Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Q3 2020 Earnings Presentation
41 slides from Freshpet's earnings presentation, Nov 2, 2020
Slide 1: Slide 1
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 SGBA as SGA expenses before depreciation and amortization expense, no
Slide 4: Slide 4
Slide 5: Nielsen Mega-Channel
Nielsen Mega-Channel consumption vs. YA thru 10/24/21 + Q3: +40% * Latest week: +39% + YTD: +31% Strong consumption leveled off due to capacity limits Nielsen Mega-Channel Consumption
Slide 6: Growth rate peaked in low 40's; out-of-stocks hurting growth rate
Growth rate peaked in low 40’s; out-of-stocks hurting growth rate Nielsen Mega-Channel Consumption Growth (indexvs. YA) Continuous media on Latest week: +39% vs. YA air May-October capitalized on lower media rates and higher viewership and drove strong growth #§ ;_——/ [aa 1
Slide 7: Q3 2020: Strong growth and leverage from scale
Q3 2020: Strong growth and leverage from scale Freshpet Net Sales & Adj. EBITDA Performance $84.2 ree) 429% $700 $65.3 $17.0 $150 10 of last 11 quarters hess 428% >25% net sales $900 $200 $12.0 e growth $300 178% mt 00 50 00 200 $00 e209 ca2020 Net Sales (Smillons) | —=Adh. EBITDA $ millions) ‘Net I
Slide 8: YTD 2020: Strong performance despite the COVID crisis
YTD 2020: Strong performance despite the COVID crisis Freshpet Net Sales & Adj. EBITDA Performance $234.3 aaa $2200 430% 50 bs. 180.1 $34.0 We anticipate rat om 038 = delivering positive $250 net income in 2020 ‘bn0 for the first time bas $16.0 oD 148% $709 s100 sso 200 soo et Sales (Smlins)- —Ad} E
Slide 9: Strong consumption growth prior to reaching capacity limits late in Q3
Strong consumption growth prior to reaching capacity limits late in Q3 YTD consumption growth of 31%
Slide 10: Q3 2020: Strong and balanced growth across all classes of trade
Q3 2020: Strong and balanced growth across all classes of trade Q3 2020 Nielsen Consumption Growth 42% 40% 40% if. Aap Fridges delivered 32% strong improvement in Big Box Pet consumption growth Mega-Channel XAOC Food Big Box Pet
Slide 11: Capacity limits
Capacity limits resulted in ~$7-8 million of net sales lost which will be recaptured in Q4 and Qi 2021 Consumption Growth Q3: Consumption grew faster than net sales as we drew down trade inventory due to capacity limitations 3 2020 Consumption to Net Sales Reconciliation “3% 1% 9% fase Year Trade Re
Slide 12: YTD: Strong, consistent performance despite capacity limits
YTD: Strong, consistent performance despite capacity limits YTD Consumptionto Net Sales Reconciliation 1% —==—= 1% 3% On track for strongest year of growth since 2015 ConsumptionGrowth Q42019Short Shipments 3 2020 Short Shipments Less Spots
Slide 13: Freshpet consistently outperforming the category during the post-COVID period
Freshpet consistently outperforming the category during the post-COVID period Retailers recognize that Freshpet has dramatically outperformed the category in the post- COVID period 3 5 5 freshpet —reshpetTotal REG — ~Dog Food Wet (wo Freshpet)
Slide 14: Freshpet's growth significantly outperformed the category
Freshpet’s growth significantly outperformed the category Nielsen Consumption Growth vs. YA sofa Freshpet * a ascii consumption grew poy >35 pts. faster than z the balance of the i category in all ie classes of trade in Q3 A ‘| sal. fne = 23.28) 36387731 La seTota Mega-Chomel Total sxAqe Total US fo
Slide 15: Consistently building market share across all classes of trade
Consistently building market share across all classes of trade Freshpet $ Share of Wet & Dry Dog 10.3 105 10.0 88 Out-of-stocks limited growth in the last 4 oS Ag 56 weeks of Q3 49 5.0 a7 49 4a U i [ : ak 130k 260% 20k Freshpet Share of Wet + Dry Dog mTotal US Food mTotal USxAOC @ Mega-Channel_m Pet
Slide 16: Category growth skewing towards more premium brands
Category growth skewing towards more premium brands Nielsen Mega-Channel Consumption Trends Pet food catego! particularly premium brands — have ae ue performed well in a 44% previous economic downturns Latest 4 Weeks vs. YA.
