Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Investor Presentation (September 2018)
55 slides from Freshpet's investor presentation, Sep 10, 2018
Slide 1: Investor Presentation: September 2018
Investor Presentation: September 2018 Exhibit 99.1
Slide 2: Safe Harbor Forward Looking Statements
Safe Harbor Forward Looking Statements This presentation contains “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the Company’s results may differ materially from those expressed or imp
Slide 3: Freshpet has the potential to change the way people feed their pets
We fundamentally believe that Freshpet has the potential to change the way people feed their pets . . . forever
Slide 4: Intersection of Two Powerful Macro-Trends in CPG
Freshpet Lives at the Intersection of Two Very Powerful Macro-Trends in CPG Humanization of Pets Fresh, Wholesome, All-Natural Foods
Slide 5: Who Is Freshpet?
A disruptive innovation in a huge and growing industry A socially responsible, pet health-centric brand built around the contemporary consumer We are redefining what good pet food is in ways that are intuitive to consumers We deliver a value proposition relevant to the average consumer and every cla
Slide 6: We start with FRESH ingredients & finish with FRESH food
We start with FRESH ingredients & finish with FRESH food. No preservatives, no additives...only the WHOLE NURISHMENT pets need.
Slide 7: Commitment to our Consumers
Category leading palatability Source: Summit ridge kennels paired feeding study 76% of consumers report health difference Source: Russell research attitude and usage study Freshpet n= 980 Category leading product satisfaction Top Two (Extremely or Very Satisfied) Source: Russell research attitude an
Slide 8: We Operate Differently
We Operate Differently Delighting consumers with fresh food & our company ideology Environmentally Focused Employee Engagement Community & Consumer Engagement
Slide 9: A Difficult Business to Replicate
High Brand Loyalty Alignment with deep pet parent emotional motivations Differentiated Innovative forms, technologies, and appearance Manufacturing Proprietary technology, processes, and infrastructure Freshpet Fridge Branded, company-owned real estate Supply Chain Only refrigerated pet food network
Slide 10: Growth Potential in Fresh E-Commerce
With Growth Potential in Fresh E-Commerce Strategy: Grow with winning players in fresh e-commerce Curbside Online Fresh Retail Home Delivery
Slide 11: In 2017, we launched our new strategy
In 2017, we launched our new strategy . . .
Slide 12: Growth Goal: $300 million net sales as soon as 2020
Growth Goal: $300 million net sales as soon as 2020 Future Economic Model FY 2016 FY 2020 Growth Rate 15% 15-20% Stores 16,609 23,000 Adj. Gross Margin 50.9% 53.9% Adj. EBITDA Margin 13% 20+% Media Investment ~6% of sales ~9% of sales Advertising Payback 1.5 yrs -- Free Cash Flow -$13.9M ~15% of sal
Slide 13: And the growth accelerated
And the growth accelerated . . . . Nielsen Mega-Channel: XAOC + Pet + WFM Sales Growth
Slide 14: Increased awareness and penetration
Increased awareness and penetration . . . 1.4%
Slide 15: Awareness and penetration well below competitors
Freshpet Rachel Ray Blue Buffalo Purina ONE Cesar Awareness (Aided) 35% 52% 86% 82% 70% Penetration 1.4% 3.6% (dry) ~8% (est) 5.2% (dry) 3.4% (wet) But still well below our competitors . . . Source: 2016 Brand Tracker, IRI 2016 HH Panel
Slide 16: Strong velocity growth
Strong velocity growth . 2017 Same Stores Sales Growth By Vintage Representative Customer 35.0% 33.4% 29.3% 30.0% 26.7% 25.0% 20.7% 21.1% 19.4% 1 ™ Original $/S/W mJan-12 $/S/W ® Jan-13 $/S/W m Jan-14 $/S/W mJan-15 $/S/W m Jan-16 $/S/W 20.0% 15.0% 10.0% 5.0% 0.0% Fr éshp t FEED THE GROWTH?#
Slide 17: Freshpet grew into its scale in 2017
Which helped Freshpet grow into its scale in 2017. . . 100 bps reduction *Leverage adjusted to projected inflationary growth of infrastructure By 2020: 900 bps reduction in fixed costs
Slide 18: Benefits of scale and velocity
Benefits of scale and velocity Fixed Cost Pick-Up Manuf. overhead absorption G&A overhead absorption Logistics More cases per pallet More pallets per order/full trucks More straight pallets Ultimately, fewer miles per order Retail Presence Lower % sales to service fridges Higher frequency retail cov
Slide 19: Year II: Bigger and Faster
Freshpet FEED THEG GROWTH/ YEAR II: Bigger and Faster
Slide 20: In 2018, We Are Accelerating Fresh Growth
In 2018, We Are Accelerating Fresh Growth… 2018 Fresh-only sales guidance: +26% 20172018% Change Net Sales $152.4>$19025+% Adjusted EBITDA$17.6>$2014+% 2018 Guidance +15% +17.5% >25% >25%
