December 2020 Investor Update December 15, 2020
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December 2020 Investor Update
December 15, 2020
1Forward 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 and economic environment. These statements are based on management's current
opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. These forward-looking statements are
only predictions, not historical fact, and involve certain risks and uncertainties, as well as assumptions. Actual results, levels of activity, performance,
achievements and events could differ materially from those stated, anticipated or implied by such forward-looking statements. While Freshpet believes that its
assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect
actual results. There are many risks and uncertainties that could cause actual results to differ materially from forward-looking statements made herein
including, most prominently, the risks discussed under the heading “Risk Factors” in the Company's latest annual report on Form 10-K and quarterly reports on
Form 10-Q filed with the Securities and Exchange Commission. Such forward-looking statements are made only as of the date of this presentation. Freshpet
undertakes no obligation to publicly update or revise any forward-looking statement because of new information, future events or otherwise, except as
otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with
respect to those or other forward-looking statements.
Non-GAAP Measures
Freshpet uses certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted EBITDA as a % of net sales, Adjusted Gross Profit, Adjusted
Gross Profit as a % of net sales (Adjusted Gross Margin), Adjusted SG&A and Adjusted SG&A as a % of net sales. These non-GAAP financial measures should be
considered as supplements to GAAP reported measures, should not be considered replacements for, or superior to, GAAP measures and may not be
comparable to similarly named measures used by other companies.
Freshpet defines EBITDA as net income (loss) plus interest expense, income tax expense and depreciation and amortization expense, and Adjusted EBITDA as
EBITDA plus gain (loss) on disposal of equipment, plant start-up expenses, non-cash share-based compensation, launch expense, fees related to equity
offerings, COVID-19 expenses, and fees associated with due diligence of new enterprise resource planning ("ERP") software.
2Forward 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, non-cash share-based compensation, launch expense,
gain (loss) on disposal of equipment, fees related to equity offerings, and fees associated with due diligence of new ERP software..
Management believes that the non-GAAP financial measures are meaningful to investors because they provide a view of the Company with respect to ongoing
operating results. Non-GAAP financial measures are shown as supplemental disclosures in this presentation because they are widely used by the investment
community for analysis and comparative evaluation. They also provide additional metrics to evaluate the Company’s operations and, when considered with
both the Company’s GAAP results and the reconciliation to the most comparable GAAP measures, provide a more complete understanding of the Company’s
business than could be obtained absent this disclosure. Adjusted EBITDA is also an important component of internal budgeting and setting management
compensation. The non-GAAP measures are not and should not be considered an alternative to the most comparable GAAP measures or any other figure
calculated in accordance with GAAP, or as an indicator of operating performance. The Company’s calculation of the non-GAAP financial measures may differ
from methods used by other companies. Management believes that the non-GAAP measures are important to an understanding of the Company's overall
operating results in the periods presented. The non-GAAP financial measures are not recognized in accordance with GAAP and should not be viewed as an
alternative to GAAP measures of performance.
Certain of these measures present the company’s guidance for fiscal year 2020, for which the Company has not yet completed its internal or external audit
procedures. The Company does not provide guidance for the most directly comparable GAAP measure and similarly cannot provide a reconciliation to such
measure without unreasonable effort due to the unavailability of reliable estimates for certain items. These items are not within the Company’s control and
may vary greatly between periods and could significantly impact future financial results.
