UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 26, 2019

 

FRESHPET, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Registrant’s Telephone Number, Including Area Code: (201) 520-4000

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

 

 

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Item 2.02. Results of Operations and Financial Condition.

On February 26, 2019, Freshpet, Inc. (“Freshpet”) issued a press release disclosing its financial results for the quarter and year ended December 31, 2018. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

As previously announced, Freshpet will hold a conference call at 4:30 p.m., Eastern Time, on Tuesday, February 26, 2019 to discuss its financial results for the quarter and year ended December 31, 2018.

Freshpet references non-GAAP financial information in the press release and makes similar references in the transcript to the conference call. A reconciliation of these non-GAAP financial measures to the nearest comparable GAAP financial measures is contained in the attached Exhibit 99.1 press release.

Item 7.01. Regulation FD Disclosure.

On February 26, 2019, Freshpet published to the investor relations section of its website a presentation which will be used by Freshpet’s management team in meetings with analysts and stockholders. A copy of the presentation is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

The information furnished with Item 2.02 and this Item 7.01, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“the Exchange Act”) or incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Freshpet uses the “Investors” section of its website (investors.freshpet.com) as a means of disclosing material non‑public information and for complying with its disclosure obligations under Regulation FD.

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

99.2            Investor Presentation

 

 

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Exhibit 99.1

 

Freshpet, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results

Provides Full Year 2019 Outlook

Announces Strategic Investment to Support Rapid Growth Beyond 2020

SECAUCUS, N.J. – February 26, 2019 – Freshpet, Inc. (“Freshpet” or the “Company”) (NASDAQ: FRPT) today reported financial results for its fourth quarter and full year ended December 31, 2018.

Fourth Quarter 2018 Financial Highlights Compared to Prior Year Period

2018 Financial Highlights Compared to Prior Year

 

“2018 was a very successful year for Freshpet. Our Feed the Growth strategy is rapidly creating the scale that we believe will drive long term profitability,” said Billy Cyr, Freshpet’s Chief Executive Officer.  “We expect 2019 to be the year where we begin to leverage that scale -- continuing our strong top line growth while delivering an even stronger rate of bottom line growth.” 

 

The Company also announced that it will invest approximately $3.0 million in non-capital initiatives designed to support long-term growth beyond 2020.  These include pulling forward strategic investments in technical talent needed to accelerate production capacity expansion to meet increased demand beyond 2020, and modest investments to further establish Freshpet in international markets.  Mr. Cyr continued, “We believe Freshpet has significant growth potential that goes well beyond 2020.  The most significant limitation to our future growth is our ability to add manufacturing capacity fast enough to keep pace with consumer demand.  As a result, we are making strategic investments in organizational capability a year earlier than we originally planned to ensure we are well positioned to support our anticipated growth.”

    

Fourth Quarter 2018

Fourth quarter of 2018 net sales increased 29.7% to $51.6 million compared to $39.8 million for the fourth quarter of 2017.  Growth in net sales for the fourth quarter of 2018 was driven by velocity, innovation, and distribution gains.

Gross profit was $23.4 million, or 45.2% as a percentage of net sales, for the fourth quarter of 2018, compared to $18.9 million, or 47.6% as a percentage of net sales, in the same period last year. The increase in gross profit was primarily driven by higher net sales offset by decreased gross margin. For the fourth quarter of 2018, Adjusted Gross Profit was $25.5 million, or 49.4% as a percentage of net sales, compared to $20.5 million, or 51.4% 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 higher ingredient

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and inbound freight costs and unabsorbed labor costs as the Company converts to a planned, new seven-day manufacturing operation, partially offset by increased efficiencies through scale and production improvements.  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 $21.5 million for the fourth quarter of 2018 compared to $17.3 million in the prior year period. The fourth quarter of 2018 included a planned increase in media spend of $1.6 million compared to the prior year period, or an additional 2.9% as a percentage of net sales.  As a percentage of net sales, SG&A decreased to 41.6% for the fourth quarter of 2018 compared to 43.5% in the fourth quarter of 2017. Adjusted SG&A for the fourth quarter of 2018 was $16.3 million, or 31.5% as a percentage of net sales, compared to $13.6 million, or 34.2% 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, offset by a planned increase in media spend. 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 $1.8 million for the fourth quarter of 2018 compared to net income of $1.5 million for the prior year period. The increase in net income was primarily a result of increased gross profit and increased leverage on SG&A, partially offset by a planned increase in media spend.

