Freshpet, Inc. · NASDAQ:FRPT

Freshpet — ICR Conference 2021

73 slides from Freshpet's conference presentation, Jan 14, 2021

  1. Slide 1: ICR Investor Presentation January 13, 2021

    ICR Investor Presentation January 13,2021

  2. Slide 2: Forward Looking Statements & Non-GAAP Measures

    Forward Looking Statements & Non-GAAP Measures * Forward-Looking StatementsCertain 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

  3. 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 SG&A expenses before depreciation and amortization expense,

  4. Slide 4: 4

    4

  5. Slide 5: Mission: Awaken the world to a better way of feeding pets

    Mission: Awaken the world to a better way of feeding pets 5

  6. Slide 6: Embed video here

    Embed video here *

  7. Slide 7: Today's Objectives

    Today’s Objectives * Share Preliminary 2020 ResultsActual Net Sales result and Adj. EBITDA guidanceStrong consumption, distribution, HH penetration and buying rate resultsShare New Cohort Buying Rate DataFirst detailed look at 5 years of buying rate data by cohortIn conjunction with rapidly growing

  8. Slide 8: Preliminary 2020 Results

    freshpet Preliminary 2020 Results

  9. Slide 9: 2020 highlights

    2020 highlights * Strongest growth since 2015 and accelerating 30% Net Sales growth for the year with 33% Nielsen Mega-Channel growthConsumption growth accelerated throughout the year – ending with 38% in Q4Strong growth occurred despite out-of-stocks and scaled back advertising investment due to ca

  10. Slide 10: 2020 challenges & opportunities

    2020 challenges & opportunities COVID created significant chaosNeed to rapidly implement numerous new protocols to keep employees safeSupply chain interruptions (e.g., ingredients and packaging, warehouse labor)Ingredient costs (i.e., beef prices)Absenteeism and labor supply issues reduced our produ

  11. Slide 11: We are operating in a difficult labor market that has caused some supply challenges

    We are operating in a difficult labor market that has caused some supply challenges *

  12. Slide 12: Increases in production capacity offset by COVID issues

    300,000 380,000370,000360,000350,000340,000330,000320,000310,000 390,000 Jan Feb Mar April Aug Sept Oct Nov Dec. Freshpet ProductionAvg. Pounds/Day 12 Increases in production capacity offset by COVID issues Pre-COVID COVID Fear Kitchens 2.0 Staffing as Back-up 4th Line 24/7 Kitchens South May June J

  13. Slide 13: Strong consumption growth vs. YA despite capacity constraints

    6,500,0006,000,000 7,000,000 7,500,000 8,000,000 8,500,000 9,000,000 10,500,00010,000,0009,500,000 11,000,000 1/4/2020 2/4/2020 3/4/2020 4/4/2020 5/4/2020 6/4/2020 7/4/2020 8/4/2020 9/4/2020 10/4/2020 11/4/2020 12/4/2020 Nielsen Mega-Channel Consumption +35% vs. YA 13 Strong consumption growth vs. Y

  14. Slide 14: Building meaningful share of the category

    14 Building meaningful share of the category 10.3 9.4 5.7 5.7 5.8 5.2 4.8 4.8 4.9 4.4 2.6 2.5 2.5 2.3 4wk 52wk Freshpet $ Share of Wet & Dry Dog10.3 10.4 13wk 26wkFreshpet Share of Wet + Dry DogTotal US Food Total US xAOC Mega-Channel Pet Superstore Source: Nielsen Mega-Channel Data thru 12/26/20

  15. Slide 15: Category growth skews heavily towards most premium brands

    15 Category growth skews heavily towards most premium brands -9.1 -20.1 -0.10.7 17.3 Price Tier Growth: Wet + Dry + Fresh Dog Food52 Weeks: Dollar % Change vs. YAG Private Label Wet + Dry Value Wet + Dry Premium Wet + Dry Dog Food Super Premium Wet + Dry Ultra Premium Wet + Dry + Refrigerated Source

  16. Slide 16: Adding HH's quickly

    1.75 2.05 2.55 3.15 1.1 4 1 .5 1 1 .97 2.52 0.75 1.25 1.75 2.25 2.75 2020 Freshpet Penetration Growth% of HH’s 2017Total Penetration (%) 2018Core Dog Penetration (%) 2019Total Penetration Trendline Core Dog Penetration Trendline +30% +32% +28% +24% +12% Adding HH’s quickly Source: Nielsen HH Panel f

