Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Q3 2022 Earnings Presentation
46 slides from Freshpet's earnings presentation, Nov 1, 2022
Slide 1: Q3 2022 Earnings Presentation
Q3 2022 EARNINGS PRESENTATION November 1, 2022 1 Q3 2022 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 “forward- Freshpet uses certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, looking” statements, which
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, plant Certain of these measures represent the Company's guidance for fiscal year 2022. The start-up expense, COVID-19 expense and non-cash share-based compensation, and
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 Q3 2022 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 Q3 2022 EARNINGS PRESENTATION
Slide 6: Continuing to drive strong and consistent top line growth
CONTINUING TO DRIVE THE STRONG AND CONSISTENT TOP LINE GROWTH THAT FRESHPET HAS DEMONSTRATED FOR 6 YEARS +41% +14% +8% +28% Net sales ahead of pace to achieve our 2025 Growth amongst heavy & super net sales goal of $1.25 billion heavy users is even stronger 6 Q3 2022 EARNINGS PRESENTATION
Slide 7: Executing on operational improvement plan to drive margin expansion
EXECUTING ON OUR OPERATIONAL IMPROVEMENT PLAN TO DRIVE MARGIN EXPANSION MARGIN EXPANSION PLAN SG&A COGS OPERATING EXCELLENCE & LOGISTICS G&A INGREDIENTS QUALITY AUTOMATION • Ship from dual locations • Leverage from scale • Price to recover margin • Immediate, Mid and Long term • Reduce labor per lin
Slide 8: Aligning long-term growth with prudent capital expenditures
ALIGNING LONG-TERM GROWTH WITH PRUDENT CAPITAL EXPENDITURES PREVIOUS PROJECTED CAPITAL UPDATED PROJECTED CAPITAL SPENDING ($ MILLIONS) SPENDING ($ MILLIONS) ~$320 ~$300 ~$290 Reduced projected capital ~$230 spending over 2022/2023 by a total of $100 million. 2022 2023 2022 2023 Source: Company estim
Slide 9: Upgrading and enhancing finance organization
UPGRADING AND ENHANCING FINANCE ORGANIZATION • Proven, public company CFO • High growth company experience • 25+ years of CPG experience • 25+ years of food experience 9 Q3 2022 EARNINGS PRESENTATION
Slide 10: ERP: Steady improvement in performance
ERP: STEADY IMPROVEMENT IN PERFORMANCE 2022 ACCOUNTS RECEIVABLE 2022 DAYS SALES OUTSTANDING (MILLIONS) 38.3 $62,090 $48,235 28.7 Q2 Q3 Q2 Q3 10 Q3 2022 EARNINGS PRESENTATION
Slide 11: Ennis Kitchen: expect to be shipping product within 2 weeks
ENNIS KITCHEN: EXPECT TO BE SHIPPING PRODUCT WITHIN 2 WEEKS • 12 sku’s qualified for production already • Moved to 24/7 operation 6 months earlier than previous start-up • Line is producing high quality product • Final requirements to ship product: building security and processing system coding 11 Q
Slide 12: Re-affirming underlying guidance but updating for new accounting treatment
