Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Q2 2020 Earnings Presentation
45 slides from Freshpet's earnings presentation, Aug 3, 2020
Slide 1: Q2 2020 Earnings Report
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: Driving growth through the crisis by focusing on our strengths
Driving growth through the crisis by focusing on our strengths Pre-Crisis Outbreak Breakout January - February, ‘March-April May - December * Drive growth under Feed * Keep our employees safe + Adapt to the new realities titegumsin laa + Reliably supply our * Leverage our strengths to + Add capacity
Slide 5: Freshpet pivoted to leverage our strengths to drive growth
Freshpet pivoted to leverage our strengths and the changing COVID environment to drive growth + Moved April advertising + Increased advertising $2 million + Continuous media May-October + Delivery options on website + Launched "Delivered" ad + Introduced DTC option Post-trough growth rate exceeds pr
Slide 6: Post-surge pivot is driving accelerated consumption growth
Post-surge pivot is driving accelerated consumption growth Nielsen Mega-Channel Consumption ($) Nielsen Mega-Channel “2x week oitweek consumption growths pre cOvID consumption vs. YA thru 7/25/20: + Q2: 421% + Latest week: +41% + YTD: +27%
Slide 7: Accelerating growth rate behind post-surge pivot
Accelerating growth rate behind post-surge pivot Nielsen Mega-Channel Index vs. YA Latest week: +41% vs. YA Continuous media on air May-October capitalizes on lower media rates and higher viewership LPP LIS IESE EEL LE > fr shpet
Slide 8: Q2 2020: Accelerating growth and leverage from scale
9 of last 10 quarters >25% net sales growth Q2 2020: Accelerating growth and leverage from scale $90.0 $800 $700 $60.0 Freshpet Net Sales & Adj, EBITDA Performance $80.0 433% $11.2 $60.1 +833% 426% $1.2 41% oa.2019 92.2020 Net Sales ($milions)_ —=Adj EBITDA(Smilions) _ @ Net income (Loss) ($ million
Slide 9: YTD 2020: Consistent performance despite the COVID crisis
YTD 2020: Consistent performance despite the COVID crisis Freshpet Net Sales & Adj. EBITDA Performance Sige $150.1 $20.0 31% Both Q1 and Q2 ae, i $16.9 delivered strong top $1200 $114.8 4326% sso line growth 426% consistent with long- fiMaia” fee term performance $80.0 se00 sso $40.0 $4.0 8% 200 soo
Slide 10: Accelerating growth after the COVID-trough
Accelerating growth after the COVID-trough YTD consumption pontoon ens growth of 27% and eee li or ee asi accelerating to >30% a? in June
Slide 11: Q2 2020: Continued strong consumption growth
Q2 2020: Continued strong consumption growth despite post-COVID trough in April Q2 2020 Nielsen Consumption Growth 27% 26% Shelter-in-place orders 21% disproportionately helped Food and hurt Big Box Pet Mega-Channel XAOC Food Big Box Pet -5%
Slide 12: June: Strengthening trends the last weeks of Q2
June: Strengthening trends the last 4 weeks of Q2 June 2020 Nielsen Consumption Growth 35% 36% 31% Last week of June Nielsen Mega- Channel: +33% growth 11% Mega-Channel XAOC Food Big Box Pet
Slide 13: Q2 consumption to net sales reconciliation
By the end of Q2, fill rates were ~90% with only a few sku’s is experiencing occasional shortages Q2: Net sales grew faster than consumption as we re- filled trade inventory void created in Q4 ‘19 and Q1 ‘20 Q2 2020 Consumption to Net Sales Reconciliation a 1% 33% 6% 2%
Slide 14: YTD: Strong, balanced performance despite COVID surge and trough
YTD: Strong, balanced performance despite COVID surge and trough YTD Consumptionto Net Sales Reconciliation a 1% 31% 27% eS June consumption growth >30% and accelerating Consumption Growth QAShot Shipments fase Year Short Shipments Less Spo Total
Slide 15: Freshpet bouncing back from post-surge trough faster than the category
Freshpet bouncing back from post-surge trough faster than the category 300) Freshpet is now ahead of where it would have been if there had been no COVID crisis = g WetsDry Dog Food Weeky Dol
Slide 16: Freshpet growth typically 25-30 points better than the category
Freshpet growth typically 25-30 points better than the category Freshpet’s growth significantly outperformed the category Nielsen Consumption Growth vs. YA ‘Total US Foods Pt Specialty
