Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Q3 2021 Earnings Presentation
63 slides from Freshpet's earnings presentation, Nov 8, 2021
Slide 1: pets. people.
pets. people.
Slide 2: Forward Looking Statements & Non-GAAP Measures
Forward Looking Statements & Non-GAAP Measures Forward-Looking Statements Certain statements in this presentation constitute “forward-looking” statements, which include any statements related to the novel coronavirus ("COVID-19"), the Freshpet Kitchens Expansion, our net sales and Adjusted EBITDA gu
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
Slide 5: Q3 2021 Results
freshpet Q3 2021 Results
Slide 6: Q3 2021: Continued strong net sales growth offset by inflation and temporary operating inefficiencies
Q3 2021: Continued strong net sales growth offset by inflation and temporary operating inefficiencies Freshpet Q3 2021 Financial Results Net Sales: Net Sales ($millions) _m Adj. EBITDA ($ millions) ‘Adj. EBITDA $107.6 $84.2 $17.0 sao +42% 932020 932021 Net Income (Loss) ($ millions)
Slide 7: YTD 2021: Strong growth with cost challenges
YTD 2021: Strong growth with cost challenges Freshpet YTD Financial Results (Sept 30) tet Sales ($milions) _ Adj EBITOA ($ milion) ‘Adj, EBITDA $309.6 ° $34.0 +113% $33.2 2020 2021 ‘Net Income (Loss) ($ millions)
Slide 8: Strong production supports robust growth vs. YA
Strong production supports robust growth vs. YA Winter storms 36% 25% 0% Macch Freshpet Pounds Produced -- 2021 (growth vs. YA) 45% 41% 46% 31% July ftulyholiday 47% August 62% September 59% October
Slide 9: We successfully re-filled ~$8.5 million of trade inventory
We successfully re-filled ~$8.5 million of trade inventory Q3 2021 Consumption to Net Sales Bridge Consumption Growth Trade inventory Change Net Sales Growth the drawdown of trade Inventory in 2 ey in 20
Slide 10: Strong production growth generated internal inventory
Strong production growth generated internal inventory needed to improve fill rates by 20 pts. Q3 2021 Net Sales & Internal Inventory Increases/Decreases $107.6 (aero me SRT — — ees — © $84.2 32020 932021 = Net Sales
Slide 11: Fill rates improved since July; significant backlog of orders remain
Fill rates improved by 20 pts since July; significant backlog of orders remain to be filled in Q4 Fill Rate Oct. Avg. = 64% July Avg. = 44% |
Slide 12: Significant investment in maintenance and inventory limited net sales potential in Q3
Significant investment in maintenance and inventory limited net sales potential in Q3 Q3 2021 Production Capacity to Net Sales Capacity (Smillions) $122.5 = | -$5.0 ozo $107.6 $3.0 ze) — — Inventory Build July Maintenance 2 Bag Line 24/7 Labor Day Holiday June Prod. Run Rate Bag ine 1 Upgrade Treats
Slide 13: Adj. Gross Margin impacted by inflation and temporary operating inefficiencies
Adj. Gross Margin impacted by inflation and temporary operating inefficiencies Q3 2021 Adj. Gross Margin YTD Adj. Gross Margin 49.3% 49.3% 45.6% 44.0% 32020 32021 2020 2021, Gross Margin (GAAP)
Slide 14: Accelerating wage and ingredient inflation had significant impact on adj. gross margin
Accelerating wage and ingredient inflation had significant impact on adj. gross margin Q2 2021 to Q3 2021 Adj. Gross Margin Bridge 46.1% -1.4% 0.9% 44.0% 0.4% es 3 2021 Ad}. Gr (02.2021 Adj. Gross Margin Labor and Overhead ‘Mix/Operating Improvement
Slide 15: Pricing, freight, labor and high-speed technology initiatives designed to improve margins
Pricing, freight, labor and high-speed technology initiatives designed to improve margins Q4 2021 Qi 2022 Q2-4 2022 Pricing 4.8% Price Increase Freight Bracket Pricing Second DC (Timing TaD) (Benefits begin Q4) Note: Initiatives must also offset ongoing mix shift towards lower margin bags and Kitche
Slide 16: Continue to deliver significant SG&A leverage excluding media & logistics
Continue to deliver significant SG&A leverage excluding media & logistics Q3 Adj. SG&A Leverage YTD Q3 Adj. SG&A Leverage 34.8% 34.8% 29.1% Plead 14.1% ae: aoa 13.1% 32020 a0. Fv 2020 Fy 2021 Ad, SGBA% Excluding Media & Logistics Total Adj. SGA % Ad} SG8A% Excluding Medla & Logistics Total Adj SGBA%
