FRPT - Earnings call transcript Q1 2020

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Operator

Greetings and welcome to the Freshpet, Inc.

First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

pleasure Katie my remarks. for now is to Turner introduce opening It

Katie Turner

are Executive you. to Chief and and Pomerantz, for conference call welcome afternoon, Financial available webcast. also be EVP Cyr, first today's Thank Chief and Heather earnings Officer; Freshpet's Scott Good Operating Kassar and Officer; Dick quarter Morris, XXXX On of Billy our will Chief Officer; Q&A. call Finance

statements refer current XX-K could management the within results remember on that issued Exchange during course or forward-looking may statements Before to materially Securities cause and made today Report Federal make materially Annual to call, of laws. risks based forward-looking in from beliefs filed actual any meaning we statements that those please begin, cause differ discussion could involve and from Securities the of detailed the the the Please uncertainties, the the expectations press Form Commission of today. Company's are this described risk for that actual forward-looking those and Company's release these differ implied results and with statements. to expressed a These on and management's in

a Please adjusted call, will note non-GAAP EBITDA management that as financial EBITDA refer on such to measures others. today's and among

comparable believes of accordance information most to financial Please for a intended be the release, considered to accordance financial Company provide the measures useful or of not with is prepared substitute GAAP. to non-GAAP measures information in financial for refer the these While measures press with presentation in non-GAAP information for reconciliation in investors. the today's this The presented the GAAP. isolation

discuss will key on will website. the Management's the that produced at the of presentation, to be presentation they found summary call. rather commentary on the presentation That investor a metrics has contains not today. results, will refer Company's be can Finally, specifically the discussed the many this Company of that

call the Officer. Chief like over Executive to Billy to And turn now I'd Cyr,

William Cyr

Thank at you I'm afternoon and their and talking Dick PA; is in you, home and New at good Scott with Katie, Jersey. in are everyone. Manhattan; homes from Bethlehem Heather

best Obviously, typically in will in on please are clear our other We risks of bit the And our background. unique and understanding a we operating so barking different guidance. addressing the a can How excuse unusual are midst than to you would assumptions any we over that will so creates, our each of we underlying any the provide, this give comments times, the not environment. trip do be call. it, we opportunities it highly

with the we you and unfavorable. provide crisis and analysis, also we'll will We including our coronavirus highlight and provide where distortion creating both presentation be quarterly might metrics favorable typically the

longer interest turbulent will relevant, it the will destocking the this where that pantry the occurred than share complete this March that We April, data and following remarks consider environment, will happening in rapidly we maximum also in you usual. is the more and allow time, transparency April about have transparent some changing results our the of see be is what months for in to To picture. a be together in two as prepared surge

are long-term doing for many to pets I enhancing who and and our X feed responsibility essential And our but Freshpet so, their First protecting also on health responsibilities. coronavirus privilege spread value limiting pet million to these public our essential the with significant to take amongst threat of role the and view safely, the and hopefully seriously. are food. business stay open, us high-quality the rely as believe families we the with serving their stakeholders. as foremost, the operate to we challenge employees, coronavirus living Being an and in gives communities we our a parents comes business of the us up

but kitchens. a locker direct cough. our day stepped As the basis, the temperature clean lengths to reduce fever take offices, in up great people and in nurses the and we weekly of to we press average a common per have addition further two and screening of brief our the our or has greatly coronavirus identifying protect deep-cleaning who detailed third-party company our and April our succeeded of a administer spaces check employees Retained rooms to and On to on people third-party on they risk the nurses and gone employees health allow release for at sanitation. we've limited no to facilities. daily any X, cleaning enter in visitors We hired our when virus, had

common breaks Installed of airborne virus and additional transmission, coverings the and space face feel to any inside dispensers the their virtually after sanitized in employee would well. policy, use. Installed every and the rooms compelled our air and areas. and reduce at highest door employees for or before meeting. out to each meetings. to filtration they of work, Suspended if that feeling our meeting in not quality locker employee risk concentration no Provide sanitizer employees every rooms to come Installed spread absenteeism to our avoid to so shifts required allow were staggered

since X% our XX% As to absenteeism increased a result, implemented to approximately we policy. from this X%