Slide 17: Store count growth limited by COVID-19 related retail disruption
Store count growth limited by COVID-19 related retail disruption 22,371 i 21,570 ay i% Sm 19,499 Q3; 251 net new ran stores ava 18,004 16,609 18% se iscie we ay 13,387 fa’ i 10,826
Slide 18: Store Count 22,371
Store Count 22,371 Upgrades and 2"¢ 20,773 Fridges are | increasingly becoming a 32019 032020 significant enabler of groftth ie Upaass 130 | Cuulahe Wincene 032019 #032020 Retail disruptions reduced new Fridge placements, but upgrades and 2" Fridge placements accelerated Net New Stores 20 second Fes
Slide 19: Distribution gains slowed during COVID-19 crisis due to retailers' operating challenges
Distribution gains slowed during COVID-19 crisis due to retailers’ operating challenges Freshpet % ACV como crisis Added 251 net new a2? stores inQ3-now [im we totaling 22,371
Slide 20: Rapid velocity growth behind continuous media
Rapid velocity growth behind continuous media Freshpet Velocity $/swn ACY Q3 velocity gains ($/$ million ACV): +29% vs. YA
Slide 21: Strong TDP growth limited by capacity constraints
Strong TDP growth limited by capacity constraints Freshpet Total Distribution Points (TDP’s) Copackty ener) Nielsen Mega-channel out-of stocks a tone _ COVID out-of stocks rr) TDP growth = +21% in July due to upgraded and 24 Fridges before capacity limits created out-of-stocks
Slide 22: Better than anticipated media response drove out-of-stocks late in Q3
Better than anticipated media response drove out- of-stocks late in Q3 Freshpet Availability Consumer Comments With Kitchens 2.0 now producing, we will catch up on supply in Q4 and Qi 2021 005-Outofstoel/Can'tFind >= WTB - Where to Buy
Slide 23: Q3 2020 e-commerce sales +188% vs. YA
Q3 2020 e-commerce sales +188% vs. YA Find Freshpet Near You 5.1% of Freshpet sales in Q3 2020 were e-commerce instacart emer >85% of e- commerce sales go through a Freshpet Fridge in Q3 amazonires sfreshdirect. Peapod 56% ek & Collect @ ClickList psn) freshpet
Slide 24: More than doubled Core Dog HH penetration in years
More than doubled Core Dog HH penetration in 3 years Strong penetration growth despite capacity limits and out-of-stocks Freshpet Penetration Growth % of HH’s 3.02 278 225 175 125 7s 2018 2019 2020 mn Total Penetration () Core Dog Penetration (5) tore Total Penetration Trending Core Dog Penetration
Slide 25: On pace for our 2025 HH penetration goal
On pace for our 5 x 2025 HH penetration goal Progress Towards 2025 HH Penetration Goal Added 725K incremental users in EHD the past year mCurrent HH Penetration _ m 2025 Target HH Penetration
Slide 26: Freshpet Post-COVID New Buyers
Freshpet Post-COVID New Buyers (index ve. Share of Pre-COVIO Buyers) Attractive » demographics for franchise longevity Freshpet Post-COVID New Buyers (index vs. share ofPre-COVID Buyers) Post-COVID new buyers skew young, urban, ethnic and unmarried Freshpet Post-COVID New Buyers (lode ve. Share of P
Slide 27: 5% growth in core dog buying rate
5% growth in core dog buying rate Buying rate growth continues $110.90 13000 120.00 11000 100.00 $90.00 80.00 $70.00 $60.00 Freshpet Buying Rate lever suz6.87 $125.70 om 4% 1% 5% $107.95 $103.52 $93.59 2017 2018 2019 Total Buying Rate {Core Dog Buying Rate $130.18 54% $113.48 2020
Slide 28: Q3 Adj. Gross Margin
Q3 Adj. Gross Margin impacted by higher beef prices and a favorable mix shift to rolls Consistent gross margin performance Q3 2020 Adj. Gross Margin Progress 49.8% 49.3% 032019 032020 YTD Adj. Gross Margin Progress 49.5% iene 2019 2020 Gross Margin (GAAP)
Slide 29: Generating significant leverage in Adj. SG&A