32020 Progress
Post-COVID: Pivoted to accelerate growth
• Moved April advertising back
• Increased advertising $2 million
Advertising • Continuous media May-October
• Delivery options on website
• Launched “Delivered” ad
e-commerce • Introduced DTC option
• Incremental retail coverage
Fix Stores
• Ran production lines continuously
• Improved fill rates to 90+%
Re-build Supply • Added 2nd shift at Kitchens South
• 3 layers of protection
• Transparent communication
Keep Team Safe
5Q3 YTD results were strong
Freshpet Net Sales & Adj. EBITDA Performance
$234.3 $40.0
$220.0 +30%
$35.0
$180.1 $34.0 $30.0
$170.0 +27% +113%
$25.0
$20.0
$120.0
$15.0
$16.0
+44%
$70.0 $10.0
$5.0
$20.0 $0.0
YTD 2019 YTD 2020
($6.0) $0.1
6
Net Sales ($ millions) Adj. EBITDA ($ millions) Net Income (Loss) ($ millions)Consistently delivering ~38% growth
Nielsen Mega-Channel Consumption Growth
(Index vs. YA)
170.0%
Latest week: +40% vs. YA
160.0%
150.0%
140.0%
Q4: ~38%
130.0%
+29% vs. YA
120.0%
110.0% Guidance = >30%
100.0%
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
7
Source: Nielsen Mega-Channel Data thru 12/5/20Bouncing back faster than the category
Weekly Dollar Sales ($MM)
$400 $12
Millions
Millions
$10.6 $10.4
$350 $9.6
$10
$340.0
$300
$7.8
$8
$250 $7.1
$200 $216.0 $6
$206.3 $207.6
$195.8
$150
$4
$100
$2
$50
$0 $0
Dog Food Wet & Dry Freshpet Total RFG
8
Source: Nielsen Mega-Channel Data thru 11/28/20Building meaningful share of the category
Freshpet $ Share of Wet & Dry Dog
10.5 10.3 10.3
9.2
5.7 5.8 5.8
4.8 4.8 5.1
4.8
4.3
2.5 2.5 2.5
2.2
4wk 13wk 26wk 52wk
Freshpet Share of Wet + Dry Dog
Total US Food Total US xAOC Mega-Channel Pet Superstore
9
Source: Nielsen Mega-Channel Data thru 11/28/201,000,000
1,200,000
1,400,000
0
200,000
400,000
600,000
800,000
4 W/E 04/25/15
4 W/E 05/23/15
4 W/E 06/20/15
4 W/E 07/18/15
4 W/E 08/15/15
4 W/E 09/12/15
4 W/E 10/10/15
4 W/E 11/07/15
4 W/E 12/05/15
4 W/E 01/02/16
Source: Nielsen HH Panel Data thru 11/28/20
4 W/E 01/30/16
4 W/E 02/27/16
4 W/E 03/26/16
4 W/E 04/23/16
4 W/E 05/21/16
4 W/E 06/18/16
4 W/E 07/16/16
4 W/E 08/13/16
4 W/E 09/10/16
4 W/E 10/08/16
4 W/E 11/05/16
4 W/E 12/03/16
4 W/E 12/31/16
4 W/E 01/28/17
4 W/E 02/25/17
4 W/E 03/25/17
4 W/E 04/22/17
4 W/E 05/20/17
4 W/E 06/17/17
4 W/E 07/15/17
4 W/E 08/12/17
4 W/E 09/09/17
4 W/E 10/07/17
4 W/E 11/04/17
4 W/E 12/02/17
4 W/E 12/30/17
4 W/E 01/27/18
4 W/E 02/24/18
4 W/E 03/24/18
4 week periods
4 W/E 04/21/18
4 W/E 05/19/18
4 W/E 06/16/18
4 W/E 07/14/18
Freshpet HH Penetration
4 W/E 08/11/18
4 W/E 09/08/18
4 W/E 10/06/18
4 W/E 11/03/18
4 W/E 12/01/18
4 W/E 12/29/18
4 W/E 01/26/19
4 W/E 02/23/19
4 W/E 03/23/19
4 W/E 04/20/19
4 W/E 05/18/19
4 W/E 06/15/19
4 W/E 07/13/19
4 W/E 08/10/19
4 W/E 09/07/19
4 W/E 10/05/19
4 W/E 11/02/19
4 W/E 11/30/19
4 W/E 12/28/19
4 W/E 01/25/20
4 W/E 02/22/20
4 W/E 03/21/20
Accelerating HH penetration grew while on air
4 W/E 04/18/20
4 W/E 05/16/20
10
4 W/E 06/13/20
Advertising back on air post-COVID
4 W/E 07/11/20
4 W/E 08/08/20
4 W/E 09/05/20
4 W/E 10/03/20
Advertising taken off air
4 W/E 10/31/20
4 W/E 11/28/20Adding HH’s quickly
Freshpet Penetration Growth
% of HH’s
3.07
+23%
2.75
2.50 2.45
+21% +26%
2.25
2.06
1.94
1.76 +17% +29%
1.75
+11% 1.50
+30%
1.25 1.15
+13%
0.75
2017 2018 2019 2020