time. results. they been for we in awaiting the guidelines results, have this, virus FDA if test for tested or pay incremental for paid who who or awaiting CDC test employees including and while exposed exposed - to over been quarantining someone all is leave and may test brought for positive Followed compensate staffing To have positive

could employees To from activities employees our paid to bonus our to Our a day. given appreciation work our very the community, all to our facilities. the limiting there. hard in help aspire restaurants spread our from Kitchens harbor since to also $XX who employees purpose employee We a our mid-March for this weeks, local facilities can them our getting entering the employees break its ability cooking to give been protect entering and survive have and Freshpet after-tax cannot their and it in in try local through safest rooms. crisis their prevent a $XXX places restaurants has within to the broader help but to virus the the an all our facilities, show it virus to we both to card every mandatory spreading facilities, spend from gift make April, demand, home and place Kitchens us meet eliminating all dining and facilities from of continue We two closing we to prevent these in

and our doing. with taking us The that ensures parents. our feedback very they care is outstanding Simply from put, of we efforts. needs can rewarded employees what the has have are pet positive That we of been employees meet

our CDC, employees. and guidance are needs manufacturers, from from FDA, the And facilities. associations from efforts virus so advice vigilant, within succeeding preventing Board trade our getting spreading But the from we and other far, reassessing our continually our remain food our input and

at these The of Dick think details we the efforts All that worth expense. are cost. cost will come well a more on those. provide

production to the employees the other and continued crisis. impacts there coronavirus incremental been In have efforts protect from to our addition

you continue list deliver to incremental our And activities the on consider In with and tools, get confidence for they any goals events but temporary, these growth growth. can have more our in sales of still ones, some mix long-term can and is however, certainly year. to our a nor this I the in toolkit our impact that will drive any other as net that we to not They know you them, from the. And will of to be plan want significant will, impact minute, use driving I ability want we notable to year. our in the to lean change offset

front we you some new volume of is the know, products, gains the fridge increased had replace advantage with from in opportunities and take advertising us. will But as significant situation of and anticipated all fluid. We investments e-commerce, replacements in

environment to retailers impacts trial. or biggest activity insulated that We keeping to will both business disruptions the aside companies. necessary. and or we our also as it is want volume of drive our any are you of the type and We in many guidance and discounting challenges remember seeing, our continue CPG plans employee to do promotional from I retail on depend that, disruption than safe, the from monitor make better adjustments not

impacted Advertising of of new and the stores And We stores into efficient. combination the drives XX% ability be contribution to crisis This items, can coming retail not from and incremental plus growth advertise more advertising. our from XX% offset but of down, before some media of are rates has the crisis our big with last fridges we that new our annual got it presence, growth. making do potentially, get hit. the enhanced

every the The fickle. very and not and Freshpet day. consistent very very eat that is demand amount are dogs loyal, consumer our Finally, households serve same

coming So that advertising, demand good strong vast with from is steady now. growth the be a we place right have and to of majority our

fully up we position take advantage QX. supply demand of to And, catches once to strong our that intend in

So of we've the or/are impacts most experienced watching are with significant those here reminders few closely.

QX and in First to surge and at release, demand ship exceed the and our only surge told not we XX% capacity our would we our QX. we stocks. we would inventories, our out trade then on drew in times, QX you the And the due consumption tremendous Day of to limits without the could at buying, ship resulting in orders Even in able demand coronavirus, catch behind in down Investor to buying, in of Xth up in books. were our April that

to QX, ship inventories, ended our had also a on margin situation backlog and cut while orders. orders, carried in roles continue trade related COVID-XX very bags bit as mix very of a surge particularly we quarter benefit back in only This we QX. and into we the capacity order with higher ample large resulted to The low those on exacerbated the and

in net quarter. into estimated will in gap quarter, in-home is be and million the the surge X to sales, in shipments actuality, for points to that resulting But second we QX. in it demand, between happen note, meaningful X.X the could important And consumption sales roughly we portion was a the scanner points. X about Before of it moved that of actual $X believe the

to shipments So our actual QX. our capacity consumption, limitations end closely the thanks in might up matching