Q3 media investment: was +30% vs YA; moved 90 bps of YTD: media to Q4 to manage capacity limits Generating significant leverage in Adj. SG&A (excluding media) Adj. SG&A Leverage Progress YTD Adj. SG&A Leverage Progress Q3 2020 (Sept. 30) 314% 40.7% 29.3% Media: ox 34.8% Met: weet 24.6% 6. Medi 22.2%
Slide 30: Capacity addition projects are on track
Capacity addition projects are on track ‘To meet demand, we have completed the following capacity expansion projects Rolls line 24/7: In January, we took our second roll ine to 24/7 production. This line will be out of capacity by Qi of 2021. GF Kichenssouth: in February, we started up a small plece
Slide 31: Kitchens 2.0 started up in September and began producing saleable product in October
Kitchens 2.0 started up in September and began producing saleable product in October Installed capacity is now $590 million in net sales when fully staffed a
Slide 32: Reiterating 2020 Net Sales and Adj. EBITDA Guidance
Reiterating 2020 Net Sales and Adj. EBITDA Guidance $in Millions Guidance __Growth vs YA Net Sales >$320 +30% Adjusted EBITDA >$46 +58% See assumptions on next page Updated Commentary: * Volume cadence: Extremely strong consumption in Q3 led to short shipments that drained $7- 8 million of net sales
Slide 33: Progress Against Guidance Assumptions
Progress Against Guidance Assumptions Our guidance considers the following factors. We believe we have made reasonable assumptions about each factor. However, the external environmentis very dynamic, so we want investors to understand the basis for our guidance: GS Supply: We do not encounter any si
Slide 34: COVID-19 Team Member safety & reward plan is working
#4 Wellness check: ee Third-paty nurse Deep cleaning DUK: Becen“seep cleaning” tener break >500,000 man-hours meeting areas with no evidence of [i RESO Car khemirus being tsjou Tribledsize ofbreak / meeting areas Masks Required: spread in our Requireduse by all taam members facilities Air filtration
Slide 35: Committed to protecting our employees and continuing to nourish our pets
Committed to protecting our employees and continuing to nourish our pets + Protecting our employees + 3 party medical staffperforming health checks on employees © pg. + Increased deep cleanings x Current estimate of * Increased sanitizing and social distancing cost ie) COVID-19 related + Providing e
Slide 36: "Feed the Growth" is working
“Feed the Growth” is working Accelerated growth rate and capturii scale benefits /[ ee 2625 FEED THE GROWTH _, freshpet
Slide 37: Freshpet - Feed the Growth
freshpet FEED THE GROWTH freet
Slide 38: Appendix
Appendix
Slide 39: Reconciliation Between Gross Profit and Adjusted Gross Profit
RECONCILIATION BETWEEN GROSS PROFIT AND ADJUSTED GROSS PROFIT ‘Three Months Ended Nine Months Ended September 30, September 30, 3020 2019 2020 2019 cr Gross Profit S 36654 $ 30,706 $ 102377 $83,958, Depreciation expense 2129 1,599 6822 4754 Plant start-up expense (8) 1928 - ‘Non-cash share-based com
Slide 40: Reconciliation Between SG&A Expenses and Adjusted SG&A Expenses
RECONCILIATION BETWEEN SG&A EXPENSES AND ADJUSTED SG&.A EXPENSES Three Months Ended ‘September 30, 7020 SGRA expenses Ss g95 $ Depreciation and amortization expense 2923 ‘Non-cash share-based compeasation 2368 Launch expense (a) 760 ‘Loss on disposal of equipment 1265 Equity offering expenses (>) =
Slide 41: Reconciliation Between Net Income (Loss) and Adjusted EBITDA
[RECONCILIATION BETWEEN NET INCOME (LOSS) AND ADJUSTED EBITDA ‘Three Months Ended ‘Nine Months Ended September 30, September 30, 72 Tino 2019 ‘Dollars in thousands) Net income los) s so 3087 $10 S$ 01) Depreciation and amestiaton gost ages, Interest expense Tacome tx expense EBITDA z Enterprise Reso