19 million of Adj. EBITDA this year
Timing mismatch on costs and pricing have cost ~$19 million of Adj. EBITDA this year ~ ~ ~ +91% ~ +12% 20
Slide 21: Adj. Gross Margin has been negatively impacted by inflation, quality issue and buffer capacity
Adj. Gross Margin has been negatively impacted by inflation, quality issue and buffer capacity 21
Slide 22: Projected 2022 capital spending reduced by $80 million; will support >$1 billion in 2023 capacity
Projected 2022 capital spending reduced by $80 million; will support >$1 billion in 2023 capacity Projected Capital Spending Targeted Annualized Net Sales Capacity ($ millions) ($ in billions) ~$320 ~$300 $2.9 $2.1 ~$200 $1.5 $1.2 ~$100 $0.9 2022 2023 2024 2025 2022 2023 2024 2025 Full Capacity 22
Slide 23: 2022 Freshpet Guidance: Net Sales
2022 Freshpet Guidance: Net Sales Key Drivers of Net Sales Cadence Q1 Actual Q2 Q3 Q4 FY 2022 ++ -- ++ - 35+% growth vs YA Out-of-stocks and delayed marketing investment in YA Front loaded media investment (75/25) Complete trade Warehouse inventory refill on issue in YA bags ERP conversion Significa
Slide 24: 2022 Freshpet Guidance: Adj. Gross Margin
2022 Freshpet Guidance: Adj. Gross Margin Key Drivers of Adj. Gross Margin Cadence Q1 Actual Q2 Q3 Q4 FY 2022 + + - -- 40.8% (down ~370 bps vs YA) Buffer capacity Inflation in cost of materials, labor and transportation Second price increase ERP conversion Quality issue Third price increase Ennis st
Slide 25: 2022 Freshpet Guidance: Adj. EBITDA
2022 Freshpet Guidance: Adj. EBITDA Key Drivers of Adj. EBITDA Cadence Q1 Actual Q2 Q3 Q4 FY 2022 - -- + + 8.3% Adj. EBITDA Margin Buffer capacity Front loaded media investment (72/25) Ennis start-up/under-utilization Mismatch between inflation costs and pricing Third price increase Lower advertisin
Slide 26: Household Penetration & Buying Rate
Household Penetration & Buying Rate
Slide 27: Updated Nielsen HH panel methodology shows a larger consumer franchise
Updated Nielsen HH panel methodology shows a larger consumer franchise and balanced growth in penetration and buying rate Freshpet Household Penetration Growth Freshpet Buying Rate 4,923,734 $141.58 4,372,082 +13% $121.31 +17% 3,813,635 +15% $104.61 +16% 2020 2021 2022 2020 2021 2022 Total Penetrati
Slide 28: Still on path to meet our 2025 HH penetration goal
Still on path to meet our 2025 HH penetration goal Progress Towards 2025 Household Penetration Goal 6.08 2025 Goal: 11 Million HH’s 4.92 Current HH Penetration Households to Achieve 2025 Target Source: Nielsen HH Panel for the period ending 7/16/22 28
Slide 29: Nielsen's updated methodology for projecting HH penetration shows larger number of HH's
Nielsen’s updated methodology for projecting HH penetration shows a larger number of HH’s and more rapid growth Comparison of Old and New Nielsen HH Panel Methodology June 2022 Data Freshpet Penetration Growth Freshpet Penetration Growth (Nielsen’s previous method) (Nielsen’s new method) 4,891,977 4
Slide 30: Nielsen's updated methodology lowers calculated buying rate and growth
Nielsen’s updated methodology for projecting HH penetration lowers our calculated buying rate and buying rate growth Comparison of Old and New Nielsen HH Panel Methodology June 2022 Data Freshpet Buying Rate Freshpet Buying Rate (Nielsen’s previous method) (Nielsen’s new method) $154.59 $139.15 $127
Slide 31: Pricing Impact
freshpet Pricing Impact
Slide 32: Price sensitivity in line with our projections
Price sensitivity in line with our projections Total Freshpet Unit Price Sensitivity 1,550,000 $11.00 1,500,000 units $10.50 1,450,000 $10.00 1,400,000 1,350,000 $9.50 1,300,000 price $9.00 1,250,000 $8.50 1,200,000 1,150,000 $8.00 Freshpet Total RFG Total MegaChannel (xAOC+Pet) Units Freshpet Total
Slide 33: Freshpet buyers holding up better than the category and have begun to bounce back
