Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Q2 2023 Earnings Presentation
42 slides from Freshpet's earnings presentation, Aug 7, 2023
Slide 1: Q2 2023 Earnings
Q2 2023 EARNINGS August 7, 2023 1 Q2 2023 EARNINGS PRESENTATION
Slide 2: Forward Looking Statements & Non-GAAP Measures
FORWARD LOOKING STATEMENTS & NON-GAAP MEASURES Forward-Looking Statements Non-GAAP Measures Certain statements in this presentation by Freshpet, Inc. (the “Company”) constitute Freshpet uses certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, “forward-looking” statements, which i
Slide 3: Forward Looking Statements & Non-GAAP Measures
FORWARD LOOKING STATEMENTS & NON-GAAP MEASURES Freshpet defines Adjusted Gross Profit as gross profit before depreciation expense, COVID- Certain of these measures represent the Company's guidance for fiscal year 2023. The 19 expense and non-cash share-based compensation, and Adjusted SG&A as SG&A C
Slide 4: Freshpet strengthens the bond between people and our pets
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 Q2 2023 EARNINGS PRESENTATION
Slide 5: Progress Report
PROGRESS REPORT Advertising & Innovation Drive Efficiencies Expand HH in Logistics Penetration Leverage Scale Increase in COGS Velocity Leverage Scale Expand Visibility in SG&A & Availability Expand Capacity 5 Q2 2023 EARNINGS PRESENTATION
Slide 6: Q2 2023 Results
Q2 2023 RESULTS 6 Q2 2023 EARNINGS PRESENTATION
Slide 7: Strong Q2 Results Demonstrating Improved Operating Performance
STRONG Q2 RESULTS THAT DEMONSTRATE IMPROVED OPERATING PERFORMANCE & 20th CONSECUTIVE QUARTER OF >25% GROWTH FRESHPET Q2 2023 NET SALES FRESHPET Q2 2023 ADJ. EBITDA ($ millions) ($ millions) $183.3 $146.0 $9.0 +26% +34% 2022 2023 2022 2023 ($1.9) 7 Q2 2023 EARNINGS PRESENTATION
Slide 8: Net Sales Growth Driven by Renewed Volume Growth and Price Increases
NET SALES GROWTH DRIVEN BY RENEWED VOLUME GROWTH AND THE IMPACT OF THE LAST TWO PRICE INCREASES CONSUMPTION GROWTH TRENDS (Volume in Pounds) 18% 14% 12% Q4 2022 Q1 2023 Q2 2023 8 Source: NIQ consumption data thru 7/1/23 and internal sales data Q2 2023 EARNINGS PRESENTATION
Slide 9: Consumption Growth Is Strong Across Channels & Over Time
CONSUMPTION GROWTH IS STRONG ACROSS CHANNELS & OVER TIME FRESHPET $ SHARE OF WET & DRY DOG Q2 2023 CONSUMPTION GROWTH Total US Food Total US xAOC Mega-Channel Pet Superstore 25% 24% 16.0 15.7 23% 15.2 14.7 15% 8.1 8.0 7.7 7.5 6.6 6.5 6.3 6.0 2.8 2.7 2.7 2.6 4wk 13wk 26wk 52wk MegaChannel Total US xA
Slide 10: Generated 700 bps Improvement on Key Operating Costs