Adjusted EBITDA was $9.2 million, or 17.9% as a percentage of net sales, for the fourth quarter of 2018, compared to $6.9 million, or 17.2% as a percentage of net sales, in the fourth quarter of 2017. The increase in adjusted EBITDA was a result of increased Adjusted Gross Profit and increased leverage of Adjusted SG&A, partially offset by a planned increase in media spend. 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.

Full Year 2018

Net sales increased 26.8% to $193.2 million for the full year ended December 31, 2018 compared to $152.4 million for the prior year. The Company’s core fresh refrigerated product offering grew 28.2% as compared to the prior year.  Growth in net sales for the full year 2018 was driven by velocity, innovation, and distribution gains.

Gross profit was $90.0 million, or 46.6% as a percentage of net sales for the full year ended December 31, 2018, compared to $72.4 million, or 47.5% as a percentage of net sales, in the same period last year. The increase in gross profit was primarily driven by higher net sales offset by decreased gross margin. For the full year ended December 31, 2018, Adjusted Gross Profit was $96.9 million, or 50.2% as a percentage of net sales, compared to $78.5 million, or 51.5% as a percentage of net sales, in the prior year. The decrease in Adjusted Gross Profit as a percentage of net sales was primarily due to higher ingredient and inbound freight costs and unabsorbed labor costs as the Company converts to a planned, new seven-day manufacturing operation, partially offset by increased efficiencies through scale and production improvements.

SG&A was $94.9 million for the full year ended December 31, 2018 compared to $75.2 million in the prior year. The full year ended December 31, 2018 included a planned increase in media spend of $7.9 million compared to the prior year, or an additional 2.2% as a percentage of net sales. As a percentage of net sales, SG&A slightly decreased to 49.1% for the full year ended December 31, 2018 compared to 49.3% in 2017. Adjusted SG&A for the full year ended December 31, 2018 was $76.7 million, or 39.7% as a percentage of net sales, compared to $60.8 million, or 39.9% as a percentage of net sales, in the prior year. The slight decrease in Adjusted SG&A as a percentage of net sales was primarily a result of increased expense leverage on higher net sales, offset by a planned increase in media spend.

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Net loss was $5.4 million for the full year ended December 31, 2018 compared to net loss of $4.3 million for the prior year.

Adjusted EBITDA was $20.3 million, or 10.5% as a percentage of net sales, for the full year ended December 31, 2018, compared to $17.6 million, or 11.5% as a percentage of net sales for the prior year. The increase in Adjusted EBITDA was a result of increased Adjusted Gross Profit and increased leverage of Adjusted SG&A, partially offset by a planned increase in media spend. 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.

Cash and Net Debt

As of December 31, 2018, the Company had cash and cash equivalents of $7.6 million and $30.0 million available under its revolving credit facility. As of December 31, 2018 there was no outstanding debt under the revolving credit facility. The $30.0 million revolving credit facility will mature in September 2020 and includes the ability to increase the revolving credit facility by an additional $10.0 million.   As part of our planned $100 million manufacturing expansion, the Company intends to amend its revolving credit facility.

Updated Non-GAAP Measures

Management continues to focus on the potential increased profitability percentage that could be gained through increased scale.  As the Company grows, it wants to ensure continued simplicity and transparency when assessing profitability via the disclosure of non-GAAP measures.

As a result, the Company has aligned all of its non-GAAP measure add-backs within Adjusted Gross Profit, Adjusted SG&A, and Adjusted EBITDA. For example, non-cash share-based compensation expense will now be an add-back to Adjusted Gross Profit as it is an add-back within Adjusted EBITDA.  Additionally, one of the financial measures the Company uses to assess profitability is Adjusted EBITDA as a percentage of net sales. Therefore, the Company will add Adjusted EBITDA as a percentage of net sales to its non-GAAP measures.