Nielsen four carry trade end we've have to of XX% begun pace, normal ago, Mega Freshpet's average surge, see normal year we We've sizable replenish to restored have the post trade expect balance consumption this high QX. backlog inventories a April QX more by of up not we and to and having mid-April orders into Channel already for into May. shipment inventories sales single-digit net growth, while weeks At consumption that, heading and the expect versus to we still through be plus our

should consumers and in-stocks progresses seeing gradual they there the a March draw-down year-on-year consumer weekly distortion of may consumption by are picture trends underlying April were and We much buying Easter, and in better much improve. early our provide in the behavior in-stock pantry and for of improvement will levels trends movement But reflect inventory as built some Freshpet. provided a clearer the

as to the will even rate it of February in adoptions Shelters March. uptick also May. in the be better of a adoptions and pet should fostering in reflect reported The in our advertising in of soared crisis. June major and cities significant return impact midst the dog

in has While about is category when it meets about is likely people impact this performed business, by how so will That hard it in feel times uncertain. are how part our to pet well directly tell pets the food recessions. their volumes

retail partner early fridge placements planned and in Our installations product March. most new stopped new

placed no don't virtually the expect fridges QX. placements March, of month and we've in result, in a As many

Walmart suspended fridges For below place new XXX the number of we significant all a on those of their and the not we activity, would will placed year stop. April, in XX perspective, retailers full-size of caps a did end high in and however first complete normally drive fridges days particularly expect, pace value volume We were but a total before long.

beginning but customers in flux. Some most customers remain to communicate plans, revised the are

expecting this this At from we XXX we stores to year, install as not we down as result, are X,XXX fridges XXX previously. down do year previously net upgrades, from new about projected, had As previously a many point, X,XXX outlined. and expect about this

second/third fridge I'll We likely are X,XXX, exceeding later. as to exceed our XXX, however of target outline expecting

the too means, by we fridge what to drive of the there changes be It's make, but net in offset these intend to early all will investments, to placements lean-in say growth.

new items from stopped as did shelf we expect the what volume previously new We items than changes. put be planned, not customers less planogram several on to the before had the they

will they new small growth this the plan communicated Some stock already accounted and that of our others a of have QX, new year. had for in larger only items customers portion our items

our significant, be any is offset impact this also can be investments. this by impact on not So lean-in

our surge of and so pushed and May QX And stores, this it had timing retailers lack ad the and April of into we into household could a in the back We consumption and supply stock March. when portion to due impact both growth were spending, also advertising struggling August, spending in to many their after penetration out of our rate pushing of of QX, QX. our the

stores loaded the The meeting brands. rates we are investments same Canada the and and getting existing impact more also significantly media there their now U.S. occurred on making the and kiosk are anticipated. than However, that what are May as from flooded we attractive in up advertising retail UK, we of beyond previously in the consumers occurred

our markets in production bit. quarter. down We advertising those settle We launched once the some a reassess will timetable efficiency

higher on maximum our a lines getting out on from than labor priority put We efficiency. production

contractor to We absenteeism deliver believe we still that to sporadic though, run scheduled of us over and our delay, will into we what output, into The - project We QX, costing even all after construction four days not the about the our on did of staffing, is were incremental labor essential that while by one now continue we absenteeism. to brought be with likely our deliberately delayed XX% had we a two-week month. Kitchens So we business. as qualified continue that appears X% or about Based X.X Kitchens. in. labor Despite enough to have the to in issue an lines know, where able in QX. construction offset QX

supply October get at subcontractors we will November. production plan the to our every a rate From QX. early impact end all our with previous day, hard instead September starting start-up staffed X.X or in of Kitchen significant September, of up of the of so delay the Kitchens that Kitchens in could been at fully the our of It's early in in The startup estimate X.X Fresh

We are meet could into the Kitchen other capacity the impact think material From overall the bag might an issue don't it Fresh QX, volume i.e., Kitchen. Kitchen roasted could our QX that from needs, a while bringing so develop on will move Fresh will a that quarterly some year, shift will in we South with our second the have We product on sales QX but from impact our move bank cadence some From and net meals. to

have watching has our you various all the of We coronavirus. industry are supply hard closely proteins, as hit packing of the been meat read by