  17. Slide 17: Buying rate growth continues

    Buying rate growth continues Source: Nielsen HH Panel for the period ending late December 2017, 2018, 2019, 2020 and company internal data $98.84 $108.14 $109.35 $116.94 $128.82 $128.94 $127.64 $134.38 $60.00 $70.00 $80.00 $90.00 $100.00 $110.00 $120.00 $130.00 $140.00 2017 2020 Freshpet Buying Rate

  18. Slide 18: Distribution growth plateaued during COVID crisis

    45.5 45.7 45.7 45.8 46.1 46.4 47.4 47.9 48.2 48.5 48.9 49.3 49.7 49.9 50.2 51.1 52.5 52.8 53.4 54.4 54.5 54.6 54.8 54.9 55.0 55.1 55.3 55.5 55.4 55.5 44.042.0 46.0 48.0 50.0 52.0 54.0 56.0 58.0 Freshpet % ACV Distribution growth plateaued during COVID crisis Source: Nielsen Mega-Channel Data thru 12

  19. Slide 19: Store count growth limited by COVID; 2nd Fridge growth accelerating

    19 Store count growth limited by COVID; 2nd Fridge growth accelerating 791 2,071 345 1,146 Qtr. Increase YTD Increase Net New Stores Q4 2019 Q4 2020 1,591 2,386 786 795 Total Operating YTD New Fridge Upgrades Q4 2019 Q4 2020 807 705 2,477 1,640 Total Operating YTD New Second Fridges Q4 2019 Q4 2020

  20. Slide 20: New fridge placements skew heavily to second fridges

    New fridge placements skew heavily to second fridges Source: Internal company data through December 2020 20 20% 60% 11% 10% Freshpet Fridge Fleet Distribution by Size(US & Canada Stores) Small Medium Large 2+ Chillers 23% 14% 5% 30% 30% 14% 11%1% 47% 51% 58% 35% 5% 48% 2%21% 5% 2017 2020 New Fridge

  21. Slide 21: Velocity growth has surged

    525 523 517 516 523 546 560 568 571 580 587 584 585 596 600 594 572 587 607 716 538 586 644 701 738 748 743 747 757 745 500.0450.0400.0 550.0 600.0 650.0 700.0 750.0 800.0 Freshpet Velocity$ / $MM ACV * Source: Nielsen Mega-Channel Data thru 12/26/20 Velocity growth has surged COVID Crisis

  22. Slide 22: Distribution is eroding behind out-of-stocks

    647 648 644 640 639 660 687 684 687 682 678 695 706 715 722 731 737 749 762 788 709 739 785 814 826 824 796 803 802 775 550.0 600.0 650.0 700.0 750.0 800.0 850.0 Freshpet Total Distribution Points (TDP)Nielsen Mega-Channel * Source: Nielsen Mega-Channel Data thru 12/26/20 Distribution is eroding beh

  23. Slide 23: Q4 2020 e-commerce results

    Q4 2020 e-commerce results: 23 Continued strong growth in e-commerce 33%Last Mile Delivery 56%Click & Collect 11%Online Fresh Delivery >85% of e- commerce sales go through a Freshpet Fridge in Q4 Net sales +192% vs. YA e-commerce = 6.1% of sales

  24. Slide 24: Leading Canadian Customer Total Weekly Sales

    Leading Canadian Customer Total Weekly Sales Canadian business accelerating post-COVID 24 Latest week +44% vs. YA

  25. Slide 25: Leading UK Customer Sales By Week

    £0 £2,000 £4,000 £6,000 £8,000 £10,000 £12,000 £14,000 £16,000 £18,000 Leading UK Customer Sales By Week £30,000 £35,000 £40,000 £45,000 £50,000 £55,000 £60,000 £65,000 £70,000 £75,000 £80,000 Leading UK Customer Sales By Week UK well ahead of YA Panic Buying TV Regular Sales Latest week +94% vs. YA

  26. Slide 26: 2020 Net Sales & Adj. EBITDA

    freshpet 2020 Net Sales & Adj. EBITDA

  27. Slide 27: Q4 2020 Net Sales: Strong growth constrained by supply limits

    Q4 2020 Net Sales: Strong growth constrained by supply limits 27 $65.8 $50.0$40.0$30.0$20.0 $60.0 $70.0 $80.0 $90.0 Q4 2019 Q4 2020 Freshpet Net Sales & Adj. EBITDA Performance$84.5 Net Sales ($ millions) +27% +29%

  28. Slide 28: Post-December guidance snowstorm impacted final net sales results

    Post-December guidance snowstorm impacted final net sales results *

  29. Slide 29: Late December Nor'easter left no time to recover lost production

    150,000100,00050,0000 200,000 400,000350,000300,000250,000 450,000 Bethlehem ProductionPacked Pounds * Late December Nor’easter left no time to recover lost production Snowstorm Christmas Guidance Incremental Staffing New Year -$1.3 million