Management believes that including consistent add-backs within its non-GAAP measures will ensure that both management and investors can more easily assess the Company’s profitability percentage by way of Adjusted EBITDA as a percentage of net sales, and so can easily assess if the percentage gains or losses came by way of Adjusted Gross Profit and/or Adjusted SG&A.

The Company has made these changes retrospectively.  These changes do not impact historical Adjusted EBITDA, Adjusted EBITDA as a percentage of net sales, or future Adjusted EBITDA projections.

Outlook

For full year 2019, the Company is providing the following guidance, which includes approximately $3.0 million of costs associated with new initiatives designed to support growth beyond 2020:

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

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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.

 

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 March 12, 2019. North American listeners may dial (844) 512-2921 and international listeners may dial (412) 317-6671. The passcode is 13684063.

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

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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: Freshpet defines Adjusted Gross Profit as gross profit before non-cash depreciation expenses, plant start-up costs 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 offering, leadership transition expenses, and litigation expense.

EBITDA and Adjusted EBITDA: EBITDA represents net loss plus interest expense, income tax expense and depreciation and amortization expense, and Adjusted EBITDA represents EBITDA plus loss on disposal of equipment, plant start-up expenses, non-cash share-based compensation, warrant fair valuation, launch expenses, fees related to a secondary offering, leadership transition costs 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

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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

Michael Fox

203-682-8218

Michael.fox@icrinc.com

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FRESHPET INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

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FRESHPET INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

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FRESHPET INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

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FRESHPET INC. AND SUBSIDIARIES

RECONCILIATION BETWEEN GROSS PROFIT AND ADJUSTED GROSS PROFIT

(Unaudited)

 

 

* Represents revision to non-GAAP measure.

 

(a)   Represents depreciation and amortization expense included in cost of goods sold.

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

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FRESHPET INC. AND SUBSIDIARIES

RECONCILIATION BETWEEN SG&A EXPENSES AND ADJUSTED SG&A EXPENSES

(Unaudited)

 

 

* Represents revision to non-GAAP measure.

 

(a)   Represents depreciation and amortization expense included in SG&A.

(b)    Represents non-cash share-based compensation expense.

 

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FRESHPET INC. AND SUBSIDIARIES

RECONCILIATION BETWEEN NET LOSS AND ADJUSTED EBITDA

(Unaudited)

 

 

 

* Represents new non-GAAP measure.

 

(f)     Represents fees associated with two securities lawsuits.

 

Investor Presentation: February 26, 2019 Exhibit 99.2

Safe Harbor Forward Looking Statements This presentation contains “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the Company’s results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate and any statements of assumptions underlying any of the foregoing. These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future performance. These forward-looking statements are based on certain assumptions and are subject to risks and uncertainties, including those described in the “Risk Factors” section and elsewhere in the preliminary prospectus for this offering. You should read the prospectus, including the Risk Factors set forth therein and the documents that the Company has filed as exhibits to the registration statement, of which the prospectus is a part, completely and with the understanding that if any such risks or uncertainties materialize or if any of the relevant assumptions prove incorrect, the Company’s actual results could differ materially from the results expressed or implied by these forward-looking statements. Except as required by law we assume no obligation to update these forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Non-GAAP Disclosure This presentation contains certain non-GAAP financial measures such as EBITDA and adjusted EBITDA among others. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to the Company’s earnings press releases for a reconciliation of non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP.

WE FUNDAMENTALLY BELIEVE THAT FRESHPET HAS THE POTENTIAL TO CHANGE THE WAY PEOPLE FEED THEIR PETS . . . FOREVER

Growing 25 pts. faster than category in all classes of trade % Change vs YA by Class of Trade Nielsen: Freshpet RFG $ as of 12-29-18

Increased penetration & buying rate Total Freshpet Buying Rate, Penetration and Repeat Rate Source: TTL FP RFG, 52 weeks ending 12/29/18, Nielsen HH Panel, Internal Buy Rate Calculation, Repeat NBD-Adj Nielsen HH Panel Penetration 1.34 1.50 1.56 1.75 2.04 Repeat 65 66 68 69 70