While the prices interruptions date are to not our we any and experienced for fixed. extended year chicken have

previously to time had from suppliers to time. go have to We second qualified source

potential some supply. have significant packaging in we late ingredients for future and are out good inventory really to So then. January the procurement closely this team. point potential by head-off build to watching disruptions of Base materials and of steps any interruptions protect work supply taken and better our to began part will some our also I supply

arrived disruptive, at initiatives backup the ingredients larger thanks supplies, many on and key made suppliers materials but good cannot source finalize designed to we not mean have and also our some key significantly been not packaging. significantly that that have work. build we put So less place we the and in They longstanding to fresh ingredients challenges, challenges crisis, inventory, on had smaller does we their where

confident situation proven remain tells current our sound in be plan is you business; way. And would we Freshpet employees. the opportunity to in that us fortunate short-term have strategy, in sheet to strong overall?" is, that long-term to The and does protect nothing that capability. that and have the to feel balance I very see despite We such has we our strategies question fact, a leave chaos answer that "Where significant, our our plans today, all asking working for and the altered, a there team need robust the probably long-term of remains is its are following this goals yourself Freshpet very remain

proven strengthen customer also strong model, are a capitalized have learned demand, We've well during We crisis bit that growth us going forward. have a a quite diverse organization. will and a strong this base

short-term We success. both long-term for are well very and positioned

have to of As the from these some to changing impact environment issues a investments a any result described, strengths. offset changes, I decided our make we incremental leveraging and retail capitalizing competitive on

easier designed pet channels. to of Freshpet are to that media in the fridges initiatives, relevant highly e-commerce incremental is We on make several developing pet message, Freshpet, and and low will capacity specialty. second all increased second through to our adoptions second e-commerce, invest combination The and lean developed incremental acquire This the channels time half a in, half. ideal advertising Enhanced new it advertising. include offer to have some support incremental pickup we the in Curbside will costs,

program in Tagged incremental have Creations stores, most year. an we keep in-stock recover the advertising The total their and consumers for third-party when of stock we our of coverage premium allows to order retail time supporting are who to and investing amount the up. incremental investment in in million online are delivered coverage, Freshpet conditions retail challenges Strength desperate home. to line at ordering retailers Homestyle given $X that are this is making quickly a the our can't SOS

Some the next and that from placements, that guidance, to delays get we that momentum. deliver investment continue as case, good fridges offset volume the it of view the our a product to new either we investment come ensuring of of year. In impact some on expect will and we will our

saying of with reflective they quarter minor year a encouraged first to are results. business by strength demand our I you underlying than the the few exceptions, start little and think we that our going-in turn are that see the only Now, your very of this to plan. will surge benefit by the our very our and Due we let data. scanner are me constraints, to the realized in that of better the attention capacity they of preface in

volume get in shipment and QX. We will

So report this is that normal quarters probably one CPG the a environment. company in this of more that

we we Growth we strong Feed years delivering began three line plan ago. have top the been continued momentum the our For quarter, the since

is continue and which increasing scale the We that working. virtuous leveraging a advertising and both our of drives our bottom our created velocity, demonstrate increased This profit strengthen distribution increased gains increased is the also in from to it We've the drives to provides essence the scale. cycle where reinvest to strategy business and line. added

Our strategy is pet the also care for working who them. parents in for pets,

producing pet X keeps households now food more are million We for that than number and growing.

write us tell to category, of food food opportunity of scratching year difference was to growth lives. continue parents call - Pet the surface believe Freshpet pets the healthy We the pet and to quarter, about and parents firmly the we in quarter. pets. this change makes that are we amazing that XX% their just on XX% enabling of the top ago less growth designed In pet fresh, provide processed top first delivered in to line for us the

by penetration last growth generated eight we XXXX. fact, in consumption gains in XX%. our was growth driven expanded excess of had the nine continued household by of The delivered In have strong quarters

Mega box the to Mega mass March, XX% our in and growth consumption our in in up up line was big behind XX% business channel was in in pet. Nielsen trends. grocery; growth surge Channel XX% Prior growth Nielsen long-term with XX% XX% early

of and the surge of plus to Velocity buying underlying more growth. not growth XX% and XX% the the for consumption. representative grew year-over-year X likely in last accounted of the are related For points than

meals accounts of sum the quarter. business, of Kitchen Our From dog meal our and up business, XX% the than dog rolls, was Fresh roasted for our in core items XX.X% more which and main the is

online XX% Now e-commerce customers, small More Direct ago Shipt like pickup to Curbside of is XXX% Amazon our in-store but shift the via our of of year shelter major growth now volume went fridge no for home for were in-place business, more like business than Prime than that during key we up well. XX% services weeks and a and e-commerce Our Fresh e-commerce the growing which our versus X.X% Curbside contributed strong to was and includes rapidly accounts accounts up now XX% There seeing our before was growth, business. consumption doubt quarter. Instacart and in with very but programs that our and fresh network. that through delivery as

