Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Q4 2020 Earnings Presentation
73 slides from Freshpet's earnings presentation, Feb 22, 2021
Slide 1: Q4 2020 Earnings Report & 2021 Guidance
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, and the Company's general operating
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 costs, COVID-19 expenses and non-cash share-based ‘compensation, and Adjusted SG&A as SGBA expenses belore depreciation and amortization expense,
Slide 4: Q4 2020 & FY 2020 Final Results
freshpet Q4 2020 & FY 2020 Final Results
Slide 5: Q4 2020: Strong growth constrained by supply limits that also temporarily increased costs
Q4 2020 : Strong growth constrained by supply limits that also temporarily increased costs Net Ses Freshpet Net Sales & Adj. EBITDA Performance fe Fale $900 $84.5 $250 $200 429% $200 sia $65.8 428% $50 $00 $300 wake $12.9 178% es ay $0.0 $30 $300 $200 $00 e019 1982020 freshpet Aaj EBIOA (5 mtions) N
Slide 6: Continued accelerating Net Sales and Adj. EBITDA growth
Continued accelerating Net Sales and Adj. EBITDA growth eee Freshpet Net Sales & Adj. EBITDA Performance bape 318.8 s200 $ $00 130% ge $205.9 ee “ 4 s1700 00 $29.2 s1200 aay 200 $700 s100 200 s00 Fr2019 42020 freshpet Aap EBIOA (5 mtions) Net Income (Loss) ($ millions)
Slide 7: 2020: Fourth consecutive year of accelerating growth
2020: Fourth consecutive year of accelerating growth Freshpet Net Sales (Smilions) 25% CAGR 2016 2017 2018 2019 2020
Slide 8: Strong growth across channels; resurgence of pet specialty
Strong growth across channels; resurgence of pet specialty Q4 2020 Nielsen Consumption Growth 43% 38% 38% 37% Mega-Channel XAOC Food Big Box Pet
Slide 9: Despite COVID interruptions, store count growth continued
Despite COVID interruptions, store count growth continued Freshpet Store Count 2013 apie 2o1s 2016 2017 ze 2019 2020
Slide 10: New fridge placements skew heavily to second fridges
New fridge placements skew heavily to second fridges New Fridge Installations by Size Freshpet Fridge Fleet (US& Canada) Distribution by Size {US& Canada Stores) FEE 2018 2019 2020 ‘= Small = Medium ® Large 2+ Chillers Small m Medium large = 2Chillers = 3 chillers
Slide 11: Strong gains in retail availability
Strong gains in Net New Stores 2071 1,146 345 retail availability Fridge Upgrades Second Fridges ate aan | 1s 7s wo ne was2019 #082020 042019 #042020
Slide 12: 2020 Freshpet e-com grew +173%
2020 Freshpet e-com grew +173% 2020-4.9% % of total FP sales through e-com 189% of Sales contribute to brick & mortar e-com business model established with strong returns 2021+ will see 3x marketing investments 2021 - major expansion with partners instacart sHIPT- ek collect amazon’ resh Peapod fres
Slide 13: Halfway to our 2025 MM household (HH) goal
Halfway to our 2025 8 MM household (HH) goal Progress Towards 2025 HH Penetration Goal 4.0 4.0 mCurrent HH Penetration 2025 Target HH Penetration » freshpet
Slide 14: Opportunity to continue growing the buying rate
Opportunity to continue growing the buying rate Buying Rate $630 1 Current Buying Rate ‘Avg, Cost to Feed 30 Ib Dog
Slide 15: Capacity investments are driving scale and flowing through to bottom line
Capacity investments are driving scale and flowing through to bottom line Freshpet Adjusted EBITDA (Smilions) $17.1 2017 2018 2019 2020
Slide 16: Adj. Gross Margin negatively impacted by COVID-related productivity issues and higher beef costs
Adj. Gross Margin negatively impacted by COVID-related productivity issues and higher beef costs Q4 2020 Adj. Gross Margin Progress 49.1% 45.8% 242019 042020 FY 2020 Adj. Gross Margin 49.4% 48.3% 2019 2020 Gross Margin (GAAP)
Slide 17: >200 bps of Adj. SG&A leverage excluding media in 2020