Slide 17: Market Data
freshpet Market Data
Slide 18: Consumption growth vs. YA projected to accelerate through 2H21
Consumption growth vs. YA projected to accelerate through 2H21 Nielsen Mega-Channel Consumption s390m00 2000000 oc stomp o0n00 009000, r Capacity constrained and out-of-stocks scan Nielsen Mega-Channel consumption vs. YA: + Latest 4 weeks:+22% 7,900,000 + Q3:+18% + Q4to date: +22% sone + VID: 424% e
Slide 19: Inflection point: 2021 growth rate re-accelerates
Inflection point: 2021 growth rate re-accelerates as in- stocks improve & advertising investment increases Freshpet 2021 Growth Rate vs. 2020 Consumption 2020: post-COVID surge Bheavy advertising | | 2020: outof stocks & reduced advertising 1 a 1 28% 21% 22% 22% 2% aig mm Hit so 10 288 mm2021 te 202
Slide 20: Freshpet: Building meaningful share of the category
Freshpet: Building meaningful share of the category Freshpet $ Share of Wet & Dry Dog 1s 113 113 ‘og 62 6.2 6.2 5.9 52 Sa Sa 49 2.8 2.8 27 26 4wk 130k 26wk 520k Freshpet Share of Wet + Dry Dog Total USFood mTotal USxAOC m= Mega-Channel__m Pet Superstore
Slide 21: Out-of-stocks constrained growth in Q3; continued strength in pet specialty
Out-of-stocks constrained growth in Q3; continued strength in pet specialty Latest 13 Week Nielsen Consumption Growth 36% 18% 15% 15% ‘Mega-Channel xAoc Food Big Box Pet
Slide 22: Continued strong velocity gains
Continued strong velocity gains Freshpet Velocity $/swna acy COVID Crisis, iL uy ) m es sa
Slide 23: Freshpet now rivals the leading brands in the grocery channel
On a total brand basis, Freshpet now rivals the leading brands in the grocery channel Total Wet & Dry Dog Food Brands Dollar Sales: US Food (Latest 13wks thru 10/09/21--SM) Pedigree Total Dog Food $76,020 Blue Buffalo Total Dog Food 75920 Freshpet Total REG 74,735, Purina ONE Total Dog Food $88,186
Slide 24: Freshpet velocity leads the category in grocery
Freshpet velocity leads the category in grocery Total Wet & Dry Dog Food Brands Dollar Velocity: US Food (Latest 13Wks $/%6ACV thru 10/09/21 ~$M) Pedigree Total Dog Food saz ‘Blue Buffalo Total Dog Food $385 I Purina ONE Total Dog Food $767 Beneful Total Dog Food seo. Private Label Total Dog Food $5
Slide 25: Freshpet is #1 brand by dollar sales in US Food
Retailers paying attention: Freshpet is #1 brand by dollar sales in US Food {_ Larger Dollar Sales Than All Dry Dog Food Brands in US Food Grocery) | Dog Food Brands Consumption Brands > $20N4N4 Annual Sales US Food (Latest saWeeks) 9p.
Slide 26: Freshpet is fastest growing brand by dollar sales
Retailers paying attention: Freshpet is fastest growing brand by dollar sales Dog Foods Brand Dollar Change Brands >$10NM Dollar change ‘egachannel (Latest 52),
Slide 27: Category growth skews towards premium
Category growth skews towards premium it Growth by Value Segment Value Segment Size Latest 13wks dollar sales vs. YA Latest 13wk Dollar Share 11%, Vals Super Premium Wet+Ory 15.9 Premium WetsDry 62 vaeweoy [as Pre talveroy I 2s
Slide 28: Despite out-of-stocks, store count continued to grow
Despite out-of-stocks, store count continued to grow Freshpet Store Count rane 2338 21,570 19,499 18,004 16,609 15,015 13,387 2018 2015 2016 2017 2018 2019 2020 932021
Slide 29: Distribution growth continues despite capacity limits
Distribution growth continues despite capacity limits Freshpet % ACV pssst: 2754955055158
Slide 30: Q3: Continued increases in retail availability & visibility
Q3: Continued increases in retail availability & visibility Store Count 23,381 Net New Stores 801 665 251 226 (tr. increase Y1D increase 032020 #032021 SS Sri Be piste} [sz scf <0 5a 1B Fridge Upgrades 3,123 2226 635665 Total Operating YTD New =.032020 32021 Second Fridges 3,159 2351 1.344 | = Total
Slide 31: Q3 2021 Freshpet E-Com grew +57%
Q3 2021 Freshpet E-Com grew +57% vs. amazon‘ esh F instacart Peapod SHIPT 6.8% % of Total FP Sales Through E-Com 86% of Sales Contribute to Brick & Mortar
Slide 32: YTD Q3 2021 Freshpet E-Com grew +74%