$X.X million year the in quarter versus ago. or EBITDA up Adjusted was $X.X XXX% million,

with significant dog in follows: adjusted Progress demonstrated XX% expanding particularly in has as buying drivers ago leverage robust penetration what was the is from the key core grew such year business XX% presentation, chart flat, the media. included rate gains. a penetration our penetration to X.X%. grew total in get documents would As was impacted consumer basically household Buying to and the against investor franchise, we SG&A, rate the We've how our quarter time. we excluding growth household household scale, which we over X.XX% penetration expect growth versus

phenomenon, but towards can you is that clear. this very see on growth measures both the long-term So trend

at stocking the it looked they already in negligible, on to were items the what which new had, data Consumers was they makes and up items not then, by see surge trying penetration were sense. We buy. impact March demand in week

buying about by because also data Further, versus one ability but see to of rate saw bought space food so where at month's little. week believe because This limited very our forward. some in is likely to bought their extra one we almost suggests out-of-stocks, only and tight that measured where buy dog fridge the consumers our week the dry supply. they We consumers impact, Freshpet data extra we late it would period. happened look we And expect one-year

strengthen our expectations. XXX which only added stores quarter, We the Freshpet's net below presence. in new second, retail The was

and of XX stopped fridges installations new than fridges, upgrades second same and fewer As upgraded I fridges occurred The phenomenon on also at virtually second March. anticipated. beginning the as we mentioned, XX added

the second fridges Australian exiting. enter space of and are XXX the our in business provides of their number validation pet acquire are the of space, now get that this more channel, to decision several we in picking that specialty market U.S. years, while that's those fridges, be the is largely will been to thrilled we strength amount totaling competitor, QX And to meaningful. up of expect a is a more the for even pick-up we than large attempting significant at the However,

In total, expect to more over balance second than we of year. the X,XXX add fridges the

line in Third, we February. in our well increased capacity Kitchen the small-sized up Kitchens addition that project, started running to and ahead South plan. X.X Production is going very our of

We are there added a on supply second shift against adding interruptions. in QX, any will buffer provide planning that

already Additionally, we've more the and hired begun We on have employees hiring in planning, support of facility Texas. now the way. design are Ennis, construction that five to and

I more QX our outlook detail turn over in XXXX. Dick discuss financials our will it to to and for now

Dick Kassar

crisis. equity X backdrop growth all coronavirus were announced the Billy deliberate good included and was which a plan, the than consider quite everyone. five necessary households and plans add all We better support quarter got our now million When Thank offering that XXXX disruption results, to of and have million afternoon that renewed We in and you, what an strong $XXX in to agreement. plan. XXXX our by credit the you or the our we through against strategic that accomplished capital new bit renegotiated netted new We done occurred our internal completed we XXXX. one, by

year net inflated many companies the million, versus because results March. somewhat while of period, $XX.X ago of we portion indicated, was up quarter driven growth. for one XX% report think a panic Billy As quarter very buying We that in sales small the of our one,

two. our if our we limited growth constraints borrow sales much any from not quarter did In that fact, capacity

with well that below inventories As normal still two and operating our Billy rebuilding indicated, are conditions we began trade quarter pipeline.