>200 bps of Adj. SG&A leverage excluding media in 2020 ‘Adj. SG&A Leverage Q4 2020 30.5% 29.0% Media: 26.1% 2.9% 5.7 24.8% 42019 242020 Aad, SGA % Excluding Media ® Total Adj. SGA 5 Metis FY 2020 Adj. SG&A Leverage 37.6% 33.6% 23.3% Ad), SGA % Excluding Media ® Total Ad. SGBA % ‘SG&A (GAAP)
Slide 18: Delivered bps of Adj. SG&A (excl. media) leverage since 2016
Delivered 780 bps of Adj. SG&A (excl. media) leverage Net Sales $3500 $3000 $200 s2000 s1s00 s1o00 31.2% $129.7 Fy 2016 since 2016 Freshpet Adj. SG&A Leverage Progress 31.0% as $245.9 $193.2 $152.4 FY 2017 Fy 2018 Fy 2019 Net Sales S millions) —Ad}. SGB&A% Excluding Media $318.8 Fy 2020 Ad). SGRA sa
Slide 19: 2021 Progress To Date
freshpet 2021 Progress To Date
Slide 20: Building meaningful share of the category
Building meaningful share of the category Freshpet $ Share of Wet & Dry Dog 100 95
Slide 21: Strong consumption despite out-of-stocks and delayed start to advertising
Strong consumption despite out-of-stocks and delayed start to advertising Nielsen Mega-Channel Consumption omme soo Capacity constrained and out-of-stocks LA Vises Nielsen Mega-Channel consumption vs. YA: sea + Latest week: +26% + Ql to date: +31% gases + YTD: 431% Ahn wae unm wm sun wane AAS RNID H
Slide 22: Winter storms have interrupted progress, but production has improved significantly from Q4
Winter storms have interrupted progress, but production has improved significantly from Q4 Rolling 7 Day Production Average Total Pounds
Slide 23: Outside of winter storms, production consistently exceeds consumption since January 1
Outside of winter storms, production consistently exceeds consumption since January 1 Production vs. Consumption yo TY Total WeeyRetllS Vale (inc. teats) Produced —=Nelson Mga Channel Consumption zB
Slide 24: Actively communicating with consumers via social media to explain the out-of-stocks
Actively communicating with consumers via social media to explain the out-of-stocks Freshpet item Wanted Available On Last Shopping Trip 24% e% ATK 70% 7% | | | 80% sye/2020 ai
Slide 25: Distribution growth plateaued during COVID crisis
Distribution growth plateaued during COVID crisis Freshpet % ACV
Slide 26: Velocity growth has surged
Velocity growth has surged Freshpet Velocity $/swm acy covio crisis
Slide 27: Out-of-stocks due to short shipments are eroding TDP's temporarily
Out-of-stocks due to short shipments are eroding TDP’s temporarily Freshpet Total Distribution Points (TDP) Nielsen Mega-Channel
Slide 28: Canada: advertising investment driving retail sales
L=)) = aa = oO => Bo) oO Bo} = C= oO a i= 2) = & gc co) [o) Oo 1S) oO Ww i) oO = Ww =| p=} ‘= S ae oO = oO O investment Leading Canadian Retailer Weekly Sales Retail Sales Last 4 weeks +35% vs. YA ny
Slide 29: Freshpet's advertising-driven model works in the UK
Freshpet's advertising-driven model works in the UK s Leading UK Retail Customer Sales by Week Retail Sales Leading UK Retail Customer Sales by Week all
Slide 30: Increasing Long Term Guidance
freshpet Increasing Long Term Guidance
Slide 31: Scale and leverage through accelerated growth rate
creates scale and leverage thr accelerated growth rate fréshpe freshpet
Slide 32: In the early stages of accelerating consumer adoption
In the early stages of accelerating consumer adoption Roger's Diffusion of Innovation Model 100¢—) Current Prime Prospect net sales potential 75 =$2billion and growing Total Market Potential—————p Take-off Rate of Consumer |5° Adoption % aleys JEW 12% of Prime Prospects using Core Dog products 25 l
Slide 33: Demographic trends are working in our favor
Demographic trends are working in our favor Dog HHs Today Dog HHs 2025 Builder 2% Cee! 2% Boomer 18% Boomer 26% Genx 45% -
Slide 34: Addressable market: >20 million HH's
Addressable market: >20 million HH’s Consumer Concept Top 2 Box purchase interest 28MM 16MM jobably 2.6x buy 12MM Definitely 3.0x ld buy Prime Prospect Methodology (Consumers who are similar to existing users) 20MM Dog H's 7.5MM 2016 2.6x.
