Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Q2 2021 Earnings Presentation
62 slides from Freshpet's earnings presentation, Aug 2, 2021
Slide 1: Q2 2021 Earnings Call
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 SGA 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: Q2 2021 Results
freshpet Q2 2021 Results
Slide 6: Q2 2021: Strong growth in Net Sales; Inflation & temporary inefficiencies hurt Adj. EBITDA
Q2 2021: Strong growth in Net Sales; Inflation & temporary inefficiencies hurt Adj. EBITDA eo Freshpet Net Sales & Adj. EBITDA Performance CEES $30.0 s1200 $108.6 eae $100.0 436% $200 $80.0 $800 33% $150 $600 ee $11.2 $10.9 ae #839% 3% $400 as $200 $00 922020 a2.2021 Ad}, EBITDA ($ milions) Net Inco
Slide 7: We successfully re-filled ~$8 million of trade inventory
We successfully re-filled ~$8 million of trade inventory Q2 2021 Net Sales Bridge 37% ase Consumption Growth Trade Inventory Adjustments YA Trade Inventory Re-fill Net Sales Growth
Slide 8: Production is running well ahead of YA with more capacity coming on-stream in Q3
Production is running well ahead of YA with more capacity coming on-stream in Q3 2021 vs. 2020 Production Performance Comparison Rolling 7-Day Average Pounds Produced sso | April ~ August 1 production = 497K Ibs/calendar day i canrtoay aot Bee ieee senses [er prduction4/72012/5/20%359kba/eenderdey b
Slide 9: YTD 2021: Strong growth with cost challenges
YTD 2021: Strong growth with cost challenges Net Sales: Freshpet Net Sales & Adj. EBITDA Performance Aol eae 220.0 $330 : $202.0 425% $300 s1700 $150.1 $25.0 431% one $120.0 OO ——EE————— 18.6 +323% ~ $700 $00 $50 $200 $00 2020 Fy2003 Net Sales ($millons)_ —=Adi. EBITDA (§ millions) Net Income (Loss)
Slide 10: Adj. Gross Margin impacted by inflation and temporary operating inefficiencies
Adj. Gross Margin impacted by inflation and temporary operating inefficiencies Q2 2021 Adj. Gross Margin Progress YTD Adj. Gross Margin Progress 49.3% 49.1% 46.1% 496.4% 22020 22021 2020 2021 Gross Margin (GAAP)
Slide 11: Adj. SG&A leverage
Adj. SG&A leverage Adj. SG&A Leverage Q2 2021 36.1% 35.1% 22.1% | 022020 22021 Adj, SGBA % Excluding Media m Total Adj. SG&A % YTD 2021 Adj. SG&A Leverage 38.0% ao Media: Media: 14.8% 12. 24.6% 23.2% | Fr 2020 fy 2021 Adi, SGA % Excluding Media @ Total Adj. SG&A% SG&A (GAAP)
Slide 12: As we rebuild inventory, fill rates go up and freight costs go down
As we rebuild inventory, fill rates go up and freight costs go down son Net inventory vs. Fill Rate i Freight Cost/Pound vs Fill Rate oe x 700 on sox 4 =n R= 0.748 a 301 20% 1% o% 15070. a0 29 Oa amet mm ae rite cases in Inventory (Thousands) @ Actual ~— @ TrendLine 2
Slide 13: Market Data
freshpet Market Data
Slide 14: Consumption growth vs. YA projected to accelerate through 2H21
Consumption growth vs. YA projected to accelerate through 2H21 Nielsen Mega-Channel Consumption aomno00 projese 435% (est) Capacity constrained and out-of-stocks x00 Nielsen Mega-Channelconsumptionvs. YA: + Latest 4 weeks: +19% + Q2: 437% e000 + QB to date: +19% + YTD: +28% seonsno gee RR ER RREERA
Slide 15: Velocity gains
g velocity gains Freshpet Velocity $/smna acy ** covip crisis = it w= BF SPS SP SP gh
Slide 16: Out-of-stocks constrained growth in Q2; continued strength in pet specialty
Out-of-stocks constrained growth in Q2; continued strength in pet specialty Latest 13 Week Nielsen Consumption Growth 57% 37% 34% 32% Mega-Channel XAOC Food Big Box Pet
Slide 17: Building meaningful share of the category
Building meaningful share of the category Freshpet $ Share of Wet & Dry Dog 112 107 105 ae SL 57 58 sa 50 43 46 26 25 26 25 130k 26k S20k Freshpet share of Wet + Dry Dog. Total USFood Total US¥AOC sm Mego-Channel met Superstore