Total Penetration (%) Core Dog Penetration (%) Total Penetration Trendline Core Dog Penetration Trendline 11
Source: Nielsen HH Panel for the period ending late November 2016-2020On track for 2025 goal of 8 MM HH’s
Progress Towards 2025 HH Penetration Goal
8.0
3.9
Current HH Penetration 2025 Target HH Penetration
12
Source: Nielsen HH Panel for the 52-week period ending November 28, 2020Buying rate growth continues
Freshpet Buying Rate
$140.00
$134.92
$130.00 $125.45 $127.21 $127.57
+6%
+1% +0%
$120.00 +8% $117.14
$109.35
$110.00 $105.69 +7%
+3%
$100.00 $96.71 +9%
$90.00 +7%
$80.00
$70.00
$60.00
2017 2018 2019 2020
Total Buying Rate Core Dog Buying Rate
Source: Nielsen HH Panel for the period ending late November 2017, 2018, 2019, 2020 and company internal data
13Distribution growth plateaued during COVID crisis
Freshpet % ACV
COVID Crisis
58.0
56.0 55.3 55.5 55.4
54.9 55.0 55.1
54.4 54.5 54.7
54.4
54.0 53.3
52.7
52.3
52.0
50.9
49.7 50.0
50.0 49.6
49.2
48.8
48.1 48.4
47.8
48.0 47.2
46.2
45.6 45.9
46.0 45.4 45.6 45.6
45.2
44.0
42.0
14
Source: Nielsen Mega-Channel Data thru 11/28/20Velocity growth has surged
Freshpet Velocity
$ / $MM ACV COVID Crisis
800
748 743
750 738
702 701
700
650
630
596
600 584 587 582
576 576
568 575 572 573 561
560
549 557
550 535
528
516 514
508 508 507 514
497 498
500 490
479
469
460
450
400
15
Source: Nielsen Mega-Channel Data thru 11/28/20Distribution is eroding behind out-of-stocks but 2nd
Fridges adding TDP’s vs. YA
COVID Crisis
Freshpet Total Distribution Points (TDP)
Nielsen Mega-Channel
826 824
814
796 803 802
785 780
758
746
727 734 735
718
702 711 705
684 681 683 678 691
674
657
644 645 641 635 635
626 632 633 633 639
616 619
601
589 581 582 584
576 578
16
Source: Nielsen Mega-Channel Data thru 11/28/20New fridge placements skew heavily to second fridges
Freshpet Fridge Fleet New Fridge Installations by Size
Distribution by Size (US & Canada)
(US & Canada Stores)
11% 10% 5% 2% 5%
21%
47%
20% 51% 54%
58%
30%
60% 30% 31%
23% 13%
14% 10%
6% 1%
Small Medium Large 2+ Chillers 2017 2018 2019 2020
Small Medium Large 2 Chillers 3 Chillers
17
Source: Internal company data through September 2020Canadian business accelerating post-COVID
Leading Canadian Customer Weekly Sales Latest week +44% vs. YA
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
TOTAL $ Linear (TOTAL $)
18£30,000
£35,000
£40,000
£45,000
£50,000
£55,000
£65,000
£70,000
£75,000
£80,000
£60,000
Week 01
Week 04
Week 07
Week 10
Week 13
Week 16
Week 19
Week 22
Week 25
Week 28
Week 31
Week 34
Week 37
Week 40
Week 43
Week 46
Week 49
Week 52
Week 02
Week 05
Week 08
Week 11
Week 14
Week 17
Week 20
Leading UK Customer Sales By Week
Week 23
Week 26
Week 29
Week 32
Week 35
Panic Buying
Latest week +44% vs. YA
Week 38
Week 41
£0
£4,000
£6,000
£8,000
£10,000
£12,000
£14,000
£16,000
£18,000
£2,000
TV
2-Sep
16-Sep
30-Sep
14-Oct
28-Oct
11-Nov
25-Nov
9-Dec
23-Dec
6-Jan
Regular Sales
20-Jan
3-Feb
17-Feb
2-Mar
16-Mar
30-Mar
13-Apr
27-Apr
11-May
25-May
8-Jun
22-Jun
6-Jul
20-Jul
3-Aug
17-Aug
Leading UK Customer Sales By Week
31-Aug
14-Sep
19
28-Sep
12-Oct
26-Oct
9-Nov
Latest week +98% vs. YA
23-Nov
UK well ahead of YA; benefits of advertising impacted by COVID
7-DecCapacity 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 line to 24/7 production. This line will be out of capacity by Q1 of 2021.