Slide 35: COVID-19 brought more young buyers into the franchise
COVID-19 brought more young buyers into the franchise Freshpet Post-COVID New Buyers Freshpet Post-COVID New Buyers (index ve Share ofPe-COVI Buyers) (index Shae of Pre-COVIO Buyers) Freshpet Post-COVID New Buyers \lndex vs. Share of Pre-COVID Buyers) Freshpet Post-COVID New Buyers 2 index ve Shae o
Slide 36: Added 24% more HH's each of past two years despite capacity limits
Added 24% more HH's each of past two years despite capacity limits and reduced advertising investment Freshpet Penetration Growth Total H's 3,960,971 ‘00000 3so0000 169,113 300000 _ wane 2,166,989 200000 ot Epis 410,933 1% 160000 2017 2018 2019 2020 (Gace bag Pesaneton ne a freshpet Coreg Penetratio
Slide 37: Demonstrated track record of driving HH penetration gains via media investment
Demonstrated track record of driving HH penetration gains via media investment Freshpet HH Penetration & Media Spending $90,000,000 R2=,983 3 Source: Nielsen S2-week HH panel rough 12/26/20 and intemal data O00
Slide 38: Increasing penetration in all dog HH's regardless of size or number of dogs
Increasing penetration in all dog HH’s regardless of the size of the dog or number of dogs in the HH Freshpet H's by # of Dogs* Freshpet HH’s by Size of Dog* Under 1 4og in 2038) (nex Gant Do in 2018) os ww Cc ts 1 100 fs a il Fl 109 2+ Dogs fs Mesum (sorts) 6090s) Gesehs) (NES) 2018 22019 2020 hs M
Slide 39: At our current 24% growth rate, HH penetration exceeds legacy target
At our current 24% growth rate, HH penetration exceeds our legacy 8 MM HH target by 3.8 MM HH's HH Penetration n1a72388 24% CAGR 3.960971 20% eed zone one 200 zoe 20st
Slide 40: At $50 CAC and media at ~11% of net sales, HH penetration could reach 13.9 million
At $50 CAC and media spending at ~11% of net sales, HH penetration could reach 13.9 million in 2025 HH Penetration 29% CAGR 219 2020 zone rot 2023 ro2ee aarse
Slide 41: Raising HH penetration target by 2025
Raising HH penetration target to 11 million HH’s by 2025 Freshpet HH Penetration 11,000 8,000 23% CAGR 3,558 2020 2025 Target Previous HH Penetration Target (thousands) m@ New HH Penetration Target (thousands)
Slide 42: Buying rate grew 7% this past year
Buying rate grew 7% this past year Freshpet Buying Rate Sane $134.38 $128.82 $128.94 Migrien % “it . a $320.00 $116.94 $130.00 $108.14 $109.35, 11% $110.00 sio000 998-84 $20.00 $7000 $00.00 2017 2018 2019 2020 ‘otal Buying Rate Core Dog Bing Rate
Slide 43: More than half of new users become regular users
More than half of new users become regular users 2019 Buying Habits of New Consumers Who Entered in 2018 47% 54% Became Regular Users J ene 'm Super Heavy ($2004) m Heavy ($120S200) m Regular ($40-S112) = Occasional ($0540) freshpet Source: Nelsen Freshpet Be roary 2020
Slide 44: Cohort buying rate data confirms significant multi-year growth potential
Cohort buying rate data confirms significant multi-year growth potential of each new user Freshpet Core Dog New Buyers Dollar Buy Rate Evolution (Undexs. 2016 Now Buyers) Each new cohort buys twice a mith in year? 335 ‘sthey 6 inyeorL F 24 aS | 255 263 F 16 ‘il i | I ii i | | 2016 Cohort 2017 Cohort
Slide 45: Holding buying rate growth at 7% CAGR
Holding buying rate growth at 7% CAGR due to ongoing dilution from rapid influx of new users 2025 Buying Rate Target $161.58 $162.03 7% CAGR giz3e $116.94 2020 2025 Tas Previous Buying Rate Target m New Buying Rate Target
