Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Q3 2024 Earnings Presentation
37 slides from Freshpet's earnings presentation, Nov 4, 2024
Slide 1: Q3 2024 Earnings
Q3 2024 Earnings November 4, 2024 1 Q3 2024 EARNINGS PRESENTATION
Slide 2: Forward Looking Statements & Non-GAAP Measures
Forward Looking Statements & Non-GAAP Measures FORWARD-LOOKING STATEMENTS adjusted SG&A as a % of net sales. These non-GAAP financial measures component of internal budgeting and setting management should be considered as supplements to GAAP reported measures, compensation. The non-GAAP measures are
Slide 3: 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. 3 Q3 2024 EARNINGS PRESENTATION
Slide 4: Mainstream, Main Meal, More Profitable
MAINSTREAM Expand the Freshpet consumer base MORE PROFITABLE MAIN MEAL Create a sustainable Increase the percentage business by improving of consumers who our margin and increasing are HIPPOHs* our capital efficiency 4 *High profit pet owning households Q3 2024 EARNINGS PRESENTATION
Slide 5: Highlights
Highlights 5 Q3 2024 EARNINGS PRESENTATION
Slide 6: 25th consecutive quarter of >25% net sales growth
“We delivered our 25th consecutive quarter of >25% year-on-year net sales growth and matched that with a very strong operating performance.” 6 Q3 2024 EARNINGS PRESENTATION
Slide 7: Q3 2024: Robust growth and profitability improvement across each key metric
Q3 2024: Robust growth and profitability improvement across each key metric FINANCIAL RETAIL Q3 2024 YoY Change YoY Change Net Sales $253.4M +26% Household Penetration +17% Adjusted Gross Margin* 46.5% +630 bps Buy Rate +6% Adjusted EBITDA $43.5M +$20.2M Cubic Feet +9% Adjusted EBITDA Margin* 17.2%
Slide 8: Strong performance driven by key fundamentals
Strong performance driven by key fundamentals: Strength of the Freshpet Improved operational Operating discipline growth model effectiveness to balance capacity and demand at a high growth rate • 25th consecutive quarter of >25% • 790 basis point improvement • Expanding capacity on-budget year-on-ye
Slide 9: Long-term tailwinds supporting our growth
Long-term tailwinds supporting our growth: Humanization of Pets • Growing importance of pets in our lives • Long-term trend we have seen for over a decade Value • Consumers recognize quality for the price, not just price • Find value in a differentiated product • Heaviest users growing faster than t
Slide 10: Vast runway for growth in a growing category
MAINSTREAM Vast runway for growth in a growing category $54B U.S. pet food category1 96% $37B Dog food category1 3.2% Freshpet market share of fresh/frozen in Freshpet market share of dog food1 measured channels2 1. NIQ Total US Pet Food $ - OmniChannel by Category 52 Weeks Ended 9/28/24 10 Q3 2024
Slide 11: Continued growth in consumer franchise; added 1.9m+ households YoY
Continued growth in consumer franchise; MAINSTREAM added 1.9m+ households YoY Freshpet Household Penetration Growth (in millions) (52 weeks) 12.9 11.0 +17% 9.7 +14% 8.0 +21% 7.2 +11% 2020 2021 2022 2023 2024 11 Source: Numerator Panel data for the 52-week periods ending 10/4/20, 10/3/21, 10/2/22, 10
Slide 12: Sales increasingly concentrated in heaviest users (HIPPOHs)
Freshpet sales are increasingly concentrated MAIN MEAL in our heaviest users (HIPPOHs*) and account for 90% of Q3 2024 net sales 6.0 295 Freshpet Users who are Super Heavy/Heavy Buyers (in millions) 5.0 5.0 275 Super Heavy/Heavy HHP Super Heavy/Heavy Buy Rate 4.0 4.0 255 3.2 $238.08 $239.00 3.0 235
Slide 13: Converting toppers into main meal users will increase buy rate
Converting toppers into main meal users MAIN MEAL will continue to increase buy rate Freshpet Buy Rate (52 weeks) $103.64 $98.07 +6% $84.80 +16% $75.92 +12% $66.70 +14% 2020 2021 2022 2023 2024 13 Source: Numerator Panel data for the 52-week periods ending 10/4/20, 10/3/21, 10/2/22, 10/1/23, and 9/2