Slide 18: Consistent 2-year stacked growth poised to accelerate in 2H21
Consistent 2-year stacked growth poised to accelerate in 2H21 with increased advertising investment Nielsen Mega-Channel Consumption Growth (Year tect) = ges an = pian ee ie satel ae 555 cag, BP S8% E56 sane 595 a4 “ase 3H 0 stom. Potdka a 2020 = 2021 18
Slide 19: On a total brand basis, 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 (atest 13ks thru7/17/21—-$M)
Slide 20: Freshpet velocity leads the category in grocery
Freshpet velocity leads the category in grocery Total Wet & Dry Dog Food Brands Dollar Velocity: US Food (Latest 13ks$/%ACV thru 7/17/21-$M) Blue Buffalo Total Dog Food 8 SN Pecigree Total Dog Food sre Purina ONE Total Dog Food oa Bent Tatl Dog Food sn Cesar Tota Dog Food ssa nt Label Total og Food
Slide 21: Retailers paying attention: Freshpet is #1 brand in US Food
Retailers paying attention: Freshpet is #1 brand in US Food {_ Larger Dollar Sales Than All Dry Dog Food Brandsin US Food (Grocery) | _ om Freshpet & Dry Dog Food Brands Consumption i ‘ands > 20 An aes 3 san (soot Latestsaecs)
Slide 22: Retailers paying attention: Freshpet is fastest growing brand
Retailers paying attention: Freshpet is fastest growing brand Wet & Dry Dog Food Consumption Growth Brands with >$10MM Dollar Change (Wileen Mega-Channel: Latest s2wks) SE
Slide 23: Category growth skews towards premium items
Category growth skews towards premium items Growth by Value Segment Value Segment Size Latest 13 weeks dollar sales vs. YA Latest 13wk Dollar Share, as e = 2
Slide 24: Despite out-of-stocks, store count continued to grow
Despite out-of-stocks, store count continued to grow Freshpet Store Count 22,716 23,155, 21,570 19,499 18,004 16,609 15,015 13,387 2018 2018 2016 2017 2018 2019 2020 22021 2
Slide 25: Distribution growth continues despite capacity limits
Distribution growth continues despite capacity limits Freshpet % ACV, COVID Crisis PPP Pe Soyer FFF IF IF GF IF GF IF GF I Ff Hal Heater KM SPM
Slide 26: Q2: Continued increases in retail availability & visibility
Q2: Continued increases in retail availability & visibility Store Count 23,55, 22420 22020 22021 2021 Guidance: 23,750 Net New Stores Fridge Upgrades Second Fridges 550 a 3,003 3,108 oases 1.808 Gu 779 634 218 — (te. ncrease ID increase Total Operating YIDNew Total Operating ID New 022020 022021 1 1
Slide 27: New fridge placements skew heavily to large and multi-fridge stores
New fridge placements skew heavily to large and multi- fridge stores Freshpet Fridge Fleet New Fridge Installations by Size Distribution by Size (US& Canada) (US & Canada Stores) 31% 32% Bhim & mm Small = Medium = Large = 2" Chillers mar sate agis S50 Bae Small mMedium mLarge = 2Chillers m3.Chillers
Slide 28: Q2 2021 Freshpet E-Com grew +46%
Q2 2021 Freshpet E-Com grew +46% vs. amazoniresh, y* instacart SHIPT 5.6% 20.21 mixof e- ee commerce sales Serres @ ClickList ws ,£. 83% of Sales Contribute to Brick & Mortar 22
Slide 29: H1 2021 Freshpet E-Com grew +86%
H1 2021 Freshpet E-Com grew +86% vs. amazoniresh, y* instacart SHIPT 5.9% 20.21 mixof e- ey commerce sales ees @ Clicktist ws ,£. 87% of Sales Contribute to Brick & Mortar
Slide 30: Partnership with Chewy.com began on July 7th
Partnership with Chewy.com began on July 7th A Fresh Idea for Pets and Pet Parents We are excited to announce our entry into the fresh and prepared pet food space with new selections from the segment's leading brand, Freshpet, and our premium proprietary brand, Tylee’s. Our highly trained and best-i
Slide 31: Strong HH penetration growth despite out-of-stocks