Slide 46: Revised 2025 Plan: Increasing Net Sales target by 25% to $1.25 billion
Revised 2025 Plan: Increasing Net Sales target by 25% to $1.25 billion 2025 Net Sales Target $1,250 $1,000, 31% CAGR $318.8 $318.8 2020 Actual 2025 Target Previous Net Sales Target ($ millions) m New Not Sales Target ($ millions)
Slide 47: Holding Adj. EBITDA margin target to enable increased investment
Holding Adj. EBITDA margin target to enable increased investment for future growth 2025 Adj. EBITDA Margin Target 25% 25% New Adj. EBITDA Margin Target Previous Adj. EBITDA Margin Target
Slide 48: Generating strong free cash flow by 2023
Generating strong free cash flow by 2023 Free Cash Flow % Net Sales —FCFGNS ~—FCF ex Capacity Expansion 96S
Slide 49: Maintaining leverage below 3.5x Adj. EBITDA while driving accelerated growth
Maintaining leverage below 3.5x Adj. EBITDA while driving accelerated growth Equity Debt Cash from Operations Accelerated Growth With these financing plans, we believe we will have the ability to support a $1.25 billion business with capacity at the end of 2025 of almost $2 billion in net sales
Slide 50: Accelerating and Increasing Capacity
freshpet Accelerating and Increasing Capacity
Slide 51: Significant achievements in 2020 demonstrate our capability to add capacity
Significant achievements in 2020 demonstrate our capability to add capacity and the value of our partnership fi réshpet KITCHENS South Completed construction and Proved that we could create and operate _ Started up operations with long-term started up Kitchens 2.0 ~ despite higher throughput lines w
Slide 52: Strategy: Accelerating and increasing capacity investments
Strategy: Accelerating and increasing capacity investments to meet increased demand expectations fréshpet freshpet —KITCHENS— —KITCHENS— South South #2 Pulling forward Ennis start-up Pulling forward Kitchens South Adding a second building at Ennis Phase 1 to begin production in Q2 of Line #2 and add
Slide 53: Kitchens 2.0: Proving that higher speed/more automated operations work
Kitchens 2.0: Proving that higher speed/more automated operations work as expected
Slide 54: Kitchens 3.0 in Ennis, TX is being pulled forward and will produce more
Slide 55: 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 Freshpet Capacity Net Sales Potential Pulled forward one quarter $1,160 $760 $610 $350 $400 00 a ee i = | = South ne ——_Kichens208 Seth ines42 4) Innovation tine New Capacity Ennis Phase 1 Cumulative Capacity [New: Ope
Slide 56: At ~$2 billion in net sales, a 75/25 split between self-manufacture and partner production
At ~$2 billion in net sales, we will have a 75/25 split between self-manufacture and partner production Total Freshpet Capacity ($ millions) lm Freshpet Kitchens Bethlehem & Freshpet Kitchens Ennis = Freshpet Kitchens South
Slide 57: Capital spending plan supports up to ~$2 billion in capacity
Capital spending plan supports up to ~$2 billion in capacity South Line #2 & #3 Ennis Phase 1 Chicken Processing (TX) South Building 2 Ennis Phase 2 2019 TotalCapex* $71 mm ges a South Line #1 ==> 2020 2021 ~$135mm “$380 mm 2022 $300 mm. 2023 ~$75-95 mm 2024 2025 ~$70-$90 mm _~$70-$90 mm
Slide 58: 2021 Guidance
freshpet 2021 Guidance
Slide 59: 2021 Guidance: Accelerating growth again