We happening Billy two, up to results expect our than April as in April that with reported show greater catch XX%. sales, up that quarter

place began we the We in We up XX% shelter all advertising of advertising by once are They That orders ads know invested don't with take our that of consistent invest $XX.X of one should glad the one new reminding ad and breakthrough we in top quarter the people other. quarter, in much. and that did million home are why versus each are ago named so was year in care plan. just Metrix. Ace [indiscernible] XX we

Now it ads of has ads ads. tested. X,XXX Bowl recognized Five other more Super than with

More seen in advertising, distraction payout importantly delivered to on. the it's you've time, of quite all despite the response it going strongest some been our

is good that done good also our work. a both think that I is indicator team very and nimble

these and will be have that While our success. to been key

big SG&A quarter our period. by for XXXX. versus an exclude higher improvement end than Adjusted or up ago one final in media small processing X.X% Media bps was net bps lots year XXX year the million quarter ago costs, [indiscernible] slightly on from capacity the quarter at ago at XX.X%, year line at down the higher When you and higher SG&A [ph] basis points was XXX versus schedule. XX Adjusted gross of margin ago. period, versus the start-up the moving $XX.X Quarter four the quarter include of period. prices. the of driven XX.X% spending, a including XX/X benefit selling of by Higher parts, availability capacitor role of improved sales, spending was margin the - year

we're incremental spending, SG&A of easily not in deliver, improvement XXXX. we by XXX to million of bps total of So lean $X our going invest would the

next However, repeat up come that year. increase likely but will it likely that this cause extra a little spending year, to not short bit will

P&L, It good up was the of the the across $X.X financial metrics ago in indicator, EBITDA part XXX% the adjusted grow ability million, from get a X.X% our we sales. essential also Feed or of excess and our virtuous was And quarter demonstrate meaningful These period. EBITDA year net to the in in scale adjusted embedded cycles our benefit Growth from plan.

scale. that achieve Now meaningful we

to But continue margins we'll scaled P&L excluding those opportunities. and future. for foreseeable incremental increase we opportunities, the to the time, to adjusted capture expect growth to time EBITDA From choose to expand investments generate benefits in

retail external to the to to we're investments these investment strong of encouraged results, will the At making X.X delays capacity. we in the in despite But adjusted year the guidance accelerate very incremental position reducing are the uncertainty net approximately us our we due our environment. EBITDA disruptions. guidance are That guidance net $X are but ensure activity. We the our deliver to reiterating are mindful also volume and we by replace into this our point sales sales significant and Kitchens loss million would this total reflect

we of supply for related extra employees, the including costs. also protect We COVID-XX to cost will increased other believe them, chain and crisis, enhanced to operating $X of crisis. We COVID-XX costs our are higher related adding back to higher efforts cost incur our protect million compensation

Our greater net $XXX million sales of million. $XX EBITDA now greater than adjusted guidance than for and

external fluid we guys. support how environment Given to want is, assumptions the that clear about that be the

of fridge We We quarter three. and distribution are they told of Retailers following. been resume we what have assuming portion a item customers. believe will, by this the and significant is their places many new our

patterns presence reasonable Data restrictions reasonable Additionally, replenishment we that is assuming April suggests by drives to growth. as this in-store, Effective most historically. factor the but conclusion, environment. shopping media consumption adversely this our what we is of and have for share as [indiscernible] for of changing significant important similar investment on This not is lion's this doesn't a impacted prevent are the the yet. seen consumer us our on that of the media

in lower the refresh least prior media go as at pets, our years, and will in that year. optimistic we costs deliver ability back the on effective interest are We our strong as increased once combination to message of

has premium Additionally food very performed well in recessions. pet previous

we we that watching support well should would but evidence are this. the So do

facilities. us not from over our encounter supply interruptions, we upstream Also, either significant do any

incidental We to we while we sustain Freshpet. can income that carry crisis cannot the our or or make are we significant inventory. don't as outages. our a adverse we interruptions, won't could everything just cannot much guarantee doing are distribute have operation, that absorb continuous incurred million manage $X We to but event less. have, they extended impact to ability possible ensure Costs We

Costs and the required. compensation if anticipating of distancing we for efforts the doing sanitizing include health employees. and and support any employees, are cost direct are Our for and don't for staffing quarter social will new actions that, the incremental internal of of the be the we impact incurring absenteeism we need costs, checks estimates but know payments incremental the higher now to

two, $XXX,XXX efforts. we about spend spent million. we will In for we one, quarter these quarter $X.X estimate In

result We major customers as issues, no credit have crisis. of COVID-XX

Our this not business But customers the they we demand. are mass one, which but be of turbulent about experienced broader of account remain benefits. XX% grocery overall in the and very higher benefiting to an in also Specialty those helping retailers, seems same are to We costs. all-inclusive not their environment, This succeed in our customers business. is part committed covering small surge for have list. quarter from

the For that SEC consult our XX-Q please risk filings. of section latest

establishing approach that major are times the about know we to bring database that you like the required transparency wanted We kind factors business. our considering the we'd These in guidance. to and of

profitable driven growth drive hesitation uncertainty supply our Freshpet, to is economic and retail environment Any on are consumer long the to We near-term. overall bullish and haul. the chain interest of over environment, the the ability by we have very in the