Net Sales +29.7% +26.8% Adj. EBITDA +33.8% +15.5% Adj. Gross Margin 4Q18 and FY18 results compared to prior year periods

Gaining SG&A leverage and reinvested for growth SG&A Leverage   FY 2018 FY 2017 Y-o-Y Change Adj. SG&A % Excluding Media 28.5% 31.0% +2.4% Media% 11.1% 8.9% -2.2% Total Adj. SG&A % 39.7% 39.9% +0.2%

Growing distribution reach (ACV) and depth (TDP) with significant room to grow Nielsen Mega-Channel % ACV for 13 week periods 4/5/14 through 12/29/18 Nielsen Mega-Channel TDP for 13 week periods 4/5/14 through 12/29/18 19,499 stores as of 12/31/18 Upgraded 805 stores in 2018

Freshpet productivity loop creates shareholder value

2019

Carrying strong momentum into 2019 Nielsen measured $ consumption for 7 weeks ending 2/16/19 and 2/17/18 compared to the same period prior year

Freshpet 2019 growth priorities Expand the Freshpet consumer franchise Increase HH penetration Expand buying rate Strengthen Freshpet’s retail presence Increase ACV and TDP’s Upgrade Fridges Install 2nd Fridges Strengthen Gross Margin/Adjusted EBITDA Margin Pricing Product Innovation Efficiency gains and capacity utilization Build more efficient capacity (Kitchens 2.0 start-up in 2020) Deliver SG&A absorption gains Continue Measured Development in Canada and UK Modest investment to establish consumer foundation Build Capability to Support Accelerated Longer-Term Capacity Expansion Invest in technical talent to enable more rapid and reliable capacity expansion and maximize its productivity

Expand the Freshpet consumer franchise Increase US advertising investment to $27 million (11+% of sales) More weeks Higher media weights

Expand the Freshpet consumer franchise Innovation that attracts new users Homestyle Creations – Custom Dog Meals Multi-Protein Roll

Expand Freshpet’s retail presence Strong velocity growth is driving increased retailer interest Add 1500-1600 net new stores to 21,000+ ( ACV by 7%) Upgrade another 500 Fridges (beyond 1000 committed in 2018) Install 800 second Fridges Will exceed 21,000 stores in 2019 Upgraded 805 Fridges in 2018

Strengthen gross margin/adjusted EBITDA margin Pricing Targeted bag items +2% pricing impact across total line Effective in mid-Q1 Innovation Increase appeal of rolls Higher margin bag items Begins shipping end of Q1 COGS Increase yield/throughput 24/7 on 2 lines in Jan. ‘19 24/7 on final line in Q2 Break ground on Kitchens 2.0 SG&A Scale benefits in freight G&A growth significantly < sales growth Increase Adj. Gross Margin – largely in back half of the year – to 51+% by year-end

Gaining leverage in SG&A Basis points

$2 Million Investment to Drive Establishment Continue measured development in Canada & UK

Build capability to support longer-term capacity expansion Up to $1 Million Investment in Technical Capability Process Development & Improvement Site Design & Development Quality & Process Engineering

Growing into scale: Adj. EBITDA growth > net sales growth 20182019% Change Net Sales$193.2>$240+24% Adjusted EBITDA$20.3>$28+38% $ in Millions Excluding incremental investments in Canada/UK and technical capability/capacity building, Adjusted EBITDA would be up 50+% in 2019

Driving net sales towards $500+ million and beyond

+26.8% +17.5% +14.3% +29.7% +19.6% +12.7% 2016 2017 2018 Q4 FY Q4 FY Q4 FY Topline Results – YoY Results Product innovation Upgraded Fridges Increased advertising

FY18 Results Adjusted Gross Profit % 50.2% Adjusted SG&A % 39.7% Adjusted EBITDA % 10.5% Simplifying non-GAAP measures Under our new format, you can subtract Adj. SG&A from Adj. Gross Profit to calculate FRPT’s Adj. EBITDA No change to Adjusted Gross Profit Margin or Adjusted EBITDA goals Now addbacks: COGS Option Expense Now addbacks: Launch Expense SG&A Depreciation Expense (A) – (B) = (A) (B)