Freshpet buyers holding up better than the category and they have begun to bounce back Freshpet vs Total Dog Food Buying HHs Rolling Past 4 Week Buyers 35,000,000 2,500,000 34,000,000 Freshpet 2,000,000 33,000,000 1,500,000 32,000,000 1,000,000 31,000,000 Total Dog Food 500,000 30,000,000 29,000,000
Slide 34: 52WE 2022-07-10, Rolling 52WE 2022-06-19, Rolling 52WE 2022-05-29, Rolling
1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 0 500,000 52WE 2019-01-06, Rolling 52WE 2019-01-27, Rolling 52WE 2019-02-17, Rolling 52WE 2019-03-10, Rolling 52WE 2019-03-31, Rolling 52WE 2019-04-21, Rolling 52WE 2019-05-12, Rolling Source: Numerator Data thru 7/24/22 52WE 2019-06-02, Rolling 52WE
Slide 35: 04WE 2022-07-10, Rolling 04WE 2022-06-19, Rolling 04WE 2022-05-29, Rolling
1,000,000 1,200,000 1,400,000 0 200,000 400,000 600,000 800,000 04WE 2019-01-06, Rolling 04WE 2019-01-27, Rolling 04WE 2019-02-17, Rolling 04WE 2019-03-10, Rolling 04WE 2019-03-31, Rolling 04WE 2019-04-21, Rolling 04WE 2019-05-12, Rolling Source: Numerator Data thru 7/24/22 04WE 2019-06-02, Rolling
Slide 36: Current Consumption Trends
Current Consumption Trends
Slide 37: Strong, sustained growth entering traditional pre-pandemic summer consumption pattern
Strong, sustained growth entering traditional pre-pandemic summer consumption pattern Nielsen Mega-Channel Consumption 18,000,000 16,000,000 Nielsen Mega-Channel consumption vs. YA: • Latest 4 weeks: +37% 14,000,000 • Q2: +41% • Q3 to date: 37% • YTD: +39% 12,000,000 +37% vs. YA (w/e 7/30/22) 10,000
Slide 38: On a 3-year stacked basis, our growth is remarkably consistent
On a 3-year stacked basis, our growth is remarkably consistent Nielsen Mega-Channel Consumption Growth 3-Year Stacked 102% 101%100% 100%100%101%99% 99% 99% 99% 99% 95% 93% 97% 96% 97% 98% 96% 94% 92% 93% 91% 93% 92% 94% 91% 92% 92% 90% 89% 38% 31% 27% 43% 41% 43%36%43%40%43% 45% 40%40% 37% 73% 42% 4
Slide 39: Q2 2022 consumption: Strong growth in all channels
Q2 2022 consumption: Strong growth in all channels Latest 13wk Nielsen Consumption Growth 45% 46% 41% 22% Mega-Channel XAOC Food Big Box Pet 39 Source: Nielsen consumption data thru 7/2/22
Slide 40: Distribution growth continues
4 W/E 01/06/18 42.9 4 W/E 02/03/18 43.1 4 W/E 03/03/18 43.5 4 W/E 03/31/18 43.9 4 W/E 04/28/18 44.2 4 W/E 05/26/18 44.5 4 W/E 06/23/18 4 W/E 07/21/18 44.744.9 4 W/E 08/18/18 4 W/E 09/15/18 45.045.3 4 W/E 10/13/18 4 W/E 11/10/18 4 W/E 12/08/18 Source: Nielsen Mega-Channel Data thru 7/30/22 4 W/E 01/0
Slide 41: Retail availability remains at a high level
500.0 550.0 600.0 650.0 700.0 750.0 850.0 900.0 800.0 1 W/E 05/30/20 1 W/E 06/13/20 1 W/E 06/27/20 1 W/E 07/11/20 1 W/E 07/25/20 1 W/E 08/08/20 1 W/E 08/22/20 1 W/E 09/05/20 1 W/E 09/19/20 1 W/E 10/03/20 Source: Nielsen Mega-Channel Data thru 7/30/22 1 W/E 10/17/20 1 W/E 10/31/20 1 W/E 11/14/20 1 W/
Slide 42: Freshpet is now the leading brand in the grocery channel
On a total brand basis, Freshpet is now the leading brand in the grocery channel Total Wet & Dry Dog Food Brands Dollar Sales: US Food (Latest 13wks thru 7/16/22 -- $M ) Freshpet Total RFG $105,220 Pedigree Total Dog Food $88,320 Blue Buffalo Total Dog Food $80,553 Purina ONE Total Dog Food $75,911
Slide 43: Freshpet is now the #4 brand in the dog food category
Freshpet is now the #4 brand in the dog food category Top Dog Food Brands Dollar Share Mega-Channel 13 weeks ending 7/16/22 Pedigree Total Dog Food 12.8 Private Label Total Dog Food 10.2 Blue Buffalo Total Dog Food 8.1 Purina ONE Total Dog Food 6.8 Freshpet Total RFG 6.1 Cesar Total Dog Food 5.3 Pur
Slide 44: Building meaningful share of the category
Building meaningful share of the category Freshpet $ Share of Wet & Dry Dog 14.3 14.5 13.8 12.7 7.3 7.5 7.2 6.8 5.9 6.1 5.8 5.5 2.7 2.7 2.6 2.7 4wk 13wk 26wk 52wk Freshpet Share of Wet + Dry Dog Total US Food Total US xAOC Mega-Channel Pet Superstore 44 Source: Nielsen Mega-Channel Data thru 7/16/22
Slide 45: Q2 2022 Freshpet E-Com grew 92% vs YA
Q2 2022 Freshpet E-Com grew 92% vs YA 16% Online Fresh Delivery 26% Last Mile Delivery $12.1MM 7.8% % of Total FP Sales 58% Click & Collect Through E-Com 84% of Sales Contribute to Brick & Mortar 45