GENERATED 700 BPS IMPROVEMENT YEAR-ON-YEAR ON KEY OPERATING COSTS: INPUT COSTS/PRICING, LOGISTICS AND QUALITY Q2 2023 KEY OPERATING COSTS Q2 2023 ADJ. GROSS MARGIN (% of net sales) 36.8% 34.4% 39.8% 38.7% Q2 22 Q2 23 11.5% 8.0% 4.7% 3.6% Input Costs Logistics Quality Q2 2022 * Q2 2023 * 35.0% 32.3%
Slide 11: Ahead of Pace on Cost Improvements for FY 2027 Margin Targets
WE ARE AHEAD OF PACE TO DELIVER THE CRITICAL COST IMPROVEMENTS EMBEDDED IN OUR FY 2027 MARGIN TARGETS KEY MARGIN IMPROVEMENT TARGETS & PROGRESS 35.9% 34.4% 33.5% 10.7% 8.0% 7.5% 5.3% 3.6% 2.9% Input Costs Logistics Quality FY 2022 Q2 2023 2027 Target 11 Q2 2023 EARNINGS PRESENTATION
Slide 12: On Track to Deliver Adj. Gross Margin Target
WE ARE ON TRACK TO DELIVER OUR ADJ. GROSS MARGIN TARGET AS WE GROW INTO OUR MANUFACTURING SCALE AND DELIVER THE PLANNED IMPROVEMENTS ON INPUT COSTS, QUALITY AND OPERATING EFFICIENCY ADJ. GROSS MARGIN PROGRESS VS TARGETS Under-utilized capacity due to start-up/expansion 45.0% ~230 bps 38.7% 39.8% Q2
Slide 13: The Freshpet Academy Is Driving Improved Retention and Skill Levels
THE FRESHPET ACADEMY IS DRIVING IMPROVED RETENTION AND SKILL LEVELS THAT HAVE DRIVEN OPERATING IMPROVEMENTS FRESHPET TEAM MEMBER TENURE 7/23/2021 3/14/2023 7/1/2023 85% 68% 46% 19% 5% 6% <6 months >1 year 13 Source: Internal data Q2 2023 EARNINGS PRESENTATION
Slide 14: On Track to Deliver SG&A Improvements in 2027 Target
WE ARE ON TRACK TO DELIVER THE SG&A IMPROVEMENTS IN OUR 2027 TARGET; FUTURE GROWTH AND ADDED SCALE WILL UNLOCK LEVERAGE OF MEDIA AND G&A ADJ. SG&A PROGRESS VS TARGETS 40.0% 34.9% 25.3% 16.4% 14.8% 12.2% 12.2% 11.5% 8.8% 9.0% 8.0% 7.5% Adj. SG&A % Excluding Media & Media % Logistics % Total Adj. SG&A
Slide 15: Ennis Kitchen: Producing >20% of Total Freshpet Production
ENNIS KITCHEN: NOW PRODUCING >20% OF TOTAL FRESHPET PRODUCTION FROM TWO LINES IN THE ENNIS KITCHEN Both bag line and roll line are operating 24/7 Chicken processing operation is rapidly scaling up Second bag line will begin commissioning in Q4 2023 Phase II is under construction; will start up in la
Slide 16: YTD 2023 Results
YTD 2023 RESULTS 16 Q2 2023 EARNINGS PRESENTATION
Slide 17: Strong FYTD Results and Growth
STRONG FYTD RESULTS THAT DEMONSTRATE IMPROVED OPERATING PERFORMANCE AND STRONG GROWTH FRESHPET YTD 2023 NET SALES FRESHPET YTD 2023 ADJ. EBITDA ($ millions) ($ millions) $350.9 $278.2 $12.0 +26% +38% 2022 2023 2022 2023 ($2.2) 17 Q2 2023 EARNINGS PRESENTATION
Slide 18: Generated 480 bps YTD Improvement on Key Operating Costs
GENERATED 480 BPS IMPROVEMENT YTD vs YA ON KEY OPERATING COSTS: INPUT COSTS/PRICING, QUALITY AND LOGISTICS YTD 2023 KEY OPERATING COSTS YTD 2023 ADJ. GROSS MARGIN 36.5% 34.8% 39.2% 38.5% YTD 22 YTD 23 10.7% 8.6% 5.4% 4.4% Input Costs Logistics Quality 2022 * 2023 * 34.5% 31.3% Gross Margin (GAAP) 18