Slide 21: Doubling Down On Media
Doubling Down On… Media: 60% increase for the second year in a row Each quarter will increase vs. YA 70/30 first half vs. second half spending $8.0M $8.5M $13.5M $22M
Slide 22: Doubling Down On Velocity drivers
Doubling Down On… Velocity drivers: Upgraded fridges Focused innovation After Before Select Roasted Meals Grain Free Select Beef Roasted Meals Premiumization & Added Variety Small Dog Select Roasted Meals Multi-Protein
Slide 23: And the Growth Has Accelerated Again
And the Growth Has Accelerated Again… Nielsen Mega-Channel: XAOC + Pet + WFM Sales Growth YTD ‘18 fresh consumption +27%
Slide 24: Freshpet is the #1 Fastest Selling Dog Food Brand in US Food
Source: Nielsen 13 weeks ending 8-11-18 - $PPD Freshpet is the #1 Fastest Selling Dog Food Brand in US Food, Surpassing All Other Wet and Dry Brands! 54%* ACV FRESH Private Label Private Label DRY DRY DRY DRY DRY DRY DRY DRY DRY WET WET WET WET WET *US Food ACV
Slide 25: Growing Faster Than the Category in All Classes of Trade
Growing 25 pts. Faster Than the Category in All Classes of Trade Freshpet Total RFG L4W L13W L52W 30.2 29.6 25.4 31.9 31.0 27.8 35.9 34.8 31.9 23.2 24.2 16.9 Total xAOC+Pet+WFM Total US xAOC Total US Food Big Box Pet $ % Chg YA – Week Ending 08/11/18 Nielsen: Freshpet RFG $ Latest 4 Week Data as of
Slide 26: Increased Penetration & Buying Rate
Increased Penetration & Buying Rate Total Freshpet Buying Rate, Penetration and Repeat Rate Dollars per consumer/yr. Source: TTL FP RFG, 52 weeks ending June 6/18, Nielsen HH Panel, Internal Buy Rate Calculation, Repeat NBD-Adj Nielsen HH Panel
Slide 27: Growth is Driven by Advertising that Drives Penetration
Growth is Driven by Advertising that Drives Penetration Nielsen HH Panel date for Freshpet Core Dog – Rolling 52 week penetration data
Slide 28: Adding New Buyers Who Behave Like Previous Buyers
Adding New Buyers Who Behave Like Previous Buyers New User Buying Rate: Freshpet Core Dog MY= 52 weeks ending June Nielsen HH Panel date for Freshpet Core Dog – 52 week buying rate data for new users by year
Slide 29: Steady Distribution Growth & Accelerating Velocity
Steady Distribution Growth & Accelerating Velocity Nielsen Mega-Channel ACV and $M/$M ACV for 4 week periods 4/23/16 to 8/18/18
Slide 30: Growing Distribution Towards 50% ACV
Growing Distribution Towards 50% ACV Nielsen Mega-Channel % ACV for 4 week periods 7/20/13 through 8/18/18
Slide 31: Freshpet Grew into its scale in 2017 and first half of 2018
Freshpet Grew into its scale in 2017 and in the first half of 2018 Plans to deliver 9% incremental margin by 2020 $ in millions *Leverage growth projected excluding media $152 $190
Slide 32: Structural Profitability Improvement
FY 2017 Forecast FY 2018 Forecast FY 2020 +1.1% +3.6% Reported Structural Profitability Reported Temporary differences* +9.0% *Temporary differences in Forecast FY 2018 represent 130 basis points of raw material cost and 60 basis points related to unabsorbed labor from 7 day operation. Strong struct
Slide 33: Path to 20% Adjusted EBITDA Margin
Contribution Margin* - Represents Adj. Gross Margin excluding Logistics and Brokerage cost. Guidance - FY 2018 Adj. EBITDA Projected FY 2020 Adj. EBITDA Contribution Margin* 40% on additional Net Sales Media Leverage SG&A increase (excluding logistics &brokerage) >$20mm $190m Net Sales +$44mm +$5mm
Slide 34: Just scratching the surface of HH penetration potential
Just scratching the surface of HH penetration potential . . . By 2025, there will be 7.5 million HH’s who have expressed top 2 box purchase interest in the Freshpet idea – and we have reached <2 million so far Prime Prospects With Top 2 Box Purchase Interest in Freshpet Concept PP’s with Positive In
Slide 35: A business surpassing $500 million by 2023
At existing media efficiencies, we could create a business surpassing $500 million by 2023. . . . and still growing quickly
Slide 36: International expansion to impact growth in 2020 and beyond
We expect international expansion to meaningfully impact Freshpet’s growth in 2020 and beyond Currently testing in:
Slide 37: Potential for Continued Growth Beyond 2020
Potential for Continued Growth Beyond 2020 7.5 MM HH’s +10%/year 10% of sales UK and beyond >55% ACV Growth Potential: 2020 and beyond HH Penetration Buying Rate Increased Distribution Geographic Expansion E-commerce
Slide 38: Delighting pet parents, pets, shareholders and employees
Delighting pet parents, pets, shareholders and employees . . .