• Kitchens South: In February, we started up a small piece-size/small bag size line in a partner’s facility (using our
equipment). This capacity has consistently met demand.
• Kitchens South – Second Shift: We started up a second shift at Kitchens South. In combination with the first shift, that site
now has capacity for $50 million of net sales.
• Kitchens 2.0: Started up the bag line on 9/29/20 and began producing saleable product by the end of October. Will begin
producing meaningful quantities in November and December. Roll line will start-up by January 2021. Once fully
operational, we will have total installed capacity for ~$590 million of net sales.
It will take us a few months to re-fill trade inventory. We expect to be fully caught up by late-Q1 2021 and should have ample
capacity to support aggressive growth from that point forward.
• Kitchens South – Second Line: We have begun building preparation to install a second line. Target is to have the line
running by late-2021 – adding $50 million in capacity
• Ennis, TX Kitchens 3.0: Construction began in August. We now have 7 engineers on-site and numerous partners. Expect
to start-up in mid-2022.
20Capacity increases will be tied to adding staffing/shifts for the
next 3 quarters
Freshpet Capacity
Net Sales Potential
Kitchens 2.0 start-up plan:
• Bag line now running 60 hours per week Kitchens South expected to start-up line #2 $1,340
• Roll line starts up in late-December or early in Q4 of 2021
January – based on staffing
• Increasing shifts and staffing throughout 2021
• Expect to be running 24/7 by end of 2021 $940
$640
$590
$400
$350
$300 $300 $300
$240
$50 $50
Kitchens 1.0 Kitchens South #1 Kitchens 2.0 Kitchens South #2 Ennis Phase 1 Ennis Phase 2
New Capacity Cumulative Capacity 21Kitchens 2.0 adding significant bag production to help offset
production lost due to testing/quarantines
Bethlehem Kitchens Bag Production
(November Production)
Thanksgiving
Holiday
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
RM 1 Packed lbs RM 2 Packed lbs Kitchens 2.0 Packed lbs
22COVID-19 is rampant in the locations we have team members
COVID cases/100K people in PA now
above where NYC was in the spring
23
Source: Centers for Disease Control & PreventionCOVID-19 team member Safety & Reward plan is working
Wellness check: Personal Sanitation: Restaurant gift cards:
Third-party nurse At doors and in meeting room sanitation $50 gift cards to local restaurants 2x
month through July, helping the
community and our team
Deep cleaning: Quarantine with pay:
Expert “deep cleaning” of Kitchens’ Followed or exceeded all CDC and FDA
break/
Gift baskets to teams’
guidelines
meeting areas families:
Game / movie night + stay safe
Staggered Shifts: initiatives + masks for family + bulk
Social distancing: To avoid a concentration of team food
Tripled size of break / meeting members
areas Vaccine education &
Quarterly incentive: availability
Quarterly incentive based on Educating team members of safety
Masks Required: performance on quality, safety,
Required use by all team members and efficacy of vaccines and will offer
productivity them onsite to team members and
families
Air filtration: Incremental Cash bonus:
Increased air filtration and system Cash bonuses for all Kitchens’ team
upgrades members based on hours worked
24Freshpet position on COVID-19 vaccines
• We will not require team members to get vaccinated
• We are providing frequent and consistent communication on vaccine safety and efficacy to inform our work
force so they can make good decisions for themselves and their families
• Strongly encouraging team members to consult with their doctors about vaccination
• We are considering incenting team members to provide evidence of vaccination
• We incur significant costs due to COVID so if a team member is willing to help us reduce those costs by getting
vaccinated and telling us, we are strongly considering providing an incentive/reward for taking the step to help
us keep them safe. We would addback this cost.
• We will offer onsite vaccination for team members and potentially family members
• The goal is to make it as easy and fast as possible for our team to get vaccinated
• Due to the higher incidence of side effects (“reactogenicity”) of the COVID-19 vaccines, we will offer the
vaccinations the day before a scheduled day off and compensate our employees with an incremental day off
later in the year
• Once a meaningful portion of our workforce is vaccinated, we will gradually
rollback our incremental COVID procedures
• Based on current vaccine timelines, we expect that to occur in Q2. Until then, we will continue to addback
COVID-related costs 25Lost time due to testing & quarantines is impacting production
% of Team Missing Work Kitchens 2.0 Start-up
Absenteeism & Testing/Quarantine
30.00% COVID Fear
Backfill with Kitchens 2.0 Lost production time due to
25.00% team that was in training testing/quarantine
20.00%
15.00%
Consumer Brands Assn. reported avg.