Productivity gains offset by increased staffing, commodities and mix New Hires for 7-day Production Commodity & In-bound Freight Mix Shift Increased Yield and Throughput 4Q18 4Q17 Q4 Gross Margin Bridge

SG&A Leverage   4Q18 4Q17 Change Adj. Gross Margin 49.4% 51.4% -2.0%     Adj. SG&A % Excluding Media 27.8% 33.4% +5.6% Media % 3.7% 0.8% -2.9% Total Adj. SG&A % 31.5% 34.2% +2.7%     Adjusted EBITDA % 17.9% 17.2% +0.7%     Gaining leverage in SG&A

FY2019 Guidance 20182019% Change Net Sales$193.2>$240+24% Adjusted EBITDA$20.3>$28+38% $ in Millions Excluding incremental investments in Canada/UK and technical capability/capacity building, Adjusted EBITDA would be up 50+% in 2019

Series of actions designed to increase adjusted gross margin Price increases implemented Benefit of price increases realized Innovations launched Start-up final line on 24/7 Benefit of innovations realized Benefit of 24/7 staffing realized 51+% Adj. Gross Margin target Q1 Q2 Q3 Q4

Bridge to $60 million EBITDA in FY2020 FY19 Adj. EBITDA Guidance Contribution on $60mm of Additional Net Sales to get to $300MM Reduced int’l investment/loss Adjusted Gross Margin Increase from 50% to 52% on $300MM net sales Increased Fixed SG&A of 4% Logistics & Brokerage Efficiencies (1/2%) FY20 Adj. EBITDA Plan

Delighting pet parents, pets, shareholders and employees . . .

