Release Details

Company Reports 8^th Consecutive Quarter of Greater Than 20% Growth
Reiterates Full Year 2019 Guidance

SECAUCUS, N.J., Nov. 04, 2019 (GLOBE NEWSWIRE) -- Freshpet, Inc. (“Freshpet” or the “Company”) (NASDAQ: FRPT) today reported financial results for its third quarter and nine months ended September 30, 2019.

Third Quarter 2019 Financial Highlights Compared to Prior Year Period

• Net sales of $65.3 million, an increase of 28.5%
• Net income of $3.1 million compared to net loss of $0.1 million
• Adjusted EBITDA of $12.0 million, an increase of 78.5%¹

“Our third quarter results demonstrate the remarkable strength and potential of the Freshpet business.  We delivered our eighth consecutive quarter of net sales growth in excess of 20% and increased profitability even faster,” commented Billy Cyr, Freshpet’s Chief Executive Officer.  “We continue to believe we are in the early stages of changing the way people feed their pets – with a very long runway of growth ahead of us.  Our mission of providing more pets with fresh, all-natural foods that enrich their lives and the relationships with their pet parents is increasingly relevant to the growing number of households who choose to share their lives with a pet.”   

Third Quarter 2019

Third quarter of 2019 net sales increased 28.5% to $65.3 million compared to $50.8 million for the third quarter of 2018.  Growth in net sales for the third quarter of 2019 was driven by velocity, innovation, and distribution gains.

Gross profit was $30.7 million, or 47.0% as a percentage of net sales, for the third quarter of 2019, compared to $23.6 million, or 46.5% as a percentage of net sales, in the same period last year. The increase in gross profit was primarily driven by higher net sales. For the third quarter of 2019, Adjusted Gross Profit was $32.5 million, or 49.8% as a percentage of net sales, compared to $25.3 million, or 49.7% as a percentage of net sales, in the prior year period. The slight increase in Adjusted Gross Profit as a percentage of net sales was primarily due to higher sales price realization and a shift in sales mix to higher margin items, partially offset by higher ingredient and inbound freight cost. Adjusted Gross Profit is a Non-GAAP financial measure defined under “Non-GAAP Measures,” and is reconciled to gross profit in the financial tables that accompany this release.

Selling, general and administrative expenses (“SG&A”) were $27.2 million for the third quarter of 2019 compared to $23.6 million in the prior year period. As a percentage of net sales, SG&A decreased to 41.6% for the third quarter of 2019 compared to 46.4% in the third quarter of 2018. Adjusted SG&A for the third quarter of 2019 was $20.5 million, or 31.4% as a percentage of net sales, compared to $18.6 million, or 36.5% as a percentage of net sales, in the prior year period. The decrease in Adjusted SG&A as a percentage of net sales was primarily a result of increased expense leverage on higher net sales including leverage on media spend which remained consistent with prior year period. Adjusted SG&A is a Non-GAAP financial measure defined under “Non-GAAP Measures,” and is reconciled to SG&A in the financial tables that accompany this release.

Net income was $3.1 million for the third quarter of 2019 compared to net loss of $0.1 million for the prior year period. The increase in net income was a result of an increase in gross profit, partially offset by higher SG&A.

Adjusted EBITDA was $12.0 million, or 18.4% as a percentage of net sales, for the third quarter of 2019, compared to $6.7 million, or 13.2% as a percentage of net sales, in the third quarter of 2018. The increase in Adjusted EBITDA was a result of higher net sales and Adjusted Gross Profit, partially offset by higher Adjusted SG&A. Adjusted EBITDA, Adjusted Gross Profit and Adjusted SG&A are Non-GAAP financial measures defined under “Non-GAAP Measures,” and are reconciled to the closest comparable GAAP measures in the financial tables that accompany this release.

First Nine Months of 2019

Net sales increased 27.2% to $180.1 million compared to $141.6 million for the first nine months of 2018.  Growth in net sales for the first nine months of 2019 was driven by velocity, innovation, and distribution gains.

Gross profit was $83.9 million, or 46.6% as a percentage of net sales, for the first nine months of 2019, compared to $66.6 million, or 47.1% as a percentage of net sales, in the same period last year. The increase in gross profit was driven by higher net sales. For the first nine months of 2019, Adjusted Gross Profit was $89.2 million, or 49.5% as a percentage of net sales, compared to $71.4 million, or 50.4% as a percentage of net sales, in the prior year period. The decrease in Adjusted Gross Profit as a percentage of net sales was primarily due to increased production and processing cost, and higher ingredient and inbound freight cost, partially offset by higher sales price realization and a shift in sales mix to higher margin items. 

SG&A was $89.1 million for the first nine months of 2019 compared to $73.4 million in the prior year period. As a percentage of net sales, SG&A decreased to 49.5% for the first nine months of 2019 compared to 51.8% in the prior year period. The first nine months of 2019 included a planned increase in media spend of $8.0 million compared to the prior year period, or an additional 4.4% as a percentage of net sales.  Adjusted SG&A for the first nine months of 2019 was $73.2 million, or 40.7% as a percentage of net sales, compared to $60.4 million, or 42.7% as a percentage of net sales, in the prior year period. The decrease in SG&A and Adjusted SG&A as a percentage of net sales was primarily a result of increased expense leverage on higher net sales, partially offset by a planned increase in media spend. 

Net loss was $6.0 million for the first nine months of 2019 compared to net loss of $7.1 million for the prior year period. The decrease in net loss was a result of an increase in net sales and gross profit, partially offset by higher SG&A.