Slide 39: APPENDIX: Consumer Dynamics
APPENDIX: Consumer Dynamics
Slide 40: Grocery and Mass: Select is middle of the pack on cost to feed
Grocery and Mass Select is middle of the pack on cost to feed
Slide 41: Pet Specialty: Vital is an economical choice in Pet
Pet Specialty Vital is an economical choice in Pet
Slide 42: Reasons start buying Freshpet
Source: Nielsen NLR Survey 2017, n=67 Why have you INSERT Q9 RESPONSE: started purchasing, purchased more of Freshpet in the past 12 months compared to the previous 12 months? Please select all that apply. Note: Top 13 responses shown 80% Health 70% Dog Eating Woes 50% Add Variety to Meal Reasons st
Slide 43: Freshpet Dog Parent Segments
Visitors (Use Occasionally) 40% of FP Buyers 15% of FP $ Loyal (Use Exclusively or Most Often) 31% of FP Buyers 53% of FP $ FRESHPET DOG PARENT SEGMENTS * Fresh, Real Food * Mixers - VARIETY Married with children Multi-pet HH/have cats Income $80K Like to try new cuisines/restaurants Eating as much
Slide 44: Barriers to Purchasing Freshpet
Source: 2016 FP Brand Tracker, 2016 FP A&U, TTL Aware Non Users/Prime Prospects Main Reason Not Purchasing, Shop-A-longs, n=202 BARRIERS TO PURCHASING FRESHPET (AMONG PRIME PROSPECTS) 43% Aided Awareness Making the Strange, Familiar It’s freshER Roll looks like a Sausage/”Gross Factor” ~40% Content
Slide 45: Appendix: Kitchens 2.0
Freshpet Appendix: Kitchens 2.0 PRESERVATIVES CAN KISS MY i
Slide 46: Expanding our manufacturing advantage
Expanding our manufacturing advantage . . . Improving Safety, Quality, Value, Customer Delight Quakertown Kitchens Kitchens 2.0
Slide 47: By creating Freshpet Kitchens 2.0
By creating Freshpet Kitchens 2.0 . . . Use automation to further improve: Quality Safety Cost
Slide 48: Kitchens 2.0 plan will deliver
Kitchens 2.0 plan will deliver . . . Efficient use of capital: Payback at full capacity in <2 years Strengthened manufacturing expertise advantage: Increased automation delivers improved quality, safety and lower cost – improving gross margins Continued focus on existing gross margin improvement goa
Slide 49: Creating 2nd Production Facility on Site
Creating 2nd Production Facility on Site Existing 100,000 sq. ft. production facility Existing 50,000 sq. ft. innovation center and warehouse renovated to include production and R&D New 90,000 sq. ft. construction Total site: 15.3 acres
Slide 50: Continuing Commitment to the Environment
Continuing Commitment to the Environment 100% landfill free 100% wind energy Rain water will be collected and used for lawn and landscape irrigation
Slide 51: Freshpet Kitchens 2.0 Investment
Freshpet Kitchens 2.0 Investment Incremental volume will flow through at a 40% contribution rate At full capacity payback is less than two years. Capex Spend Annual Sales Capacity Contribution $200+mm $80mm $100mm
Slide 52: Kitchens 2.0 Adjusted Gross Margin Growth
Freshpet Kitchens 2.0 Adjusted Gross Margin Growth Safety, quality, and productivity enhancements will improve adjusted gross margin by 100 basis points, with an additional 50 basis points due to scale
Slide 53: Kitchens 2.0 Contribution to FCF
Freshpet Kitchens 2.0 Contribution to FCF Original Freshpet Kitchens Freshpet Kitchens 2.0 Capacity Capacity Free Cash Flow Free Cash Flow $300mm ~$44mm 15% $500mm ~$97mm 19% As we continue to leverage our infrastructure we expect to reap the benefits of scale with our Free Cash Flow increasing by 4
Slide 54: Freshpet Kitchens 2.0 - Recap
Freshpet Kitchens 2.0 - Recap Cost: $100mm plus or minus 5% Financing: Replace our existing $30mm credit line with a $90mm line in Q4 18 Leverage: Will not exceed 2.5x Adj EBITDA Pay Off: We expect to pay off the credit line by 2022 Capacity: Net Sales capacity increases $200mm+ to $500mm+ Payout: A
Slide 55: Timeline
Timeline 2016 2017 2018 2019 2020 2021 2022 2023 Existing Kitchens fully operational Feed the Growth 7 day operations begin Break ground on Kitchens 2.0 Start-up Kitchens 2.0 Next increment of capacity needed* * Timing for next increment of capacity is dependent on growth rate and product mix