RE-AFFIRMING UNDERLYING GUIDANCE BUT UPDATING TO REFLECT NEW ACCOUNTING TREATMENT NEW GUIDANCE TO REFLECT ACCOUNTING CHANGE $100 $700 $90 $600 $575.0 $575.0 $80 +35% +35% $70 $500 $60 $400 $48.0 $50 $300 +12% $40 $30 $200 $15.0 $20 $100 -57% $10 $0 $0 Previous 2022 Guidance Updated 2022 Guidance Net
Slide 13: Q3 & YTD 2022 Results
Q3 & YTD 2022 RESULTS 13 Q3 2022 EARNINGS PRESENTATION
Slide 14: Strong net sales growth continues
STRONG NET SALES GROWTH CONTINUES FRESHPET Q3 NET SALES FRESHPET YTD NET SALES (SEP. 30) ($ MILLIONS) ($ MILLIONS) $151.3 $429.5 +41% +39% $107.6 $309.6 +28% +32% 2021 2022 2021 2022 14 Q3 2022 EARNINGS PRESENTATION
Slide 15: Net sales growth driven by volume/mix, pricing and trade inventory re-fill
NET SALES GROWTH DRIVEN BY VOLUME/MIX, PRICING AND TRADE INVENTORY RE-FILL Source: Nielsen consumption data thru 10/1/22 and internal sales data 15 Q3 2022 EARNINGS PRESENTATION
Slide 16: Decline in adj. gross margin due to plant start-up expenses and inflation
DECLINE IN ADJ. GROSS MARGIN DUE TO PLANT START-UP EXPENSES AND INFLATION Q3 2022 ADJ. GROSS MARGIN PROGRESS YTD ADJ. GROSS MARGIN PROGRESS 43.5% 44.4% Pricing/cost mismatch 3.3% 3.4% Plant start-up 4.2% 5.3% expense Reported Adj. 37.1% 34.5% Gross Margin Q3 2021 Q3 2022 2021 2022 38.6% 29.4% Gross
Slide 17: Delivered significant adj. SG&A leverage excluding media & logistics
DELIVERED SIGNIFICANT ADJ. SG&A LEVERAGE EXCLUDING MEDIA & LOGISTICS Q3 2022 ADJ. SG&A LEVERAGE YTD Q3 2022 ADJ. SG&A LEVERAGE 32.3% 35.6% 36.9% 31.0% Freight costs: +60 bps Freight costs: -10 bps 13.1% 13.9% -200 bps 11.9% 13.8% -220 bps 10.9% 9.2% 10.4% 6.3% Q3 2021 Q3 2022 FY 2021 FY 2022 Adj. SG
Slide 18: Investment in plant start-up and fridge placements impacted adj. EBITDA
SIGNIFICANT INVESTMENT IN PLANT START-UP AND NEW FRIDGE PLACEMENTS IMPACTED ADJ. EBITDA FRESHPET Q3 ADJ. EBITDA FRESHPET YTD ADJ. EBITDA (SEP. 30) ($ MILLIONS) ($ MILLIONS) $27.4 $13.5 -4% -7% $3.5 -74% $1.3 -95% 2021 2022 2021 2022 New reporting method for Adj. EBITDA 18 Q3 2022 EARNINGS PRESENTATI
Slide 19: Q3: Reconciliation of previous reporting method to new adj. EBITDA
Q3: RECONCILIATION OF PREVIOUS REPORTING METHOD TO NEW ADJ. EBITDA DEFINITION Reconciliation of Adj. EBITDA to previous reporting method. 19 Q3 2022 EARNINGS PRESENTATION
Slide 20: YTD: Reconciliation of previous reporting method to new adj. EBITDA
YTD: RECONCILIATION OF PREVIOUS REPORTING METHOD TO NEW ADJ. EBITDA DEFINITION Reconciliation of Adj. EBITDA to previous reporting method. 20 Q3 2022 EARNINGS PRESENTATION
Slide 21: Household Penetration & Buying Rate
HOUSEHOLD PENETRATION & BUYING RATE 21 Q3 2022 EARNINGS PRESENTATION
Slide 22: Continued growth in consumer franchise; exceeded 5 million HHs