CPG absenteeism
10.00%
5.00%
Historical absenteeism
0.00%
% of Team Missing Work 26Increases in production capacity offset by COVID issues
Pre-COVID Freshpet Production Kitchens 2.0 Roll Line
Avg. Pounds/Day & Incremental Staffing
390,000
COVID Fear Kitchens 2.0 Staffing as Back-up Testing/Quarantine Increase
380,000
370,000
360,000
350,000
340,000
330,000
320,000
310,000
300,000
Jan Feb Mar April May June July Aug Sept Oct Nov Dec.
Avg. Scheduled Day
4th Line 24/7 Kitchens South Kitchens South Second Shift Kitchens 2.0 Bag Line 27Shipments are only slightly below consumption levels, but
unfilled orders are snowballing – resulting in a low fill rate
Nielsen XAOC Orders, Shipments & Consumption
$18,000,000
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
Nielsen XAOC Consumption Orders Grossed Up Shipments Grossed Up 4 per. Mov. Avg. (Orders Grossed Up) 4 per. Mov. Avg. (Shipments Grossed Up)
28Supply shortages have been noticed by consumers
Weekly Trend – Out-of-Stock & Where To Buy
160
140
120
100
80
60
40
20
0
OOS - Out of Stock/Can't Find WTB - Where to Buy
29Efforts to manage short shipment issues
Moved advertising back again:
• Cancelled all cancellable Q3 media and moved some to the UK and some to November in the US
• Delayed the start of 2021 media until the last week of January
Added overtime:
• Kitchens South is running overtime
• Running Kitchens 2.0 on 60-hour schedule
Increased investment in recruitment marketing:
• Hired recruiting agency, improved social media presence, added Spanish language efforts, adding
staffing to screen candidates
Brought Ennis engineering team to Bethlehem to try to improve output on Kitchens 1.0 lines:
• Goal is to maximize throughput on existing lines
30Reiterating 2020 Net Sales & Adj. EBITDA guidance
$ in Millions Guidance Growth vs YA
Net Sales >$320 +30%
Adjusted EBITDA >$46 +58%
Updated Commentary:
• Volume cadence: Extremely strong consumption continues and is leading to continued short shipments. We are
producing at the rate of demand but have not caught up on inventory yet. Will recapture those net sales during Q1
2021 as Kitchens 2.0 ramps up production, we hire more staff, and testing/quarantines abate due to lockdowns and
vaccines.
• Advertising investment: Completed Q4 advertising investment in the US and UK with positive results. Delayed Q1
2021 advertising to begin at the end of January rather than beginning of January.
• Gross margin: Q4 adj. gross margin will be hurt by mix shift to bags, increased testing/quarantines that result in
lost production, and continued higher cost of beef. Q4 adj. gross margin ~46-47% range.
• Add Backs: COVID-19 related costs accelerated in Q4 due to testing and quarantines; anticipate ~$4 million in total
costs for the year. 31Progress against guidance assumptions Our guidance considers the following factors. We believe we have made reasonable assumptions about each factor. However, the external environment is very dynamic, so we want investors to understand the basis for our guidance: • Supply: We do not encounter any significant supply interruptions – either upstream from us or in our facilities. Q4 production is impacted by large number of team members out for testing/quarantine. Good planning and preparation avoided upstream interruptions. • Costs: The costs that we incur to manage the COVID-19 crisis total $4 million and are concentrated in Q2 and Q3. Likely to be ~$4 million. Q4 costs have increased due to double time pay and testing/quarantines. • Media Effectiveness: The effectiveness of our media investment is not adversely impacted by the changing consumer environment. Media returns greatly exceeded YA. We have completed our media plan for the year. • Shopping Behavior: The presence of significant restrictions on shopping in stores doesn’t prevent reasonable consumption and replenishment patterns similar to what we have seen historically. No significant impact this year. • Retailer Activity: Retailers resume a significant portion of their fridge placements and new item distribution in Q3. On track with expectations. • Customer Credit: We have no major customer credit issues as a result of the COVID-19 crisis. No issues to date. This is not an all-inclusive list. For that, please consult the Risks section of our latest SEC filings. 32
“Feed the Growth” creates scale and leverage through
accelerated growth rate
3334
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