Slide 17: Consistently building market share across all classes of trade
Consistently building market share across all classes of trade Freshpet $ Share of Wet & Dry Dog 404 95 Freshpet’s total $ 86 at growth leads the category in Nielsen 5.6 Pe Mega-Channel se 4s ee 14 | ry 20 19 4k 13k 261k 52k Freshpet Share of Wet + Dry Dog wTotal US Food mTotal USxAOC m= Mega-Channe
Slide 18: Store count growth limited by COVID-19 related retail disruption
Store count growth limited by COVID-19 related retail disruption 22,120 20 21,570 = +11% nm 19,499 Q2: 253 net new e stores 00 tel 16,609 8% fas i% 15,015 HiD% 0) 13,387 2% ™ 10,826 om 4m 2013 ©2018-2015. 2016.—2017,-S 2018 += 2019 YTD 2020 pall shpet 1 Ineralcom Iperodsare ending 12/31 exept 2020 w
Slide 19: Retailers have resumed Fridge placements
Retailers have resumed Fridge placements consistent with our expectations Retail disruptions reduced new Fridge placements, but second Fridge placements were completed Store Count 22,120 2013 22020 Fridge Upgrades 1303 | , fis] cams Woinzene mc22019 9a22020 Net New Stores 26 Ctr ncrease yiDincesse m
Slide 20: Distribution gains slowed during COVID-19 crisis; expected to resume
Distribution gains slowed during COVID-19 crisis; expected to resume in Q3 and beyond Freshpet % ACV como crits Added 253 net new stores in Q2 — now totaling 22,120
Slide 21: Rapid velocity growth behind post-surge pivot
Rapid velocity growth behind post-surge pivot Freshpet Velocity $/SMM ACY Latest 4 weeks $/$ million ACV: +19% vs. YA
Slide 22: Retail availability has improved significantly
Retail availability has improved significantly Freshpet Total Distribution Points (TDP’s) Nielsen Mega-Channel Outof-stocks Retail conditions = ms returned to normal es m by the end of x June/early July
Slide 23: Freshpet consumers confirm improved availability
Freshpet consumers confirm improved availability Freshpet Availability Consumer Comments >90% of consumers claimed they could find the exact item ° they wanted by June 7 005 - Out of Stock/Can't Find —»-WTB- Where to Buy 1 Ineralcom onsume jee mot etterandphone a
Slide 24: Q2 2020 e-commerce sales +201% vs. YA
Q2 2020 e-commerce sales +201% vs. YA Find Freshpet Near You 5.0% of Freshpet amazon sales in Q2 2020 4 sfreshdirect. Peapod were e-commerce instacart @sner >90% of e- commerce sales go through a Freshpet Fridge in Q2 ek & Collect @ ClickList 5 as ., freshpet
Slide 25: Strong penetration growth despite moving April advertising
Strong penetration growth despite moving April advertising back to May-October Freshpet Penetration Growth 2.81 as More than doubled Paral Core Dog HH saa Ps 421% penetration in 3 years us 12s ars 2017 2018 2019 2020 sm Tots Peetration 6) coreg Penetration (8) ene Total Penetration Trending +++++Cor
Slide 26: 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 575K incremental users in 8.0 the past year Current HH Penetration _m 2025 Target HH Penetration
Slide 27: Buying rate growth continues
Buying rate growth continues Freshpet Buying Rate $10.00 $131.02 ere $123.68 $123.52 $124.30 55% 120.00 11% 1% 5% growth in core $112.56 dog buying rate $110.00 $106.66 $100.18 s10000 $95.69 $90.00 ac $20.00 $70.00 $60.00 2017 2018, 2019 2020 ‘Total Buying Rate Core Dog Buying Rate
Slide 28: Consistent gross margin performance
Q2 Adj. Gross Margin impacted by mix shift to bags vs. Q1 Consistent gross margin performance Q2 2020 Adj. Gross Margin Progress 49.1% 022019 22.2020 YTD Adj. Gross Margin Progress 49.4% 49.3% 2019 2020 Gross Margin
Slide 29: Delivered bps of Adj. SG&A leverage in Q2
Delivered 260 bps of Adj. SG&A (excluding media) leverage in Q2 SG&A Leverage Progress Adj. SG&A Leverage Progress Q2 2020 Q2 2020 46.456 Moving April media sm 54.8% 0 to May-August drove 340 bps reduction in fia a Adj. SG&A ing2 = Meds: 353% 22.1% am 2.7% ays: MeHia: 13 _ = 24.7% | 22.1% now Ea ae
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 io Rolls line 24/7: In January, we took our second roll line to 24/7 production. Since then, we have had ample capacity to meet all demand for rolls. 75" KitchensSouth: In February, we