CONTINUED GROWTH IN CONSUMER FRANCHISE; EXCEEDED 5 MILLION HH’S FOR THE FIRST TIME FRESHPET PENETRATION GROWTH FRESHPET BUYING RATE $149.60 5,008,673 $125.32 +19% 4,400,394 4,058,329 +14% $106.66 +17% +8% 2020 2021 2022 2020 2021 2022 Total Penetration Total Buying Rate Note: Updated Nielsen project
Slide 23: Freshpet heavy/super heavy buyers continue to increase
FRESHPET HEAVY/SUPER HEAVY BUYERS CONTINUE TO INCREASE Freshpet Super Heavy/Heavy Dog Food Buyers 5 Year Trend 3,000,000 2,830,249 $250 Super Heavy/Heavy Buyers: Bought at least $40 in the most recent 10 weeks $240 2,500,000 +31% 2,164,519 $230 2,000,000 $220 1,745,620 +24% $216 $210 1,500,000 +49%
Slide 24: Pricing Impact
PRICING IMPACT 24 Q3 2022 EARNINGS PRESENTATION
Slide 25: Pricing and sensitivity have stabilized
PRICING AND SENSITIVITY HAVE STABILIZED Total Freshpet Price Sensitivity (Pounds) 3,650,000 $4.75 3,550,000 $4.65 $4.55 3,450,000 $4.45 3,350,000 POUNDS $4.35 3,250,000 $4.25 3,150,000 $4.15 3,050,000 $4.05 PRICE 2,950,000 $3.95 2,850,000 $3.85 2,750,000 $3.75 Freshpet Total RFG Total MegaChannel (x
Slide 26: Current Consumption Trends
CURRENT CONSUMPTION TRENDS 26 Q3 2022 EARNINGS PRESENTATION
Slide 27: Strong, steady consumption growth
STRONG, STEADY CONSUMPTION GROWTH Nielsen Mega-Channel Consumption 18,000,000 Nielsen Mega-Channel consumption vs. YA: 16,000,000 • Latest 4 weeks: +36% • Q3: +37% • Q4 to date: +36% 14,000,000 • YTD: +39% 12,000,000 +36% vs. YA (w/e 10/22/22) 10,000,000 Capacity constrained and out-of-stocks 8,000,
Slide 28: 3-year stacked growth is remarkably consistent
3-YEAR STACKED GROWTH IS REMARKABLY CONSISTENT NIELSEN MEGA-CHANNEL CONSUMPTION GROWTH 3-YEAR STACKED 101%100% 101% 102% 100%100% 99% 99% 99% 99% 99% 98% 97% 97% 99% 97% 96% 97% 98% 96% 97% 95% 97% 96% 94% 95% 94% 94% 94% 92% 93% 90% 93% 91% 93% 92% 91% 92% 92% 89% 38% 27% 43% 41% 43% 36% 45% 36% 31
Slide 29: Strong growth in grocery and mass; pet specialty beginning to rebound
STRONG GROWTH IN GROCERY AND MASS; PET SPECIALTY BEGINNING TO REBOUND LATEST 13WK NIELSEN CONSUMPTION GROWTH 47% 43% 37% 9% Mega-Channel XAOC Food Big Box Pet Source: Nielsen consumption data thru 10/08/22 29 Q3 2022 EARNINGS PRESENTATION
Slide 30: Freshpet distribution continues to grow
FRESHPET DISTRIBUTION CONTINUES TO GROW Freshpet % ACV Nielsen Mega-Channel 60.3 59.6 59.0 58.6 58.3 57.9 58.1 57.4 57.6 57.1 56.5 56.5 56.5 56.5 56.7 56.9 56.9 57.0 56.3 56.4 55.7 55.7 55.8 56.1 55.5 55.4 55.5 54.9 55.0 55.1 55.4 54.8 54.4 54.5 54.7 53.7 52.7 52.9 51.4 50.3 49.7 49.9 49.4 49.0 48.3
Slide 31: Retail availability at record levels
31 500.0 550.0 600.0 700.0 750.0 800.0 850.0 900.0 950.0 650.0 1 W/E 08/22/20 1 W/E 08/29/20 1 W/E 09/05/20 1 W/E 09/12/20 1 W/E 09/19/20 1 W/E 09/26/20 1 W/E 10/03/20 1 W/E 10/10/20 1 W/E 10/17/20 1 W/E 10/24/20 1 W/E 10/31/20 1 W/E 11/07/20 1 W/E 11/14/20 1 W/E 11/21/20 1 W/E 11/28/20 1 W/E 12/05/