  30. Slide 30: Freshpet Cases Shipped by Week

    200,376 211,108 157,055 160,416 - 50,000 100,000 150,000 200,000 250,000 12/1-12/7 12/8-12/14 12/15-12/21 12/22-12/28 Freshpet Cases Shipped by Week Late December Nor’easter snarled roads and logistics systemresulting in lost shipments * Snowstorm Christmas: Closed 2 days Guidance -$1.7 million

  31. Slide 31: Carrying a large backlog of orders into Q1 2021

    $4,000,000$2,000,000$- $6,000,000 $16,000,000$14,000,000$12,000,000$10,000,000$8,000,000 $18,000,000 Nielsen XAOC Orders, Shipments & Consumption Carrying a large backlog of orders into Q1 2021 Snowstorm Drew down trade inventory by an incremental $7-8 million in Q4 Orders Grossed Up Shipments Gro s

  32. Slide 32: Updated 2020 Net Sales & Adj. EBITDA guidance

    Updated 2020 Net Sales & Adj. EBITDA guidance Previous Actual/Est. Growth vs YA Net Sales (actual) >$320 $318.8 +30% $ in Millions * Adjusted EBITDA (est.) >$46 ~$46 +58%Updated Commentary:Volume cadence: Strong demand continues but supply was constrained in the back half of Q4 due to COVID testing/

  33. Slide 33: Freshpet Net Sales

    $129.3 $152.4 $193.2 $318.8 2016 2017 2018 2019 2020 Freshpet Net Sales($ millions) 2020: Accelerating growth rate continues +18% +27% $245.9+27% +14% 25% CAGR +30% *

  34. Slide 34: Capturing scale benefits on bottom line

    Capturing scale benefits on bottom line $17.6 * $20.3 2017 2018 2019 2020 (est) Freshpet Adjusted EBITDA($ millions) +15% -1% $29 .1 +43% ~$46.0+58%

  35. Slide 35: Growth Opportunity: Penetration and Buying Rate

    Growth Opportunity: Penetration and Buying Rate

  36. Slide 36: In the early stages of accelerating consumer adoption

    In the early stages of accelerating consumer adoption Take-off Roger’s Diffusion of Innovation ModelTotal Market Potential Rate of Consumer Adoption 12% of Prime Prospects using Core Dog products Current Prime Prospect net sales potential= $2 billion and growing 36

  37. Slide 37: Demographic trends are working in our favor

    Demographic trends are working in our favor 11% 34% 26% 26% 2% Boomer Builder 27% 31% 22% 18% 2% Boomer Builder 58% Gen Z Millennial Gen X Dog HHs 2025 Gen Z Millennial Gen X Dog HHs Today 45% 37 Source: Idexx, 2019 A&U, APPA

  38. Slide 38: Addressable market: >20 million HH's

    Addressable market: >20 million HH’s Prime Prospect Methodology Consumer ConceptPurchase Interest Among Never UsersTop 2 Box purchase interest 2016 2019 7.5MMDog HHs 20MMDog HH’s 2016 2019 4MM 12MMDefinitely would buy 16MMProbably would buy 28MMDog HH’s 6MM 10MMDog HH’s 3.0x 2.6x 2.6x 38 Source: 201

  39. Slide 39: Million more HH's by 2025

    39 5 million more HH’s by 2025 1,779 1,913 2,177 2,537 3,186 3,558 8,1096,8245,7614,8834,158 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Freshpet HH Penetration('000's HH's)

  40. Slide 40: Demonstrated track record of driving HH penetration gains via media investment

    1.4 1.6 1.8 2 2.2 2.4 2.6 2.8 3 3.2 $- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000 $100,000,000 Freshpet HH Penetration & Media Spending Cumulative Media Spend Total Penetration 40 Demonstrated track record of driving HH penetration gai

  41. Slide 41: Increasing penetration in all dog HH's

    41 Increasing penetration in all dog HH’s regardless of thesize of the dog or number of dogs in the HH 100 113 130 126 158 147 Freshpet HH’s by # of Dogs*(Index vs 1 dog in 2018) 2018 2019 2020*Source: Numerator Insights, Mini-America, Freshpet shoppers n=2,432 in 2020; Different source than Nielsen

  42. Slide 42: Halfway to our 2025 MM HH goal

    42 Halfway to our 2025 8 MM HH goal 4.0 4.0 Progress Towards 2025 HH Penetration Goal Current HH Penetration 2025 Target HH Penetration Source: Nielsen HH Panel for the period ending 12/26/20