Strong HH penetration growth despite out-of-stocks Freshpet Penetration Growth Total HH’s 4,096,512 4000000 coe 3,430,436 3,000,000 2,867,636 : 670,460 2,500,000 2,414,486 422% 5 181,169. 421% , 129% on 693,205 1.500000 128% 1000000 2o18 2019 2020 2021 ree Ge Ger Gee a ‘Source: Nelsen HH Panel forth
Slide 32: 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 6.90 mCurrent HH Penetration = 2025 Target HH Penetration
Slide 33: Buying rate continues to grow despite out-of-stocks
Buying rate continues to grow despite out-of-stocks Freshpet Buying Rate $143.74 100.00 18% $133.07 Ss $130.00, $127.10 a $127.54 ou2L 28 34% +12%| 120.00 2 1% $113.40 $110.00 $99.29 $100.00, $90.00 $80.00 $70.00 $60.00 2018 2019 2020 2021 Total Buying Rate = Core Dog Buying Rate Sovice: Nielsen Hi
Slide 34: freshpet
freshpet
Slide 35: Leading Canadian Retail Customer Weekly Freshpet Sales
Lo) iS a p oO => no} oO 1) = i= oO i) L=)) ss P=) © @ oO oO oO Lie wn Ww (oD) iS wn =) fa) iS S a) © = {oo} O investment Leading Canadian Retail Customer Weekly Freshpet Sales Retail Sales sione0000 Last 4 weeks +37% vs. YA 35 Source; Retail ator the prod ending 7/28/23,
Slide 36: Freshpet's advertising-driven model works in the UK
Freshpet's advertising-driven model works in the UK Leading UK Retail Customer Sales by Week Leading UK Retail Customer Sales by Week Retail sales Retail Sales a Last weeks #51%vs.YA -—* scons ‘amo Latest 4 weeks *70% vs. YA. }-———+ = = gull
Slide 37: Guidance
Slide 38: 2021 Net Sales guidance raised
2021 Net Sales guidance raised $in Millions Previous New Increase Net Sales >$430 >$aa5 | +815 veya 39% ‘aoe | Adjusted EBITDA —_>$61 7 VEYA 130% 330% Inflation: Adj. EBITDA guidance not raised due to increased costs from inflation and temporary operating inefficiencies; price increases announced fo
Slide 39: Revised 2021 net sales guidance implies further acceleration in 2H
Revised 2021 net sales guidance implies further acceleration in 2H 2021 Guidance $430.0 bared suis g2n.0 52830 $202.0 $202.0 44% Fist Halt Second Half Total = 2020 2021 (Original Guidance) m 2021 (>$445M Guidance)
Slide 40: Inflation and temporary operating inefficiencies will mute benefits from increased net sales guidance in H2
Inflation and temporary operating inefficiencies will mute benefits from increased net sales guidance in H2 Chicken Beef Packaging Freight Key cost element & = ry i = Priced annuallyin Floatswith resin | _ Tight labor ‘Assumed Reararen nace December; Priced quarterly; | price; expect | market; secon
Slide 41: On track for the cadence outlined in our guidance
On track for the cadence outlined in our guidance Q2 Expectations +VAccelerating consumption growth behind improved retail conditions and strong advertisinginvestment Shipment growth modestly in excess of consumption growth due to trade inventory re-fill +/lower cost per Ib. of production (improved
Slide 42: COVID Impact & Addback
COVID Impact & Addback Q2 Expectations Team members became eligible for vaccines on March 31, 2021 Offered team members an incentive to provide documentation thatthey have successfully been vaccinated + 2 days of paid time off if vaccinated by June 1; 1 day of paid time off if vaccinated between Jun
Slide 43: Progress Towards Improved Retail Conditions
freshpet Progress Towards Improved Retail Conditions
Slide 44: TDP's still growing but below last year's peak
FIFE RR ee OOOO TDP's still growing but below last year’s peak Freshpet Total Distribution Points (TDP) ‘Nielsen Mega-Channel a PLP PEL S LAL Se ee Sot Fh hh ME EELS SL
Slide 45: Out-of-stocks are improving