Slide 32: Freshpet is now the leading brand in the grocery channel
ON A TOTAL BRAND BASIS, FRESHPET IS NOW THE LEADING BRAND IN THE GROCERY CHANNEL TOTAL WET & DRY DOG FOOD BRANDS DOLLAR SALES: US FOOD (LATEST 13WKS THRU 10/08/22 -- $M ) Freshpet Total RFG $110,103 Pedigree Total Dog Food $98,632 Blue Buffalo Total Dog Food $85,238 Purina ONE Total Dog Food $79,569
Slide 33: 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 $/%ACV THRU 10/08/22 -- $M ) Freshpet Total RFG $1,610 Pedigree Total Dog Food $1,065 Blue Buffalo Total Dog Food $1,034 Purina ONE Total Dog Food $893 Beneful Total Dog Food $599 P
Slide 34: Building meaningful share of the category
BUILDING MEANINGFUL SHARE OF THE CATEGORY FRESHPET $ SHARE OF WET & DRY DOG 14.3 14.3 14.4 13.4 7.3 7.2 7.4 7.0 5.9 5.9 6.0 5.7 2.7 2.6 2.7 2.6 4wk 13wk 26wk 52wk Freshpet Share of Wet + Dry Dog Total US Food Total US xAOC Mega-Channel Pet Superstore Source: Nielsen Mega-Channel Data thru 10/08/22 3
Slide 35: Q3 2022 Freshpet e-com grew 65% vs YA
Q3 2022 FRESHPET E-COM GREW 65% VS YA 13% Online Fresh Delivery 7.6% % of Total FP Sales 26% Through E-Com Last Mile Delivery $12.2MM 87% of Sales Contribute to Brick & Mortar 61% Click & Collect Source: Customer and internal data through 10/1/22 35 Q3 2022 EARNINGS PRESENTATION
Slide 36: Q3 2022 Visibility & Availability
Q3 2022 VISIBILITY & AVAILABILITY 36 Q3 2022 EARNINGS PRESENTATION
Slide 37: Store count continues to grow
STORE COUNT CONTINUES TO GROW FRESHPET STORE COUNT 24,651 23,631 22,716 21,570 19,499 2022 Guidance: +~1,300 to 24,931 18,004 16,609 15,015 13,387 10,826 2013 2014 2015 2016 2017 2018 2019 2020 2021 3Q 2022 Source: Internal data for the period ending 10/1/22 37 Q3 2022 EARNINGS PRESENTATION
Slide 38: Q3 2022: Strong increase in new stores
Q3 2022: STRONG INCREASE IN NEW STORES NET NEW STORES FRIDGE UPGRADES SECOND/THIRD FRIDGES STORE COUNT 3,658 3,762 1020 3,123 3,159 24,651 665 23,381 374 226 737 682 408 382 Q3 2021 Q3 2022 Qtr. Increase YTD Increase Total Operating YTD Increase Total Operating YTD Increase Q3 2021 Q3 2022 Q3 2021 Q
Slide 39: Ennis Kitchen Update
ENNIS KITCHEN UPDATE 39 Q3 2022 EARNINGS PRESENTATION
Slide 40: Ennis Phase I is producing high quality product
ENNIS PHASE I IS PRODUCING HIGH QUALITY PRODUCT THAT WE EXPECT TO BEGIN SHIPPING WITHIN 2 WEEKS • Enables total Freshpet growth to >$1 billion in net sales • Most environmentally sustainable Kitchen • Most efficient Freshpet Kitchen • Enables significant quality improvements • Enables lower cost log
Slide 41: Appendix
APPENDIX 41 Q3 2022 EARNINGS PRESENTATION
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