Freshpet, Inc. Reports Fourth Quarter and Full Year 2016 Financial Results
Fourth Quarter 2016 Financial Highlights Compared to Prior Year Period
- Net Sales of
$34.1 million , up 13% - Net Income of
$1.2 million - Adjusted EBITDA of
$6.4 million , up 57% - Freshpet Fridges increased 11% to 16,609 from 15,015
2016 Financial Highlights Compared to Prior Year
- Net Sales of
$133.1 million , up 15% - Net Loss of
$3.2 million - Adjusted EBITDA of
$17.7 million , up 59%
“The Company made solid progress during 2016. We increased both same store sales and new store distribution while also generating higher operating cash flow and improved profitability,” said
Fiscal Fourth Quarter 2016
Net sales increased 12.8% to
Gross profit was
Selling, general and administrative expenses (“SG&A”) were
Net Income was
Adjusted EBITDA was
Full Year 2016
Net sales increased 14.5% to $133.1 million for the full year ended
Gross profit was
SG&A was
Net loss for the year ended December 31, 2016 was $3.2 million compared to $3.7 million for the year ended
Adjusted EBITDA, which is a Non-GAAP measure, was
Cash and Net Debt
For the year ended
Outlook For Fiscal Year 2017
Mr. Cyr continued, “Through our analysis we know that the Freshpet brand has very low awareness, but a very high customer repeat rate. In 2017, we will begin to increase our investment in media to drive brand awareness. Over time we expect this new level of spend will increase same store sales and grow new store penetration. We have tested this media strategy over the last several months and are pleased with the results to-date.”
The Company expects to see an accelerated rate of growth, particularly for its fresh refrigerated products, as the year develops.
In the near term, the Company expects its strategic media investment to reduce Adjusted EBITDA, however, it’s confident this will more rapidly grow the business and result in significantly higher Adjusted EBITDA potential over the medium and long-term. In addition, over the longer term, the Company believes that expansion in gross profit from its cost savings and margin improvement efforts will offset the incremental media investment. There are significant cost savings and margin improvement opportunities that can be realized now that the Company’s technical talent has the opportunity to turn its attention from the addition of plant capacity to optimization of the manufacturing facilities recently completed. The Company expects to begin to see the benefit from these efforts beginning later in 2017 and continuing into 2018 and beyond.
For full year 2017, the Company expects following results compared to the prior year:
- To exceed Net Sales of
$153 million , an increase of approximately 15%, (17% for its fresh refrigerated product offering) with an increased rate of growth throughout the year. - To exceed Adjusted EBITDA of
$16 million , a decrease of approximately 10%. The planned strategic media investment will reduce Adjusted EBITDA in the near-term, but the resulting higher brand awareness is expected to generate increased Adjusted EBITDA over time. - To exceed Freshpet Fridges of over 18,200, an increase of approximately 10%.
The Company does not provide guidance for the most directly comparable GAAP measure, net income, and similarly cannot provide a reconciliation between its forecasted Adjusted EBITDA and net income metrics without unreasonable effort due to the unavailability of reliable estimates for certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of warrants. These items are not within the Company’s control and may vary greatly between periods and could significantly impact future financial results.
Conference Call, Webcast and Slide Presentation
The Company will host a conference call and webcast including an accompanying slide presentation where members of the executive management team will discuss these results with additional comments and details today at
A replay of the conference call will be archived on the Company’s website and telephonic playback will be available from
About
Our foods are available in select mass, grocery, natural food, club, and pet specialty retailers across
Connect with
https://www.facebook.com/Freshpet
https://plus.google.com/+Freshpet
https://en.wikipedia.org/wiki/Freshpet
https://www.youtube.com/user/freshpet400
Forward Looking Statements
Certain statements in this release may constitute “forward-looking” statements. 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
Non-GAAP Financial Measures
- Adjusted Gross Profit
- Adjusted Gross Profit as a % of net sales (Adjusted Gross Margin)
- Adjusted SG&A Adjusted SG&A as a % of net sales
- EBITDA
- Adjusted EBITDA
Adjusted Gross Profit:
Adjusted SG&A Expenses:
EBITDA and Adjusted EBITDA: EBITDA represents net loss plus depreciation and amortization, interest expense, and income tax expense, and Adjusted EBITDA represents EBITDA plus loss on disposal of equipment, plant startup expense, share-based compensation, warrant fair valuation, secondary fees, leadership transition expenses, and launch expenses.