Slide 46: 1H 2022 Freshpet E-Com 86% vs YA
1H 2022 Freshpet E-Com 86% vs YA 16% Online Fresh Delivery 26% Last Mile Delivery $23.2MM 7.9% % of Total FP Sales 58% Click & Collect Through E-Com 84% of Sales Contribute to Brick & Mortar 46
Slide 47: Q2 2022 Visibility & Availability
Q2 2022 Visibility & Availability
Slide 48: Store count continues to grow
Store count continues to grow Freshpet Store Count 24,277 23,631 22,716 21,570 2022 Guidance: +~1,300 to 24,931 19,499 18,004 16,609 15,015 13,387 10,826 2013 2014 2015 2016 2017 2018 2019 2020 2021 2Q 2022 48 Source: Internal data for the period ending 7/1/22
Slide 49: Q2 2022: Strong increase in new stores
Q2 2022: Strong increase in new stores Net New Stores Fridge Upgrades Second/Third Fridges 646 3,527 3,537 Store Count 3,003 3,108 24,277 439 346 265 617 631 23,155 277 331 Qtr. Increase YTD Increase Total Operating YTD Increase Total Operating YTD Increase Q2 2021 Q2 2022 Q2 2021 Q2 2022 Q2 2021 Q2
Slide 50: Q2 2022: Continued success with placements of large and multi-fridge stores
Q2 2022: Continued success with placements of large and multi-fridge stores Freshpet Fridge Fleet Installed Fridges by Size and Year Installed Distribution by Size (US & Canada) (US & Canada Stores) 6% 2% 8% 2% 1% 14% 4% 8% 17% 22% 18% 32% 63% 62% 68% 52% 50% 61% 25% 22% 25% 10% 8% Small Medium Larg
Slide 51: International Business
International Business 51
Slide 52: Canadian business accelerating behind advertising investment
$0 $20,000 $40,000 $60,000 $80,000 $100,000 1/4/20 1/18/20 2/1/20 2/15/20 2/29/20 3/14/20 3/28/20 4/11/20 4/25/20 5/9/20 Source: Internal company data through 7/16/22 5/23/20 6/6/20 6/20/20 7/4/20 7/18/20 8/1/20 8/15/20 8/29/20 9/12/20 9/26/20 10/10/20 10/24/20 11/7/20 11/21/20 12/5/20 12/19/20 1/2/
Slide 53: Freshpet's advertising-driven model works in the UK
Freshpet’s advertising-driven model works in the UK Freshpet UK Weekly Sales by Retailer £140,000 £117 £117 £120,000 £113 £112 £110 £110 £110 £111 £110 £110 £111 £108 £109 £108 £107 £108 £106 £107 £107 £105 £105 £104 £104 £102 £103 £102 £102 £102 £103 £101 £102 £103 £102 £103 £104 £103 £102 £103 £10
Slide 54: Ennis Kitchen Update
freshpet Ennis Kitchen Update
Slide 55: Ennis Phase I is on track to open in Q3 and produce meaningful quantities in Q4
Ennis Phase I is on track to open in Q3 and produce meaningful quantities in Q4 • Enables total Freshpet growth to >$1.1 billion in 2022 • Most environmentally sustainable Kitchen • Most efficient Freshpet Kitchen • Enables significant quality improvements • Enables lower cost logistics for part of
Slide 56: "Feed the Growth" creates scale and leverage through accelerated growth rate
“Feed the Growth” creates scale and leverage through accelerated growth rate 56
Slide 57: Appendix
Appendix
Slide 58: Reconciliation Between Gross Profit and Adjusted Gross Profit
FRESHPET, INC. AND SUBSIDIARIES RECONCILIATION BETWEEN GROSS PROFIT AND ADJUSTED GROSS PROFIT Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 (Dollars in thousands) Gross profit $ 51,080 $ 43,091 $ 95,833 $ 79,405 Depreciation expense 4,295 4,021 8,996 7,821 Plant start-up
Slide 59: Reconciliation Between SG&A Expenses and Adjusted SG&A Expenses
FRESHPET, INC. AND SUBSIDIARIES RECONCILIATION BETWEEN SG&A EXPENSES AND ADJUSTED SG&A EXPENSES Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 (Dollars in thousands) SG&A expenses $ 69,215 $ 49,557 $ 129,846 $ 95,589 Depreciation and amortization expense 3,585 3,633 6,871
Slide 60: Reconciliation Between Net Income (Loss) and Adjusted EBITDA
FRESHPET, INC. AND SUBSIDIARIES RECONCILIATION BETWEEN NET INCOME (LOSS) AND ADJUSTED EBITDA Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 (ollars in thousands) Net loss S$ (20,586) $ (7,475) $ (38,128) $ (18,364) Depreciation and amortization 7,880 7,654 15,867 14,743 In
Slide 61: Freshpet: Million HH by 2025
freshpet 4 11 MILLION HH BY 2025