Slide 14: Expanding depth and breadth: 22% of stores have multiple fridges
Expanding depth and breadth: 22% of all stores have multiple fridges Freshpet Store Count Number of Fridges per Store* YTD +1,061 27,838 26,777 25,281 Second/Third 23,631 Fridges 22,716 22% 21,570 19,499 18,004 16,609 15,015 13,387 One Fridge 10,826 78% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2
Slide 15: Enhancing margins through improved operating performance
Enhancing margins through improved operating performance and leveraging scale and efficiency MORE PROFITABLE Q3 2024 Adj. Gross Margin Q3 2024 Adj. EBITDA ($m) % of net sales % of net sales 46.5% $43.5 17.2% $23.2 40.2% 11.6% Q3 2023 Q3 2024 Q3 2023 Q3 2024 33.0% 40.4% ($7.2m) $11.9m1 Gross Margin (
Slide 16: Improved costs by 790 bps in Q3 2024
Improved costs by 790 bps in Q3 2024 across key focus areas MORE PROFITABLE -120 bps -220 bps -450 bps Q3 2024 Q3 2024 Q3 2024 16 All comparisons to prior year period Q3 2024 EARNINGS PRESENTATION
Slide 17: Capacity Update
Capacity Update # Lines Facility # Lines Today Projected Bethlehem Kitchen 6 7 Kitchen South 3 5+ Ennis Kitchen 4 10+ Total 13 22+ Fourth line in Ennis began production at the end of Q3 2024; Fifth line install underway (rolls) with commissioning in Q4 2024 – provides necessary roll capacity well in
Slide 18: Capital Efficiency Framework
Capital Efficiency Framework MORE OUT OF MORE OUT OF DEVELOP & IMPLEMENT EXISTING LINES EXISTING SITES NEW TECHNOLOGIES 18 Q3 2024 EARNINGS PRESENTATION
Slide 19: Long-Term Strategy: Path to 2027
Long-Term Strategy: Path to 2027 Advertising & Innovation $1.8 billion Net Sales Drive Expand HH (target) Efficiencies Penetration Build Organization Capability to Increase Increase ~18% Velocity 20 million Effectiveness & Leverage Scale Adjusted EBITDA Margin (target) Freshpet Households by 2027 (t
Slide 20: Q3 2024 Results
Q3 2024 Results 20 Q3 2024 EARNINGS PRESENTATION
Slide 21: Strong Q3 results demonstrate all volume-driven growth
Strong Q3 results demonstrate all volume-driven growth Q3 2024 Net Sales ($m) Q3 2024 Net Sales Bridge 26% 0% 26% $253.4 $200.6 +26% Q3 2023 Q3 2024 21 Source: Internal Data Q3 2024 EARNINGS PRESENTATION
Slide 22: Consumption growth remains strong and has accelerated
Consumption growth remains strong and has accelerated Q3 2024 Consumption Growth ($) Consumption Growth Trends (volume in pounds) 31% 23% 24% 28% 22% 25% 26% 23% 18% 9% Total US Pet XAOC Food Pet Specialty Retail Plus Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 PLUS >70% GROWTH IN UNMEASURED CHA
Slide 23: Q3 2024 delivered significant margin improvement
Q3 2024 delivered significant margin improvement Q3 2024 Adj. Gross Margin Q3 2024 Adj. EBITDA ($m) % of net sales % of net sales 46.5% $43.5 17.2% $23.2 40.2% 11.6% Q3 2023 Q3 2024 Q3 2023 Q3 2024 33.0% 40.4% ($7.2m) $11.9m1 Gross Margin (GAAP) Net Income (loss) Source: Internal Data 23 1. Excludin
Slide 24: 790 basis point improvement in Q3 2024
790 basis point improvement in Q3 2024; demonstrated our ability to deliver FY 2027 margin targets again Key Margin Improvement Targets & Progress Q3 2023 Q3 2024 2027 Target 34.1% 33.5% 29.6% 6.8% 7.5% 5.6% 4.3% 2.1% 2.9% Input Costs Logistics Quality 24 Source: Internal Data Q3 2024 EARNINGS PRESE
Slide 25: Significant Adj. Gross Margin improvement YOY
Significant Adj. Gross Margin improvement YOY; ahead of our long-term target and now focused on consistent performance Adj. Gross Margin Progress vs. 2027 Targets 46.5% 45.0% 40.2% Q3 2023 Q3 2024 2027 Target 25 Source: Internal Data Q3 2024 EARNINGS PRESENTATION
Slide 26: SG&A improvements tracking to long-term target
SG&A improvements tracking to long-term target; logistics is well ahead of plan and G&A will follow as we add scale Adj. SG&A Progress vs. Targets Q3 2023 Q3 2024 2027 Target 28.6% 29.3% 25.3% 12.3% 12.9% 8.8% 9.5% 10.8% 9.0% 6.8% 5.6% 7.5% Adj. SG&A Excluding Media & Media % Logistics % Total Adj.