Management believes that the non-GAAP measures, are meaningful to investors because they provide a view of the Company with respect to ongoing operating results. The non-GAAP financial measures are shown as supplemental disclosures in this release because they are widely used by the investment community for analysis and comparative evaluation and provides 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, provides a more complete understanding of the Company’s business than could be obtained absent this disclosure. 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.
FRESHPET INC. AND SUBSIDIARIES | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
(Unaudited) | |||||||
December 31, 2016 |
December 31, 2015 |
||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 3,908,177 | $ | 8,029,413 | |||
Short-term investments | — | 3,250,000 | |||||
Accounts receivable, net of allowance for doubtful accounts | 8,886,790 | 7,030,719 | |||||
Inventories, net | 5,402,735 | 6,853,447 | |||||
Prepaid expenses and other current assets | 1,045,651 | 229,631 | |||||
Total Current Assets | 19,243,353 | 25,393,210 | |||||
Property, plant and equipment, net | 101,493,080 | 82,793,007 | |||||
Deposits on equipment | 3,620,444 | 3,243,519 | |||||
Other assets | 2,094,339 | 1,667,838 | |||||
Total Assets | $ | 126,451,216 | $ | 113,097,574 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | 6,884,155 | 6,668,643 | |||||
Accrued expenses | 4,531,139 | 2,274,557 | |||||
Accrued warrants | 253,391 | 204,314 | |||||
Borrowings under Credit Facilities | 7,000,000 | — | |||||
Total Current Liabilities | $ | 18,668,685 | $ | 9,147,514 | |||
Total Liabilities | $ | 18,668,685 | $ | 9,147,514 | |||
STOCKHOLDERS' EQUITY: | |||||||
Common stock | 33,961 | 33,537 | |||||
Additional paid-in capital | 299,477,706 | 292,484,986 | |||||
Accumulated deficit | (191,729,136) | (188,568,463) | |||||
Total Stockholders' Equity | 107,782,531 | 103,950,060 | |||||
Total Liabilities and Stockholders' Equity | $ | 126,451,216 | $ | 113,097,574 | |||
FRESHPET INC. AND SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
For the Three Months Ended | For the Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
NET SALES | $ | 34,061,456 | $ | 30,201,788 | $ | 133,053,517 | $ | 116,186,372 | ||||||||
COST OF GOODS SOLD | 18,841,142 | 16,512,375 | 72,682,634 | 61,537,230 | ||||||||||||
GROSS PROFIT | 15,220,314 | 13,689,413 | 60,370,883 | 54,649,142 | ||||||||||||
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES | 13,669,325 | 10,820,726 | 62,585,833 | 58,296,814 | ||||||||||||
INCOME/(LOSS) FROM OPERATIONS | 1,550,989 | 2,868,687 | (2,214,950) | (3,647,672) | ||||||||||||
OTHER INCOME/(EXPENSES): | ||||||||||||||||
Other Income/(Expenses), net | (88,814) | 116,621 | (181,850) | 448,943 | ||||||||||||
Interest Expense | (208,022) | (192,530) | (698,119) | (454,567) | ||||||||||||
(296,836) | (75,909) | (879,969) | (5,624) | |||||||||||||
INCOME/(LOSS) BEFORE INCOME TAXES | 1,254,153 | 2,792,778 | (3,094,919) | (3,653,296) | ||||||||||||
INCOME TAX EXPENSE | 20,754 | 12,516 | 65,754 | 57,516 | ||||||||||||
NET INCOME/(LOSS) | 1,233,399 | 2,780,262 | (3,160,673) | (3,710,812) | ||||||||||||
NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 1,233,399 | $ | 2,780,262 | $ | (3,160,673) | $ | (3,710,812 | ||||||||
NET INCOME/(LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS | ||||||||||||||||
-BASIC | $ | 0.04 | $ | 0.08 | $ | (0.09) | $ | (0.11) | ||||||||