Appendix

Quarterly reconciliation for updated non-GAAP measures NON-GAAP SCHEDULES Adjusted EBITDA Three Months Ended Three Months Ended Three Months Ended Three Months Ended Twelve Months Ended Adj EBITDA inputs: YTD March 31, June 30, September 30, December 31, December 31, 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2016 2015 2014 Interest expense 9605 159670.09999999998 (Dollars in thousands) (Dollars in thousands) 9615 115102.82 Net Loss $-3,521 $-2,880 $-3,501 $-2,652 $-97 $-,246 $1,758 $1,516 $-5,361 $-4,262 $-3,160.8700000000003 $-3,710.7379999999998 $,-37,339 9607 13232.88 Fees on debt guarantee (a) 0 0 0 0 0 0 0 0 0 0 0 0 25,937 Depreciation and amortization 3,334 3,049 3,462 3,146 3,623 3,215.554050000002 3,649 3,281.181879999991 14,068 12,691.735929999993 9,887.4909399999287 7,574 6,425 9609 8227.98 Interest expense 69 176 98 190 94.381 465.25299999999999 34.927 78.56 296.30799999999999 909.81299999999987 698.08899999999994 455.35 4,614 Income tax expense 19 21 19 21 19.032 20.754000000000001 20 11.933 77.031999999999996 75 65.754000000000005 57.515999999999998 42 Loss on disposal 6152 142158.76075000004 EBITDA $-99 $366 $78 $705 $3,639.413 $3,455.5610500000021 $5,461.9269999999997 $4,887.6748799999914 $9,080.34 $9,413.5489299999936 $7,490.4639399999278 $4,376.1279999999997 $-,321 Loss on disposal of equipment 27.879000000000001 6.0049999999999999 48.381999999999998 84.867999999999995 28.507999999999999 6.819 37.39 6.024 142.15899999999999 103.71599999999999 189.53200000000004 94 309 Launch expense 7596 2001000 Non-cash share-based compensation (a) 1,092 930 1,302 1,229 1,776.3753299999998 1,132.8520000000001 2,637.2106899999999 1,145.81852 6,807.5860199999997 4,437.6705199999997 4,193.711499999998 3,923.8879900000002 1,564 7779 1089.6300000000001 Launch expense (b) 652.726 755.55518999999993 1,009.34889 675 1,015.2405500000001 928.6243199999999 863.07164 705.81691000000001 3,540.38708 3,065.9964199999999 2,813 2,626 3,513 7585 1527633.45 Plant start-up expenses (c) 0 0 0 0 0 0 0 0 0 0 1,628 0 113 7603 10664 Warrant fair valuation (d) 0 -,108.116 0 486.79700000000003 0 -44.052999999999997 0 0 0 334.62800000000004 49.076999999999998 -,503.10578000000004 337 7564 0 Shelf registration expenses (e) 0 0 0 0 137 0 225 0 362 0 0 593 0 *Manual input Leadership transition expenses (f) 0 0 0 0 0 100 0 -37 0 63 1,291 0 0 Litigation expense (g) 135 0 93 0 120 0 0 145 348 145 0 0 0 Adjusted EBITDA $1,808.605 $1,949.4441900000002 $2,530.7308899999998 $3,180.665 $6,715.5368799999997 $5,579.8033700000024 $9,223.5993299999991 $6,853.3343099999911 $20,280.472099999999 $17,564.559869999994 $17,654.144089999929 $11,109.91021 $5,515 UPDATE THE TOTALS FORMULAS IN FUTURE Q'S Shelf Registration 9516 362500 Adjusted EBITDA as a % of Net Sales* 4.2% 5.8% 5.3% 8.2% 0.13219560787401574 0.13906052012461065 0.17860308909242295 0.17206895252203147 0.10495128831434973 0.11528403225277137 0.13610787459427731 9.8% 6.6% Do not correct rounding on 2017 $2,370.265020000008 0.34585574156822524 $2,715.9122300000054 0.15462455365242272 $2,715.9122300000054 Secondary fees 9516 362500 Three Months Ended 43465 43373 43281 43190 43100 43008 42916 42825 Stock based comp - cogs 5011 859132.60091236164 (Dollars in thousands) Stock based comp - sga 8105 5948487.1468660757 Net Loss $1,758 $-97 $-3,501 $-3,521 $1,516 $-,246 $-2,652 $-2,880 Depreciation and amortization 3,649 3,623 3,462 3,334 3,281.181879999991 3,215.554050000002 3,146 3,049 Interest expense 34.927 94.381 98 69 78.56 465.25299999999999 190 176 Income tax expense 20 19.032 19 19 11.933 20.754000000000001 21 21 EBITDA $5,461.9269999999997 $3,639.413 $78 $-99 $4,887.6748799999914 $3,455.5610500000021 $705 $366 Loss on disposal of equipment 37.39 28.507999999999999 48.381999999999998 27.879000000000001 6.024 6.819 84.867999999999995 6.0049999999999999 Litigation 7756 348336.07999999996 Non-cash