2021 Guidance: Accelerating growth again Net Sales Freshpet 2021 Guidance ‘Adj. EBITDA, #00 >$430.0 Ha) ey 161% 2020 Actual 2021 Guidance Net Sales millions) —Adj. EBITDA (millions)
Slide 60: Letters Awakening
Letters ‘Awakening MARKETING COMMUNICATIONS 'E INNOVATION. te SPRINGS #8 “SPROUT iS oe
Slide 61: Continued increases in retail availability
Continued increases in retail availability Store Count 22,716 aiae 2020 Actual 2021 Estimated
Slide 62: Continued increases in retail visibility
Continued increases in retail visibility Upgrades & Second Fridges 3,150 2,900 2,386 Za7d - ‘eae Cumulative Upgrades cumulative Second Fridges 2020 Actual 12021 Estimated
Slide 63: Adding staffing to support increasing demand in 2021
Adding staffing to support increasing demand in 2021 Freshpet Production Capacity 2021 $640 $590 $590 $590 $590 $540 $490 $390 a @ a ae ‘Equipment Capacity ($ milionfyear) _m Staffed Capacity ($ milion/year)
Slide 64: 2021 Adj. Gross Margin expected to be flat to PY but improve as the year progresses
2021 Adj. Gross Margin expected to be flat to PY but improve as the year progresses +0.2% 1, — ox wi oo tax 0.6% £2020 06s Overhead Inputcost Kitchens 2.0 Nightshift premium Expected FY 2021 Adj. Gross Margin Leverage & Uunleveragedcost _andstaffingahead Adj. Gross Margin Efficiencies
Slide 65: 2021 Guidance
2021 Guidance $in Miions 2020 2021 % Change Net Sales $318.8 >$430 +35% Adjusted EBITDA $46.9 >$61 +30% Volume cadence: Q1 growth in excess of consumption growth as we re-fill trade inventory. Q2 growth moderates due to delayed start of advertising. Strong Q3 and Q4 due to availability of capacity a
Slide 66: freshpet
freshpet
Slide 67: Significant opportunities to grow
Significant opportunities to grow We have multiple ways to win Aided Awareness 54% mAided Awareness m@ Unaware + 2020 Dog HH’s 4 / 59 mFreshpet m No Freshpet + Buying Rate $117 $630 m Current ‘Avg. Cost to Feed 30 tb Dog + % ACV Distribution 445% Available Not Available Drive Awareness Increase Pene
Slide 68: Fortified business model that provides strong competitive insulation
Fortified business model that provides strong competitive insulation Manufacturing . romana Diverse line-up piel that is difficult $~2.0 billion capacity to match cee ee iraseeertenestoecae Screeremaatgey? ~~ seni Significant 11mm HH’s — freshpet — scale in b fic ee) distribution nico ‘Walmart: : Re
Slide 69: MILLION HH BY 2025
freshpet e 11 MILLION HH BY 2025
Slide 70: Appendix
Slide 71: Reconciliation Between Gross Profit and Adjusted Gross Profit
FRESHPET, INC. AND SUBSIDIARIES RECONCILIATION BETWEEN GROSS PROFIT AND ADJUSTED GROSS PROFIT Gross Profit s 114,197 Depreciation expense x 5 6370 Plant start-up expense (2) = [Non-cash shve-based compensation 2 ‘COVID.19 expense (6) a Adjusted Gross Profit a) TL Adjusted Gross Profit as 96 of Net S
Slide 72: Reconciliation Between SG&A Expenses and Adjusted SG&A Expenses
FRESHPET, INC. AND SUBSIDIARIES [RECONCILIATION BETWEEN SG&A EXPENSES AND ADJUSTED SG&A EXPENSES “Thre Months Ended Twelve Months Ended 2 ao ‘Darin thowand SORA expenses Sse TES Sago 5 teas Depeecton ed emonuton epee 300 138 9381 ‘Nowa share bse compentton aa ie iso Lanmch expense) Yop asa oo sea Re
Slide 73: Reconciliation Between Net Income (Loss) and Adjusted EBITDA
[FRESHPET, INC. AND SUBSIDARIES [RECONCILIATION BETWEEY NET INCOME (LOSS) AND ADJUSTED EBITDA Thre Monte ded Tw Moh Ended ‘ember Deemer