-DILUTED | $ | 0.04 | $ | 0.08 | $ | (0.09) | $ | (0.11) | ||||||||
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING USED IN COMPUTING NET INCOME/(LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS | ||||||||||||||||
-BASIC | 33,885,519 | 33,497,940 | 33,674,416 | 33,497,940 | ||||||||||||
-DILUTED | 34,226,963 | 33,526,958 | 33,674,416 | 33,497,940 | ||||||||||||
FRESHPET INC. AND SUBSIDIARIES | |||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||
(Unaudited) | |||||||
For the Twelve Months Ended | |||||||
December 31, | |||||||
2016 | 2015 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | (3,160,673) | $ | (3,710,812) | |||
Adjustments to reconcile net loss to net cash flows provided by operating activities: | |||||||
Provision for (gain)/loss on accounts receivable | (5,164) | 11,985 | |||||
Loss on disposal of equipment and deposits on equipment | 189,531 | 93,599 | |||||
Share-based compensation | 4,193,490 | 3,923,857 | |||||
Fair value adjustment for outstanding warrants | 49,077 | (502,626) | |||||
Change in reserve for inventory obsolescence | (117,944) | (105,022) | |||||
Depreciation and amortization | 9,887,168 | 7,573,535 | |||||
Amortization of deferred financing costs and loan discount | 150,272 | 144,823 | |||||
Changes in operating assets and liabilities | |||||||
Accounts receivable | (1,850,907) | (1,682,304) | |||||
Inventories | 1,568,656 | 565,726 | |||||
Prepaid expenses and other current assets | (816,020) | 1,061,748 | |||||
Other assets | (398,059) | (198,902) | |||||
Accounts payable | 853,854 | 192,583 | |||||
Accrued expenses | 2,256,582 | (629,373) | |||||
Net cash flows provided by operating activities | 12,799,863 | 6,738,817 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of short-term investments | — | (7,499,205) | |||||
Proceeds from maturities of short-term investments | 3,250,000 | 4,249,205 | |||||
Acquisitions of property, plant and equipment, software and deposits on equipment | (29,952,536) | (27,015,112) | |||||
Acquisitions of land and building | — | (5,026,250) | |||||
Proceeds from sale of equipment | 13,442 | 30,957 | |||||
Net cash flows used in investing activities | (26,689,094) | (35,260,405) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Exercise of options to purchase common stock | 2,767,995 | 291,750 | |||||
Proceeds from borrowings under Credit Facilities | 10,000,000 | — | |||||
Repayment of borrowings under Credit Facilities | (3,000,000) | — | |||||
Net cash flows provided by financing activities | 9,767,995 | 291,750 | |||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | (4,121,236) | (28,229,839) | |||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 8,029,413 | 36,259,252 | |||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 3,908,177 | $ | 8,029,413 | |||
FRESHPET INC. AND SUBSIDIARIES | ||||||||||||||||
RECONCILIATION BETWEEN GROSS PROFIT AND ADJUSTED GROSS PROFIT | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Certain totals may not sum due to rounding | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Gross Profit (as reported) | $ | 15,220 | $ | 13,689 | $ | 60,371 | $ | 54,649 | ||||||||
Depreciation expense (a) | 1,368 | 669 | 4,028 | 2,566 | ||||||||||||
Plant start-up expenses and processing (b) | 420 | — | 1,628 | — | ||||||||||||
Adjusted Gross Profit | $ | 17,008 | $ | 14,359 | $ | 66,027 | $ | 57,216 | ||||||||
Adjusted Gross Profit as a % of Net Sales | 49.9% | 47.5% | 49.6% | 49.2% |
(a) Represents non-cash depreciation expense included in Cost of Goods Sold.