Slide 31: Kitchens 2.0 will take capacity to ~$590 million by Q1 2021
Kitchens 2.0 will take capacity to ~$590 million by the first quarter of 2021 $300$300 Kitchens 1.0 Freshpet Capacity Net Sales Potential $350 $50 | a Kitchens South #1 Kitchens 20 mm New Capacity $940 $640 af if 2 Kitchens South #2 Ennis Phase 1 Cumulative Capacity Adding 2" shift at Kitchens South
Slide 32: Kitchens 2.0 construction on track for start-up by Q4
Kitchens 2.0 construction on track for start-up by Q4 Plan to start-up bag line in Q4 and roll line in Q4 2021 In final installation phase. Expect to begin tine trials by the end of September. freshpet
Slide 33: Capital spending plan is on track
Capital spending plan is on track Targeting to have [aan E> available capacity aaa =i one year ahead of need Kitchens south #2 => (one PL sisoniton 2019 2020 2021 2022 2023 2024 2025 TotalCapext $80mm —$150-160mm ~$245mm —“$80mm —~$110mm_—~$70mm —~$70mm “alzolncudes maintenance capex fridges andiT "
Slide 34: COVID-19 Team Member safety & reward plan is working
COVID-19 Team Member safety & reward plan is working 9 Wellness check: Quarantine with pay: Sire pary me Folonedorexceedadal COC and FDA oueines Deep cleaning A: Seven “ccen clerngoKtenne rok! “ meeting areas Employee safety es _# Social distancing: PSU Mee B | 21 Tipedsize ofbreak / meeting areas s
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 a + 34 party medical staff performing health checks on employees &> ak * Increased deep cleanings NS Current estimate of + Increased sanitizing and social distancing cost COVID-19 related * Providing
Slide 36: Raising 2020 Net Sales and Adj. EBITDA Guidance
Raising 2020 Net Sales and Adj. EBITDA Guidance $in Millions Previous New Increase Net Sales >$310 >$320 +$10 veYA 126% 130% Adjusted EBITDA >$44 >$46 +82 See assumptions on eA ey aoe next page Updated Commentary: + Volume cadence: Q2 shipments exceeded consumption as we re-filled trade inventory dr
Slide 37: 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: Sw Supply: We do not encounter any si
Slide 38: Increasing Net Sales Guidance to >$320 million
Increasing Net Sales Guidance to >$320 million 2020 Guidance $310.1 S220) Accelerating consumption trends Stee support second half 0) growth rate of >30% BLAEn 5160.0 5270.0 $1310 sues BY j i First Half Second Half Total 12019 2020 (Orginal Guidance) = 2020 ($320 Guidance) _, fréshpet » eee
Slide 39: "Feed the Growth" is working
“Feed the Growth” is working Accelerated growth rate and capturing scale benefits ,, freshpet
Slide 40: 2020 Freshpet proxy will include long-term governance transition plan
2020 Freshpet proxy will include long-term governance transition plan Objective: Transition Freshpet’s governance practices in place since the 2014 IPO as a fast growing, small cap, private equity-backed company to the practices one would expect in 2025 of a mature $1 billion company that has a broa
Slide 41: Freshpet: Feed the Growth
freshpet FEED THE GROWTH reshpet
Slide 42: Appendix
Appendix freshpet Sao
Slide 43: Reconciliation between Gross Profit to Adjusted Gross Profit
Reconciliation between Gross Profit to Adjusted Gross Profit ‘Three Months Ended Six Months Ended Sane 30, Tune 30, 700 3019 200 20 ‘Dollarsin Gross Profit s S 53282 Depreciation expense (a) 3.55 Plant start-up expense (®) — Non-cashshare-based compensation (¢) 186 334 COVID-19 expense (6) Adjusted
Slide 44: Reconciliation between SG&A to Adjusted SG&A
Reconciliation between SG&A to Adjusted SG&A SOBA expenses s Deprecatn nleorzton expense (8) Nemcas sre bsed compensation (9) auoch expense (©) [osron dupes of egupmeat gui offing expenses) Estep Resource Panne (©) COVID-19 expense (5 jt SG&A Expenses z Adjusted SG&A Expenses 2 hf Net Sales —s 33s i
Slide 45: Reconciliation between Net Income to Adjusted EBITDA
Reconciliation between Net Income to Adjusted EBITDA Jane 30 2 9 G7) S088) Sao has Netinane (os) s Depress oination Tiere expe 9 EBITDA sam, Los (un ca dap of upset T Nowe iorebed compensation 260 Louch expense @) "1 Phat strep xpemes auf epese (2) Pd Entre Reoure Planing (2) = CoviD Ib epee) = = ‘A