share-based compensation (a) 2,637.2106899999999 1,776.3753299999998 1,302 1,092 1,145.81852 1,132.8520000000001 1,229 930 Launch expense (b) 863.07164 1,015.2405500000001 1,009.34889 652.726 705.81691000000001 928.6243199999999 675 755.55518999999993 Warrant fair valuation (d) 0 0 0 0 0 -44.052999999999997 486.79700000000003 -,108.116 Shelf registration expenses (e) 225 137 0 0 0 0 0 0 Leadership transition expenses (f) 0 0 0 0 -37 100 0 0 Litigation expense (g) 0 120 93 135 145 0 0 0 Adjusted EBITDA $9,223.5993299999991 $6,715.5368799999997 $2,530.7308899999998 $1,808.605 $6,853.3343099999911 $5,579.8033700000024 $3,180.665 $1,949.4441900000002 Net Sales 51,643 50800 $47,625 43,170 39,829 40125 38728 33,678 Adjusted EBITDA as a % of Net Sales* 0.17860308909242295 0.13219560787401574 5.3% 4.2% 0.17206895252203147 0.13906052012461065 8.2% 5.8% $2,370.265020000008 0.34585574156822524 Reconciliation: SG&A Three Months Ended Twelve Months Ended March 31, June 30, September 30, December 31, December 31, 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2016 2015 2014 (Dollars in thousands) (Dollars in thousands) SG&A expenses (as reported) $23,537.944 $18,543.748 $26,287.523000000001 $19,996.957999999999 $23,572.313999999998 $19,303.705000000002 $21,477.994999999999 $17,322.757000000001 $94,875.775999999998 $75,167.168000000005 $62,586 $58,297 $48,299 12,581.168000000005 0.20102208161569687 $19,708.607999999993 Depreciation and amortization expense (a)** 1,843.50000000001 0 1,615.3831599999999 0 1,963.6659300000001 1,697.9845500000001 2,043.7224699999999 1,767.562320000002 2,126.8181700000023 1,819.346879999991 7,979.2115700000022 6,900.7359299999935 5,859.4909399999287 5,008 3,971 Non-cash share-based compensation (b) 1,028.3969999999999 889.97500000000002 1,212.5106168660759 1,162.5139999999999 1,705.8108599999998 1,064 2,001.7686699999999 1,079 5,949.4871468660749 4,195 3,972 3,723 1,830 Launch expense (c)** 652.726 0 755.55518999999993 0 1,009.34889 675 1,015.2405500000001 928.6243199999999 863.07164 707 3,540.38708 3,065.9964199999999 2,813 2,626 3,513 Shelf registration expenses (d) 0 0 0 0 137 0 225 0 362 0 0 593 0 Leadership transition expenses (e) 0 0 0 0 0 0 0 100 0 -37 0 63 1,291 0 0 Litigation expense (f) 135 0 93 0 120 0 0 145 348 145 0 0 0 Adjusted SG&A Expenses $19,878.815999999999 $0 $15,282.834650000001 $0 $22,008.997563133926 $16,461.459449999998 $18,549.540119999998 $15,443.51836 $16,261.336519999997 $13,609.410120000011 $76,697.690203133912 $60,797.435650000014 $48,650.509060000069 $46,347 $38,985 UPDATE THE TOTALS FORMULAS IN FUTURE Q'S Net Sales $43,169.601000000002 $33,677.571590000007 $47,624.955999999998 $38,728.363509999996 $50,799.601000000002 $40,125.6479999996 $51,643.303 $39,828.545689999999 $,193,237.46100000001 $,152,359.48726999998 $,129,707 $,113,505 $84,154 Adjusted SG&A Expenses as a % of Net Sales 0.46048180987357279 0.45379859438968528 0.46213160938424652 0.42504918767738553 0.36515129557808923 0.38488513061543567 0.31487793334984782 0.3416999010189069 0.39690901446450855 0.39903938205212902 0.37508005782263154 0.40832562442183162 0.46325783682296739 Reconciliation: Gross Margin Three Months Ended Twelve Months Ended March 31, June 30, September 30, December 31, December 31, 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2016 2015 2014 (Dollars in thousands) (Dollars in thousands) Gross Profit (as reported) $20,128.18 $15,803.277000000004 $22,877.892 $18,169.837 $23,615.953000000001 $19,502.728999999996 $23,368 $18,940.74999999997 $89,989.863000000012 $72,415.917999999991 $60,371 $54,649 $42,218 Depreciation expense (a) 1,490.9949999999999 1,433.6168400000001 1,498.3340699999999 1,448.154499999999 1,579.2775300000001 1,447.99173 1,520.1818299999979 1,461.835 6,088.7884299999978 5,791 4,028 2,566 2,454 Plant start up expense (b) 0 0 0 0 0 0 0 0 0 0 1,628 0 113 Non-cash share-based