YTD Q3 2021 Freshpet E-Com grew +74% vs. amazon‘res!) F instacart Peapod SHIPT 6.1% % of Total FP Sales Through E-Com sa es Lies) ClickList f es .&, vaguaer 87% of Sales Contribute to Brick & Mortar
Slide 33: HH penetration growth is temporarily restrained by out-of-stocks
HH penetration growth is temporarily restrained by out-of-stocks Freshpet Penetration Growth Total HH’s 4,112,309 3,777,191 034,275 a 427% 2019 2020 2021 (Core Dog Penetration + ++++Total Penetration Trending Core Dog Penetr
Slide 34: Exceeded MM HH's: On our way to MM HH goal
Exceeded 4 MM HH's: On our way to 11 MM HH goal Progress Towards 2025 Household Penetration Goal 6.89 m™ Current HH Penetration 2025 Target HH Penetration
Slide 35: Buying rate continues to grow despite out-of-stocks
Buying rate continues to grow despite out-of-stocks Freshpet Buying Rate $150.56 145% $130.88 $134.08 $126.28 $125.18 10% . 1% $114.57 $105.36 $107.09 2018 2019 2020 2021 Total Buying Rate m Core Dog Buying Rate
Slide 36: freshpet
freshpet
Slide 37: Canadian business accelerating behind advertising investment
Canadian business accelerating behind advertising investment Leading Canadian Freshpet Retailer Weekly Sales Last 4 weeks +32% vs. YA. |-———+
Slide 38: Freshpet's advertising-driven model works in the UK
Freshpet’s advertising-driven model works in the UK Freshpet UK Last 4 weeks: Weekly Sales by Retailer Sanne , aS obec Fi Pia | erate
Slide 39: Slide 39
Slide 40: 2021 Adj. EBITDA guidance updated to reflect incremental inflation and temporary inefficiencies
2021 Adj. EBITDA guidance updated to reflect incremental inflation and temporary inefficiencies $in Millions Previous: New Change Net Sales >$445 “$aa5 ob = = YA 40% "40% Adjusted EBITDA —>$61 ~$50 “$11 vs. YA 430% 47% + Net Sales: Provides consideration for delay in Kitchens South Line #2 start-up
Slide 41: We expect significantly more net sales capacity in Q4 than Q3
We expect to have significantly more net sales capacity in Q4 than Q3 Q3 to Q4 2021 Production Capacity Bridge $20.0 $10.0 323.4 ~» z $135.0 ($4.0) Estimated Giretsaes $8.0 | ens $107.6 Es Q3 Inv. Build Diff: Hol/Maint vs 3 z No Hol/Maint Run Rate Cap. 3 Wet Sales (8 capacity Adtions Total a capacty
Slide 42: Q4 net sales will grow significantly vs. Q3 and YA
Q4 net sales will grow significantly vs. Q3 and YA Increased production capacity Volume from re-filling trade inventory previ &, Mim ame 7) WB improved in-store availability 5 a Strongest Q4 marketing investment ever Mia. Healthy demand for Freshpet in a4
Slide 43: Inflation and temporary operating inefficiencies accelerated in Q3 and expected to continue in Q4
Inflation and temporary operating inefficiencies accelerated in Q3 and expected to continue in Q4 Chicken Beef Packaging Labor Freight cee a Key cost element oe = Pl ami™ Labor market Assumed Floatswith resin | tightnessis | inflation but Priced annuallyin | priced quarterly; | price; increases | dr
Slide 44: COVID Impact & Addback
COVID Impact & Addback Q2 Actuals Team members became eligible for vaccines on March 31, 2021 Offered team members an incentive to provide documentation that they have successfully been vaccinated * 2 days of paid time off if vaccinated by June 1; 1 day of paid time off if vaccinated between June 1
Slide 45: Progress Towards Improved Retail Conditions
freshpet Progress Towards Improved Retail Conditions
Slide 46: Retail availability is improving
Retail availability is improving Freshpet Total Distribution Points (TDP) Nielsen Mega-Channel —COVID Crisis
Slide 47: Out-of-stocks have improved significantly
Out-of-stocks have improved significantly Freshpet Consumer Comments: Out-of-stock & Can’t find 1000 POLE OSE LEE EEE LEEEN “s Out of Stock/Can't Find sourte: Intra! comoony dto a7
Slide 48: Production is running well ahead of YA with more capacity coming on-stream
Production is running well ahead of YA with coming on-stream more capacity 2021 vs. 2020 Production Performance Comparison Rolling 7-Day Average Pounds Produced ‘April 1 Nov. 7 production = 525 k ibs/calendar day Kitchens 1 shutdown for upgrade 2 I Easter Holiday af uy Winter storms Holiday & 3 Avg.