(b) Represents additional operating costs incurred in 2016 in connection with the startup of our new manufacturing lines as part of the Freshpet Kitchens expansion project.
FRESHPET INC. AND SUBSIDIARIES | ||||||||||||||||
RECONCILIATION BETWEEN SG&A EXPENSES AND ADJUSTED SG&A EXPENSES | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Certain totals may not sum due to rounding | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
SG&A Expenses (as reported) | $ | 13,669 | $ | 10,821 | $ | 62,586 | $ | 58,297 | ||||||||
Non-cash stock based compensation (a) | 690 | (1,546) | 3,972 | 3,723 | ||||||||||||
Secondary fees (b) | — | — | — | 593 | ||||||||||||
Leadership transition expenses (c) | (36) | — | 1,291 | — | ||||||||||||
Adjusted SG&A Expenses | $ | 13,015 | $ | 12,367 | $ | 57,323 | $ | 53,981 | ||||||||
Adjusted SG&A Expense as a % of Net Sales | 38.2% | 40.9% | 43.1% | 46.5% |
(a) Represents non-cash stock based compensation expense.
(b) Represents fees associated with the secondary public offering of our common stock, which was completed on
(c) Represents charges associated within our former Chief Executive Officer’s separation agreement as well as changes in estimates associated with leadership transition costs.
FRESHPET INC. AND SUBSIDIARIES | ||||||||||||||||
RECONCILIATION BETWEEN NET INCOME / (LOSS) AND ADJUSTED EBITDA | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(Amounts in thousands) | ||||||||||||||||
Certain totals may not sum due to rounding | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income/(loss) | $ | 1,233 | $ | 2,780 | $ | (3,161) | $ | (3,711) | ||||||||
Depreciation and amortization | 2,929 | 2,031 | 9,887 | 7,574 | ||||||||||||
Interest expense | 208 | 193 | 698 | 455 | ||||||||||||
Income tax expense | 21 | 13 | 66 | 58 | ||||||||||||
EBITDA | $ | 4,391 | $ | 5,016 | $ | 7,490 | $ | 4,376 | ||||||||
Loss on disposal of equipment | 20 | 10 | 190 | 94 | ||||||||||||
Launch expense (a) | 775 | 686 | 2,813 | 2,626 | ||||||||||||
Plant start-up expenses and processing (b) | 420 | — | 1,628 | — | ||||||||||||
Non-cash stock based compensation (c) | 734 | (1,566) | 4,193 | 3,924 | ||||||||||||
Warrant fair valuation (d) | 68 | (98) | 49 | (503) | ||||||||||||
Secondary fees (e) | — | — | — | 593 | ||||||||||||
Leadership transition expenses (f) | (36) | 1,291 | — | |||||||||||||
Adjusted EBITDA | $ | 6,372 | $ | 4,048 | $ | 17,654 | $ | 11,110 | ||||||||
(a) Represents new store marketing allowance of
(b) Represents additional operating costs incurred in 2016 in connection with the startup of our new manufacturing lines as part of the Freshpet Kitchens expansion project.
(c) Represents non-cash stock based compensation expense.
(d) Represents the change of fair value for the outstanding common stock warrants.
(e) Represents fees associated with the secondary public offering of our common stock, which was completed on May 5, 2015.
(f) Represents charges associated with our former Chief Executive Officer’s separation agreement as well as changes in estimates associated with leadership transition costs.
CONTACT ICR Katie Turner 646-277-1228 katie.turner@icrinc.comMichael Fox 203-682-8218 Michael.fox@icrinc.com
Source: Freshpet, Inc.