compensation (c)* 63.603000000000065 0 40.024999999999977 0 89.489383133924093 0 66.486000000000104 0 70.564470000000028 0 68.852000000000089 0 635 68 859.09887313392483 242.67051999999967 221.07114999999976 200.88799000000017 -,266 Adjusted Gross Profit $21,682.615999999998 $0 $17,276.918840000006 $0 $24,465.715453133926 $0 $19,684.338449999999 $0 $25,265.795000000002 $0 $21,019.572729999996 $25,522.181829999998 $20,469.909999999996 $96,937.750303133944 $78,449.58851999999 $66,248.71150000003 $57,415.887990000003 $44,519 Net Sales $43,169.601000000002 $33,677.571590000007 $47,624.955999999998 $38,728.363509999996 $50,799.601000000002 $40,125.6479999996 $51,643.303 $39,828.545689999999 $,193,237.46100000001 $,152,359.48726999998 $,129,707 $,113,505 $84,154 Adjusted Gross Profit as a % of Net Sales 0.50226584211422287 0.51300963888768325 0.5137162846540777 0.50826672407465223 0.49736207573756336 0.5238521952757077 0.49420119061710671 0.51395072668042474 0.50165092110754828 0.51489795565521657 0.51075170306922524 0.5058445706356548 0.5290182284858711 -1.3% 15,900.254553133898 0.26152837505629062 Three Months Ended 43465 43373 43281 43190 43100 43008 42916 42825 (Dollars in thousands) Gross Profit (as reported) $23,368 $23,615.953000000001 $22,877.892 $20,128.18 $18,940.74999999997 $19,502.728999999996 $18,169.837 $15,803.277000000004 Depreciation expense (a) 1,520.1818299999979 1,579.2775300000001 1,498.3340699999999 1,490.9949999999999 1,461.835 1,447.99173 1,448.154499999999 1,433.6168400000001 -49273319575271479.049% $-1.9624846600016714 Non-cash share-based compensation (b)* 635 70.564470000000028 89.489383133924093 63.603000000000065 68 68.852000000000089 66.486000000000104 40.024999999999977 Adjusted Gross Profit $25,523.181829999998 $25,265.795000000002 $24,465.715453133926 $21,682.615999999998 $20,469.909999999996 $21,019.572729999996 $19,684.338449999999 $17,276.918840000006 Adjusted Gross Profit as a % of Net Sales 0.49423634444915338 0.49736207573756336 0.5137162846540777 0.50226584211422287 0.51400000000000001 0.5238521952757077 0.50826672407465223 0.51300963888768325 Three Months Ended 43465 43373 43281 43190 43100 43008 42916 42825 (Dollars in thousands) SG&A expenses (as reported) $21,477.994999999999 $23,572.313999999998 $26,287.523000000001 $23,537.944 $17,322.757000000001 $19,303.705000000002 $19,996.957999999999 $18,543.748 Depreciation and amortization expense (a)** 2,126.8181700000023 2,043.7224699999999 1,963.6659300000001 1,843.50000000001 1,819.346879999991 1,767.562320000002 1,697.9845500000001 1,615.3831599999999 0 Non-cash share-based compensation (b) 2,001.7686699999999 1,705.8108599999998 1,212.5106168660759 1,028.3969999999999 1,079 1,064 1,162.5139999999999 889.97500000000002 Launch expense (c)** 863.07164 1,015.2405500000001 1,009.34889 652.726 707 928.6243199999999 675 755.55518999999993 0 Shelf registration expenses (d) 225 137 0 0 0 0 0 0 Leadership transition expenses (e) 0 0 0 0 -37 100 0 0 0 Litigation expense (f) 0 120 93 135 145 0 0 0 Adjusted SG&A Expenses $16,261.336519999997 $18,549.540119999998 $22,008.997563133926 $19,878.815999999999 $13,609.410120000011 $15,443.51836 $16,461.459449999998 $15,282.834650000001 $0 Adjusted SG&A Expenses as a % of Net Sales 0.31487793334984782 0.36515129557808923 0.46213160938424652 0.46048180987357279 0.3416999010189069 0.38488513061543567 0.42504918767738553 0.45379859438968528

Annual reconciliation for updated non-GAAP measures

Accelerated growth in mega-channel 2018 fresh consumption +28% Nielsen Mega-Channel: XAOC + Pet + WFM Sales Growth

Steady distribution growth & accelerating velocity Nielsen Mega-Channel ACV and $M/$M ACV for 4 week periods 1/2/16 to 12/29/18

Advertising drove penetration gains which drove growth Nielsen HH Panel date for Freshpet Core Dog (Rolls, Roasted Meals and Fresh from the Kitchen) – Rolling 52 week penetration data