Slide 19: FY 2023 Guidance
FY 2023 GUIDANCE 19 Q2 2023 EARNINGS PRESENTATION
Slide 20: Raising 2023 Adj. EBITDA Guidance and Re-affirming Net Sales Guidance
RAISING 2023 ADJ. EBITDA GUIDANCE AND RE-AFFIRMING NET SALES GUIDANCE: FOCUS ON IMPROVING PROFITABILITY WHILE DRIVING GROWTH FRESHPET FINANCIAL PROJECTIONS $80 • Volume cadence: Accelerating volume growth in Q3 and $800 ~ $750.0 ~ $750.0 $70 Q4; net sales growth rate stronger in Q3 vs Q4 due to $700
Slide 21: 2023 Guidance: Q3 Expectations
2023 GUIDANCE: Q3 EXPECTATIONS Volume/Net Sales cadence: Q3 2023 is projected to have stronger net sales growth rate than Q4 and Q2; volume growth rate will accelerate throughout Q3 and Q4 Advertising investment: Continued investment in media in Q3 at levels above 2022 spending ($) Logistics costs:
Slide 22: 2023 Plan: Key Growth Drivers
2023 PLAN: KEY GROWTH DRIVERS STRONG ADVERTISING SIGNIFICANT INCREASE NEW PRODUCT INVESTMENT IN RETAIL PRESENCE LAUNCHES 22 Q2 2023 EARNINGS PRESENTATION
Slide 23: 2023 Plan: Operational Improvements
2023 PLAN: OPERATIONAL IMPROVEMENTS Ample More efficient Improved Commodity costs capacity logistics quality in line with pricing 23 Q2 2023 EARNINGS PRESENTATION
Slide 24: Household Penetration & Buying Rate
HOUSEHOLD PENETRATION & BUYING RATE 24 Q2 2023 EARNINGS PRESENTATION
Slide 25: Continued Growth in Consumer Franchise; Exceeding 10MM Households
CONTINUED GROWTH IN CONSUMER FRANCHISE; EXCEEDING 10MM HH’S WITH VERY STRONG BUYING RATE INCREASE FRESHPET PENETRATION GROWTH FRESHPET BUYING RATE (52 weeks) (52 weeks) $95.19 10,278,265 9,359,226 +10% $80.26 +19% $75.79 7,633,694 +23% 6,542,497 $63.07 +6% 5,328,983 +17% +20% $55.17 +23% +14% 2019 2
Slide 26: Freshpet Buying HH's: Rolling 13 Weeks
26 3,800,000 4,000,000 4,200,000 4,400,000 4,600,000 5,000,000 5,200,000 4,800,000 13WE 2022-01-02, Rolling 13WE 2022-01-09, Rolling 13WE 2022-01-16, Rolling 13WE 2022-01-23, Rolling 13WE 2022-01-30, Rolling 13WE 2022-02-06, Rolling 13WE 2022-02-13, Rolling 13WE 2022-02-20, Rolling 13WE 2022-02-27,
Slide 27: Freshpet Heavy/Super Heavy Buyers Continue to Increase
FRESHPET HEAVY/SUPER HEAVY BUYERS CONTINUE TO INCREASE FRESHPET ULTRA/SUPER HEAVY/HEAVY BUYERS 5 YEAR TREND (PAST 52 WEEKS) 4,000,000 Ultra/Super Heavy/Heavy Buyers: 3,571,337 $290 3,500,000 Bought at least $40 in the most recent 10 weeks +17% 3,059,491 $270 3,000,000 +28% $250 2,500,000 2,389,972 +
Slide 28: Current Consumption Trends
CURRENT CONSUMPTION TRENDS 28 Q2 2023 EARNINGS PRESENTATION
Slide 29: Year-on-Year Growth Rate Has Reached an Inflection Point