  43. Slide 43: Opportunity to continue growing the buying rate

    43 Opportunity to continue growing the buying rate $117 $630 Buying Rate Current Avg. Cost to Feed 30 lb Dog Source: Nielsen HH Panel Data through 12/26/20 and internal company calculations

  44. Slide 44: Quality & satisfaction drives increasing buying rate

    44 Quality & satisfaction drives increasing buying rate $81.73 $90.29 $96.53 $105.78 $106.65 $112.34 $120.43 $161.58$150.01$139.28$129.42 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Freshpet Buying Rate$/HH/Year $630 = cost to feed 30 lb. dog/year

  45. Slide 45: Very strong consumer satisfaction

    45 Very strong consumer satisfaction 96% 98% 100% 90% 96% 95% Freshpet Product SatisfactionTop Two Box PercentagesAmong Regular FP Users FFTK% Agree Completely/Somewhat on Good Value Rolls Roasted Meals% Extremely/Very Satisfied on Product SatisfactionSource: Freshpet Quality and Satisfaction Study,

  46. Slide 46: The Freshpet journey begins tentatively

    46 The Freshpet journey begins tentatively – as you would expect with something so different and new 40% 60% Form Entry 32 OUNCES7% 48 OUNCES2% 72 OUNCES7% 80 OUNCES8% 88 OUNCES6% 96 OUNCES11% Size Entry Source: Nielsen Freshpet Behavioral Study – February 2020, Based on FP Dog Food Only 1 lb16 OUNC

  47. Slide 47: More than half of new users become regular users

    47% 25% 12% 17% % HHs 2019 Buying Habits of New Consumers Who Entered in 2018 Super Heavy ($200+) Heavy ($120-$200) Regular ($40-$112) Occasional ($0-$40) 47 More than half of new users become regular users Source: Nielsen Freshpet Behavioral Study Preview – February 2020 29% Became Heavy Users 54%

  48. Slide 48: Buying larger quantities per trip

    48 Buying larger quantities per trip 2.3 3.6 3.002.50 3.50 5.004.504.00 2.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Trip Number Pounds per Household (first 30 trips) Freshpet Behavioral Study – March 2020

  49. Slide 49: Moving into larger sizes and higher price points

    Moving into larger sizes and higher price points $7.47 $9.54 $8.50 $10.00 $7.001 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30Trip Number Price per Unit (first 30 trips) 49 Freshpet Behavioral Study – March 2020

  50. Slide 50: Steady increase in dollars spent per trip

    50 Steady increase in dollars spent per trip $8.96 $12.11 $9.00 $11.00$10.00 $12.00 $16.00$15.00$14.00$13.00 $8.00$7.001 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30Trip Number Dollars per Household (first 30 trips) Freshpet Behavioral Study – March 2020

  51. Slide 51: Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution

    100 242 113 266 125 297 263 256 143 335 244 294 163 2016 Cohort 2017 Cohort 2018 Cohort 2019 Cohort 2020 Cohort Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution(Index vs. 2016 New Buyers)366 Cohort buying rate data confirms significant multi-year growth potential of each new user +142% +135%

  52. Slide 52: Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution

    100 242 113 266 125 297 263 256 143 366 335 244 294 163 2016 Cohort 2017 Cohort 2018 Cohort 2019 Cohort 2020 Cohort Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution(Index vs. 2016 New Buyers) Cohort buying rate data confirms significant multi-year growth potential of each new user +142% +14%

  53. Slide 53: Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution

    100 242 113 266 125 297 263 256 143 366 335 244 294 163 2016 Cohort 2017 Cohort 2018 Cohort 2019 Cohort 2020 Cohort Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution(Index vs. 2016 New Buyers) Cohort buying rate data confirms significant multi-year growth potential of each new user +142% +135

  54. Slide 54: Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution

    100 242 113 125 143 244 163 2016 Cohort 2017 Cohort 2018 Cohort 2019 Cohort 2020 Cohort Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution(Index vs. 2016 New Buyers) Cohort buying rate data confirms significant multi-year growth potential of each new user +142% +135% +14% +14% +10% +13% +7% -5

  55. Slide 55: Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution

    100 242 113 266 125 297 263 256 143 366 335 244 294 163 2016 Cohort 2017 Cohort 2018 Cohort 2019 Cohort 2020 Cohort Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution(Index vs. 2016 New Buyers) Cohort buying rate data confirms significant multi-year growth potential of each new user +142% +135