Adjusted EBITDA was $16.0 million, or 8.9% as a percentage of net sales, for the first nine months of 2019, compared to $11.1 million, or 7.8% as a percentage of net sales, in the prior year period. The increase in Adjusted EBITDA was a result of higher net sales and Adjusted Gross Profit, partially offset by increased Adjusted SG&A.

Cash and Net Debt

As of September 30, 2019, the Company had cash and cash equivalents of $7.2 million.  During the nine months ended September 30, 2019, the Company drew $35.4 million on its credit facility in connection with the Kitchens 2.0 project, planned increased media investment, and funding of working capital. The Company expects to fund the $100 million Kitchens 2.0 manufacturing expansion through its credit facility and cash from operations.

Outlook

For full year 2019, the Company reiterated its guidance. The Company continues to expect the following results:

• To exceed net sales of $244 million, an increase greater than 26% from 2018
• To exceed Adjusted EBITDA of $29 million, an increase greater than 43% from 2018

The Company is unable to provide guidance for net income or a reconciliation of forecasted Adjusted EBITDA to net income because certain items that are excluded from Adjusted EBITDA are inherently uncertain and cannot be predicted without unreasonable effort due to the unavailability of reliable estimates.

Conference Call and Webcast

The Company will host a conference call and webcast with the executive management team to discuss these results with additional comments and details today at 4:30 p.m. ET. The conference call webcast will be available live over the Internet through the “Investors” section of the Company’s website at www.freshpet.com. To participate on the live call listeners in North America may dial (877) 407-0792 and international listeners may dial (201) 689-8263.

A replay of the conference call will be archived on the Company’s website and telephonic playback will be available from 7:30 p.m. ET today through November 18, 2019. North American listeners may dial (844) 512-2921 and international listeners may dial (412) 317-6671. The passcode is 13695042.

About Freshpet

Freshpet’s mission is to improve the lives of dogs and cats through the power of fresh, real food. Freshpet foods are blends of fresh meats, vegetables and fruits farmed locally and made at our Kitchens in Bethlehem, PA.  We thoughtfully prepare our foods using natural ingredients, cooking them in small batches at lower temperatures to preserve the natural goodness of the ingredients. Freshpet foods and treats are kept refrigerated from the moment they are made until they arrive at Freshpet Fridges in your local market.

Our foods are available in select mass, grocery (including online), natural food, club, and pet specialty retailers across the United States, Canada and Europe. From the care, we take to source our ingredients and make our food, to the moment it reaches your home, our integrity, transparency and social responsibility are the way we like to run our business. To learn more, visit www.freshpet.com.

Connect with Freshpet:

https://www.facebook.com/Freshpet 

https://twitter.com/Freshpet 

http://instagram.com/Freshpet 

http://pinterest.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 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 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 filed with the Securities and Exchange Commission. Such forward-looking statements are made only as of the date of this release. 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 Financial Measures

Freshpet uses the following non-GAAP financial measures in its financial communications. These non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies.

• 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 EBITDA as a % of net sales

Adjusted Gross Profit: Freshpet defines Adjusted Gross Profit as gross profit before non-cash depreciation expense and non-cash share-based compensation.

Adjusted SG&A Expenses: Freshpet defines Adjusted SG&A as SG&A expenses before depreciation and amortization expense, non-cash share-based compensation, launch expense, fees related to secondary offerings, and litigation expense.

EBITDA and Adjusted EBITDA: EBITDA represents net income (loss) plus interest expense, income tax expense and depreciation and amortization expense, and Adjusted EBITDA represents EBITDA plus gain (loss) on disposal of equipment, non-cash share-based compensation expense, launch expenses, fees related to secondary offerings, and litigation expense.

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. 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. 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. 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.

CONTACT
ICR
Katie Turner
646-277-1228
katie.turner@icrinc.com

¹ Adjusted EBITDA, as well as certain other measures in this release, is a non-GAAP financial measure.  See “Non-GAAP Measures” for how we define these measures and the financial tables that accompany this release for reconciliations of these measures to the closest comparable GAAP measures.

FRESHPET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited)

FRESHPET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

FRESHPET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited

FRESHPET, INC. AND SUBSIDIARIES

RECONCILIATION BETWEEN GROSS PROFIT AND ADJUSTED GROSS PROFIT
(Unaudited)

(a) Represents depreciation expense included in cost of goods sold.
(b) Represents non-cash share-based compensation expense included in cost of goods sold.

FRESHPET, INC. AND SUBSIDIARIES

RECONCILIATION BETWEEN SG&A EXPENSES AND ADJUSTED SG&A EXPENSES
(Unaudited)

(a) Represents non-cash depreciation and amortization expense included in SG&A.
(b) Represents non-cash share-based compensation expense included in SG&A.
(c) Represents new store marketing allowance of $1,000 for each store added to our distribution network, as well as the non-capitalized freight costs associated with Freshpet Fridge replacements. The expense enhances the overall marketing spend to support our growing distribution network.
(d) Represents fees associated with secondary public offerings of our common stock.
(e) Represents fees associated with two securities lawsuits.

FRESHPET, INC. AND SUBSIDIARIES

RECONCILIATION BETWEEN NET INCOME (LOSS) AND ADJUSTED EBITDA
(Unaudited)

(a) new store marketing allowance of $1,000 for each store added to our distribution network, as well as the non-capitalized freight costs associated with Freshpet Fridge replacements. The expense enhances the overall marketing spend to support our growing distribution network.
(b) Represents fees associated with secondary public offerings of our common stock.
(c) Represents fees associated with two securities lawsuits.

   Source: Freshpet, Inc.