YEAR-ON-YEAR GROWTH RATE HAS REACHED AN INFLECTION POINT AND IS NOW TRENDING UP NIELSENIQ MEGA-CHANNEL CONSUMPTION ($) GROWTH VS YA 34% 32% Lapping YA 12% Price Increase 31% 31% 30% 30% 30% 29% 29% 29% 29% 28% 28% 27% 27% 26% 25% 25% 23% 23% 23% 23% 22% 22% 22% 21% 18% Easter Calendar Shift 29 Sourc
Slide 30: Volume Growth Is Driving Consumption Growth Again
VOLUME GROWTH IS DRIVING CONSUMPTION GROWTH AGAIN FRESHPET NIELSENIQ MEGA-CHANNEL DOLLAR SALES & POUNDS GROWTH RATE 30% $21,500,000 $20,500,000 25% $19,500,000 20% $18,500,000 $17,500,000 15% $16,500,000 10% $15,500,000 $14,500,000 5% $13,500,000 $12,500,000 0% 6/25/2022 7/25/2022 8/25/2022 9/25/202
Slide 31: 2-Year Stacked Growth Remains Strong
2-YEAR STACKED GROWTH REMAINS STRONG NIELSENIQ MEGA-CHANNEL CONSUMPTION GROWTH 2-YEAR STACKED 78% 75% 75% 72% 72% 71% 70% 69% 65% 67% 66% 66% 65% 66% 66% 67% 65% 65% 64% 66% 64% 65% 63% 63% 62% 61% 61% 61% 61% 59% 60% 59% 30% 57% 58% 58% 56% 57% 57% 58% 56% 57% 57% 32% 27% 54% 53% 30% 28% 27% 22% 39
Slide 32: Capital Spending, Capacity & Liquidity
CAPITAL SPENDING, CAPACITY & LIQUIDITY 32 Q2 2023 EARNINGS PRESENTATION
Slide 33: Flexible Approach to Capital Spending and Capacity Expansion
WE ARE TAKING A FLEXIBLE APPROACH TO CAPITAL SPENDING AND CAPACITY EXPANSION DESIGNED TO SUPPORT OUR GROWTH WITHIN OUR EXISTING RESOURCES GOAL: DELIVER OUR COMMITTED GROWTH PLAN WITHOUT ANY FURTHER DILUTION KEY PRINCIPLES: • Always have adequate capacity to meet demand • Short-shipping customers is
Slide 34: Capacity Expansion Plan Designed to Prevent Need for Additional Equity
OUR CAPACITY EXPANSION PLAN IS CONSISTENT WITH THE PRINCIPLES DESIGNED TO PREVENT THE NEED FOR ADDITIONAL EQUITY COMMITTED PROJECTS: • First portion of Ennis Phase II (building for all of Phase II but only two out of four production lines) • When completed, we will have ~$1.5 billion of capacity PRO
Slide 35: Q2 2023 Visibility & Availability
Q2 2023 VISIBILITY & AVAILABILITY 35 Q2 2023 EARNINGS PRESENTATION
Slide 36: Store Count Continues to Grow
STORE COUNT CONTINUES TO GROW FRESHPET STORE COUNT 25,963 25,281 23,631 22,716 21,570 19,499 18,004 16,609 15,015 13,387 10,826 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD 2023 36 Source: Internal data for the period ending 6/30/23 Q2 2023 EARNINGS PRESENTATION
Slide 37: Retail Availability at Record Levels
37 500 600 700 800 900 1,000 1,100 1,200 5/22/2021 6/5/2021 6/19/2021 7/3/2021 7/17/2021 7/31/2021 8/14/2021 8/28/2021 9/11/2021 9/25/2021 10/9/2021 10/23/2021 NIELSENIQ MEGA-CHANNEL 11/6/2021 11/20/2021 Source: NielsenIQ Mega-Channel Data thru 7/22/23 12/4/2021 12/18/2021 1/1/2022 1/15/2022 1/29/20
Slide 38: Appendix
APPENDIX 38 Q2 2023 EARNINGS PRESENTATION
Slide 39: Q2 2023 Earnings Presentation
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