Slide 49: Production is in excess of consumption every week outside of holidays and upgrades
Outside of holidays, snowstorms and upgrades, production is in excess of consumption every week this year Production vs. Consumption se ‘Pf ily Holiday Kitchens 1 4000 shutdown for upgrade Memorial Day holiday oo Tabor Day Winter Storm Urt rach (Kitchens South) ony 4000 ‘sfs/aza_ (23/000, 7/e3/mz0 w
Slide 50: freshpet
freshpet
Slide 51: Steady increases in production capacity through 2021
Steady increases in production capacity through Freshpet Annualized Production Capacit 2021 < Line 3 in Kitchens Kitchens 2.0 rolls 760 South: begins in Qa ‘Successfully 24/4 operation line to 24/7 $ started up rolls ‘on both lines in $710 ay mM at inkitchens 2.0 itchen: kitche | ) v in $660 Kitchen
Slide 52: Key capacity projects remain on track
Key capacity projects remain on track vo HEE = new technotogy Bethlehem Team cae Under construction Planning begun Engineering Team SA v Design begun Under construction Team 2019 2020 2021 2022 2023 2024 2025
Slide 53: Key efficiency improvement projects underway
Key efficiency improvement projects underway v inder construction [I = new technology romania Begins late Nov. Kitchens 1.0 Higher Under construction. —_Planningbegun » Planning begun capacity/lower anne? capital lines aEIS Testing begun, second DC fosisoc 2020 2021 2022 2023 2024 2025
Slide 54: Almost $2 billion in net sales production capacity by 2025
Almost $2 billion in net sales production capacity by 2025 $300 $300 Kitchens 1.0 $350 $50 South Line #1 Freshpet Capacity Net Sales Potential Pulled forward one quarter SSS $1,160 $760 $610 $400 $260 a a | Ennis Phase 1 New Capacity ™ Cumulative Capacity [Opens in 2023 $1,460 $300 kitchens South Bl
Slide 55: Kitchens 2.0 is now running 24/7 on all lines
Kitchens 2.0 is now running 24/7 on all lines
Slide 56: Kitchens 3.0 will include all the technical advances found in Kitchens 2.0
Kitchens 3.0 will include all the technical advances found in Kitchens 2.0 with additional improvements designed to increase throughput, improve quality and safety, and enhance the environmental sustainability ofthe facility
Slide 57: Freshpet Kitchen in Ennis, TX
Freshpet Kitchen in Ennis, TX October 2021
Slide 58: "Feed the Growth" creates scale and leverage through accelerated growth rate
“Feed the Growth” creates scale and leverage through accelerated growth rate Expand HH Penetration freshpet Z 4 FEED THE GROWTH Velocity 11 MILLION HH BY 2025 roe Expand Visibility 8 Availabilty
Slide 59: FEED THE GROWTH
FEED THE GROWTH freshpet 4
Slide 60: Slide 60
Slide 61: Reconciliation Between Gross Profit and Adjusted Gross Profit
FRESHPET, INC. AND SUBSIDIARIES RECONCILIATION BETWEEN GROSS PROFIT AND ADJUSTED GROSS PROFIT Three Months Ended Nine Months Ended September 30, September 30, 2024 2020 2024 2020 (Dollars in thousands) Gross Profit S 41525 $ 36654 $ 120931 $ 102,377 Depreciation expense 4.075 2.129 11.896 6422 Plant
Slide 62: 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 Nine Months Ended September 30, September 30, 2024 2020 2021 2020, (Dollars in thousand: ‘SGBA expenses S 42365 S$ 32895 $ 137,955 $ 101.273 Depreciation and amortization expense 3671 2
Slide 63: Reconciliation Between Net Income (Loss) and Adjusted EBITDA
[FRESHPET, INC. AND SUBSIDIARIES [RECONCILIATION BETWEEN NET INCOME (LOSS) AND ADJUSTED EBITDA Three Months Ended Nine Months Ended ‘September 30. ‘Septem Wai a FA ‘Dota thousands). Net oss) income $ gow $738 S "Body sa Depreciaton and amortization 714 505222489 18.848 Interest expense err 26 22 999