  56. Slide 56: Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution

    100 242 113 125 143 366 335 244 163 2016 Cohort 2017 Cohort 2018 Cohort 2019 Cohort 2020 Cohort Freshpet Core Dog New Buyers - Dollar Buy Rate Evolution(Index vs. 2016 New Buyers) Cohort buying rate data confirms significant multi-year growth potential of each new user +142% +14% +14% +10% +13% +23%

  57. Slide 57: Buying rate grows even in HH's with larger dogs

    57 Buying rate grows even in HH’s with larger dogs *Source: Numerator Insights, Mini-America, Freshpet shoppers n=2,432 in 2020; Different source than Nielsen HH panel data typically reported thus totals are slightly different. To avoid confusion, we have converted actual numbers to indices to show

  58. Slide 58: Conclusions

    58 Conclusions Strong and increasingly efficient ability to drive HH penetrationHH penetration growth accelerating into mid-20% rangePenetration remains very low – with significant upsideMedia investment reduced to fit within capacity constraints; at 12% of sales, we expect stronger growth in penetr

  59. Slide 59: Capacity

    Capacity

  60. Slide 60: New capacity: Kitchens 2.0 started up in Q3 2020

    New capacity: Kitchens 2.0 started up in Q3 2020 *

  61. Slide 61: Adding staffing to support increasing demand in 2021

    Adding staffing to support increasing demand in 2021 $590 $590 $590 $640 $390 $490 $540 $590 Q1 Q2 Q3 Q4 Freshpet Production Capacity2021 Equipment Capacity ($ million/year) Staffed Capacity ($ million/year) *

  62. Slide 62: Kitchens 3.0 in Ennis, TX is on track

    62 Kitchens 3.0 in Ennis, TX is on track Phase 1 scheduled to begin production in mid-2022* *Could pull start-up forward by one quarter through increased investment to meet higher levels of demand

  63. Slide 63: Base plan has aggressive investment to deliver 2025 goals

    63 Base plan has aggressive investment to deliver 2025 goals $110-115 million Kitchens 2.0 $15 million Kitchens South Kitchens 3.0 $315 million Kitchens South #2 $15-20 million *also includes maintenance capex, fridges and IT Kitchens 3.1 $160- $230 million** 2019 2020 2021 2022 2023 2024 2025 Total

  64. Slide 64: Base plan adds significant capacity with options to pull forward and add capacity

    64 Base plan adds significant capacity with options to both pull forward capacity and add additional capacity $50 $240 $50 $300 $400 $300$300 $350 $590 $640 $1,340 Kitchens 1.0 Ennis Phase 2 Freshpet CapacityNet Sales Potential Kitchens South #1 Kitchens 2.0New Capacity Kitchens South #2 Ennis Phase

  65. Slide 65: Capital investments will drive increased profitability

    Capital investments will drive increased profitability $0.22 $0.25 $0.25 Adj. EBITDA per Cum. $1 Capex$0.31 Adj. EBITDA Per Cum. $1 Capex Phase 1 Phase 2 Phase 3 Phase 4 *

  66. Slide 66: Maintaining a Strong Balance Sheet

    Maintaining a Strong Balance Sheet Target: Hold debt to reasonable leverage and only use equity for accelerated growth opportunities beyond current plan Managing ST Debt Leverage Treating Equity as “Gold”/ Managing dilution *

  67. Slide 67: Freshpet

    freshpet

  68. Slide 68: Significant opportunities to grow

    Significant opportunities to grow 46% 54% Aided Awareness 59 2020 Dog HH’s4 55.5% 44.5% % ACV Distribution $630 Buying Rate$117 CurrentAvg. Cost to Feed 30 lb Dog Aided Awareness UnawareDrive Awareness Freshpet No FreshpetIncrease Penetration Increase Frequency of Use & Size of Dog Available Not Ava

  69. Slide 69: Million new HH's leads to $1 billion net sales by 2025

    69 5 million new HH’s leads to $1 billion net sales by 2025 27.2% CAGR

  70. Slide 70: Fortified business model that provides strong competitive insulation

    70 Fortified business model that provides strong competitive insulation ~75-80% ACV 8mm HH’s Diverse line-up that is difficult to match $1.3 billion capacity and cash flow to build more 40,000 Fridges Significant scale in distribution

  71. Slide 71: Building the foundation for a business with the potential to be >$2 billion in net sales

    71 Building the foundation for a business with the potential to be >$2 billion in net sales 40,000 highly visible, branded, technology-enabled Fridges in 75-80% ACV Manufacturing capacity to support at least $1.3 billion of net sales and the organization capability to build more R&D capability, infr

  72. Slide 72: Thank-you!

    Thank-you! freshpet

  73. Slide 73: FEED THE GROWTH

    ¥y 2©25 FEED THE GROWTH frat

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