Slide 27: FY 2024 Guidance
FY 2024 Guidance 27 Q3 2024 EARNINGS PRESENTATION
Slide 28: Updated FY 2024 Guidance
Updated FY 2024 Guidance Previous Updated Net Sales >$965M ~$975M Net Sales Growth YoY >26% ~27% Adjusted EBITDA >$140M >$155M Capital Expenditures ~$200M ~$180M Additional considerations: • Net Sales: Raising guidance with improvements on production capacity; lower first half media investment will
Slide 29: Capital Spending, Cash Flow & Liquidity
Capital Spending, Cash Flow & Liquidity 29 Q3 2024 EARNINGS PRESENTATION
Slide 30: Significant improvement in operating cash flow
Significant improvement in operating cash flow Capital Spending: Operating Cash Flow ($m) • Key projects remain on-track and on-budget; estimated 2024 spending of ~$180 million • Once Ennis Phase II is completed this fall, we will have built $103.9 adequate infrastructure/buildings to accommodate ou
Slide 31: Appendix
Appendix 31 Q3 2024 EARNINGS PRESENTATION
Slide 32: Reconciliation between Gross Profit and Adjusted Gross Profit
Freshpet, Inc. and Subsidiaries Reconciliation between Gross Profit and Adjusted Gross Profit For the Three Months Ended For the Nine Months Ended September 30, September 30, 2024 2023 2024 2023 (Dollars in thousands) Gross profit $ 102,247 $ 66,293 $ 284,357 $ 176,297 Depreciation expense 13,197 11
Slide 33: Reconciliation between SG&A Expenses and Adjusted SG&A Expenses
Freshpet, Inc. and Subsidiaries Reconciliation between SG&A Expenses and Adjusted SG&A Expenses For the Three Months Ended For the Nine Months Ended September 30, September 30, 2024 2023 2024 2023 (Dollars in thousands) SG&A expenses $ 90,338 $ 73,371 $ 265,734 $ 221,638 Depreciation and amortizatio
Slide 34: Reconciliation between Net Income (loss) and Adjusted EBITDA
Freshpet, Inc. and Subsidiaries Reconciliation between Net Income (loss) and Adjusted EBITDA For the Three Months Ended For the Nine Months Ended September 30, September 30, 2024 2023 2024 2023 (Dollars in thousands) Net income (loss) $ 11,895 $ (7,166) $ 28,803 $ (48,904) Depreciation and amortizat
Slide 35: Convertible Share Dilution Calculations at Maturity
Convertible Share Dilution Calculations at Maturity ▪ We have run share dilution calculations to compare outcomes for the 2028 convertible notes ▪ Freshpet has structured the convertible with Flexible Settlement, so we have the option to settle the convertible in shares, cash, or a combination at it
Slide 36: Q3 2024 EARNINGS PRESENTATION
36 Q3 2024 EARNINGS PRESENTATION
Slide 37: Q3 2024 EARNINGS PRESENTATION
37 Q3 2024 EARNINGS PRESENTATION