Out-of-stocks are improving Freshpet Consumer Comments: Out-of-stock & Can’t find Mii i lilsdiiiuepusuugguuuuncestnneteettnee —=-Out of Stock/Can't Find Source: nero company dat rr)
Slide 46: Strong production supports robust growth
Strong production supports robust growth vs. Freshpet Pounds Produced ~ 2021 (growths. YA) 45% Ze 41% 36% 32% Winter storms 25% psi May June July (est)
Slide 47: Outside of holidays and snowstorms, production is in excess of consumption every week this year
Outside of holidays and snowstorms, production is in excess of consumption every week this year Production vs. Consumption [Exeter ] [atmirnonany | a Winter Storm UF (Witenens South) som ‘uenem sisnmm ano 7H4n0m ayant fant roajnom syjom yap YyepON _2/snaM Yano apo Sfanom —lyram—_7apom. —Total Weekly
Slide 48: freshpet
freshpet
Slide 49: Freshpet Academy: Pathway to Shared Success
Freshpet Academy: Pathway to Shared Success Growing our talent Shifting the mix
Slide 50: Steady increases in production capacity throughout 2021
Steady increases in production capacity throughout 2021 Line 3 in Kitchens South- begins Freshpet Annualized Production Capacity Qawith 7s inaa 2021 Kitchens 2.0 lls a vs fare line to 24/7 ae started up rolls ‘on both lines in $710 in Kitchens 2.0 kitchens 2.0 $610 M ‘operation Line 2in $660 Kitchen
Slide 51: Key capacity projects remain on track
Key capacity projects remain on track Bethlehem v Engineering Team eee Under construction Planning begun Engineering Team Vv Under construction Design begun conde =z) AD Under construction 2019 2020 2021 2022 2023 2024 2025 |__| EEE = current technology new technology Team st
Slide 52: Key efficiency improvement projects underway
Key efficiency improvement projects underway Vv Under construction. Higher [EME = new technology ‘Throughput inden HE —= current technology Lines Ur a ion ‘Awaiting equipment ‘Automation in Kitchens 1.0 Higher Planningbegun Planning begun capacity/lower _ capital lines Building 2 Testing begun 2020
Slide 53: Almost $2 billion in net sales production capacity by 2025
Almost $2 billion in net sales production capacity by 202 $300 $300 kitchens 1.0 Freshpet Capacity Net Sales Potential Pulled forward one quarter sire 760 $610 es p20 $260 & $150 | se @ = Shinn Gia anes. Soa Innovation Line New Capacity = Cumulative Capacity $1,460 $300 Kitchens South Bldg. 2 $1,960
Slide 54: Kitchens 2.0 will be 24/7 on all lines by end of Q3
Kitchens 2.0 will be 24/7 on all lines by end of Q3
Slide 55: 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 improvementsdesigned to increase throughput, improve quality and safety, and enhance the environmental sustainability ofthe facility
Slide 56: Freshpet Kitchen in Ennis, TX
Freshpet Kitchen in Ennis, TX
Slide 57: "Feed the Growth" creates scale and leverage through accelerated growth rate
“Feed the Growth” creates scale and leverage through accelerated growth rate freshpet FEED THE GROWTH 11 MILLION HH BY 2025
Slide 58: Freshpet 11 Million HH by 2025
freshpet 4 11 MILLION HH BY 2025
Slide 59: Appendix
Slide 60: 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 Tune 30, Sune 30, 2021 2020 202 2020 (Dollars in thousands) Gross Profit S 43,091 $33,933 $ 79.405 $ 65,723 Depreciation expense 4.021 2,550 7.821 4,294 lant start-up exp
Slide 61: 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 Sune 30, Sune 30, 2021 2020 2021 2020 ‘Wollars in thousands) SG&A expenses S 49557 $ 33,702 $ 95,589 $ 68,378 Depreciation and amortization expense 2891 6922 5,600, ‘
Slide 62: 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 Sane 30, June 30, a 0 m0 ‘Dollars in thousands) ‘Net (loss income Saas 1S d836) 5 G437) Depreciation and amortization 76st saa 178 ‘9594 Interest expense 1556 Income tx