For say and how a unfold, to be unfair will to gross it and that will ball, our us overstatement investors. have crystal would we a know this

about $XX agreement, long-term our equity our and credit expect liquidity yet line from the we to senior deposit. $XXX.X generate remains used capital cash short-term in cash be needs. in expanded down sufficient result that We a million secured those At late In resources, We we of $XXX to million, or believe early on. not operations of our pay is of to certificates very raised strong, quarter-end million had credit. we've April, of completed facility we offering February. equivalents Our in cash, $XXX we drawn billion which credit amended now, the

We invested far. so million capital have against Kitchen $XX.X X.X project of

is project that spending date increase is those $XX capacity and to Another our million. on total to designed projects

increased - a Working P&L gain capital phenomenon increases seasonal offset our for business.

$X.X in was used operations cash So, million.

for operations to the continue from We cash positive year. expect flow

turn back closing Billy for Billy? to it now I'll comments.

William Cyr

Thanks, Dick.

a said, this come. would quarter to any not strong Harbinger with of first Dick year. But things and As that year, be is just a almost any

adapt external you control - thing what control to or are quickly dealing customers, happens of employees, When of uncertainty care do suppliers the new environment. consumers. smartest your to and We in a information open, keep and and the wide can take the with circumstances, eyes your that amount all significant changing

side, in. pretty these we will other the well, started. went we we If out do are And on this all we come stronger than strong when

We well are incredibly positioned to succeed.

capable We treating well. Growing us, front pets to A are in product, our and in an organization sheet. to highly and winning less is exceptional be challenge processed, strong idea foods consumer a proven brand more interest balance with up of it. a the strong natural behind

our extremely so diligently worked are circumstances. teammates, to who challenging under grateful have very We

appreciative our very are We work and suppliers also done customers, of their employees. the by

each together this crisis. officials and fighting together. our federal, of industry remain to public pulled how all are support state committed I'm in them who with other and We local to collaboratively and all working proud the health we this are has

And field the enough the finally, front on medical work the who're in about of we say can't this professionals fight. the of lines

opportunity are all, at the home a that We and sacrifices. thoughts they end service their grateful cat, and days. with or we hope of have their dog of were him for deeply the affection Our long to to go and love

That questions, glad be operator? overview. now concludes take your to We'll our

Operator

Thank you.

Morgan. Ken proceed you comes conducting question be J.P. a question-and-answer Instructions] question And session. Please limit interest yourself ask from We first one the your line the time, to follow-up. that one will of and we question. Goldman with [Operator please of with now Our

Kenneth Goldman

for is Hi, thank everybody appreciated. detail very you color as always the and I good to two all wanted questions. the afternoon ask and

at - lot to and influx customers said of I getting to think sort still of not that your guidance or I what quarter about more are said least that from First, terms the risks, a in talked some third you're But sort you there. in phrase assuming them your normal also that guidance is there of the of exact forget used, you're as recovery one I refrigerator is of think expect. you a exact rollout you you the

little just So quarter? will on how level wanted to that expect be in a kind you bit of confidence where, high is, take fridge that your your as rollout that third temperature,

William Cyr

Scott to I we would a say it. get comment normalcy. give more Ken, let on But you you color that more of comfortable little probably a bit and can with me sort more get to their return every single just give detail customers day, from and more

So for hours, example, store we've normal seen some customers changes just whatnot. this were and more planogram initiating week announced that they restoring

is So is to made by status what our look, current a they've us. commitments based assessment their customer customer what that and on

we've in pretty color the you feel, is probably year, on that to you has bit that. Scott I the that new the schedule given but good a outline net get So stores this thousand deliverable more little

Scott Morris

Sure.

of the advertising. the The by is want obviously - as we've year I of the kind mentioned lot script, I of critical, it's the ACV of course total So, stores over in growth over but there's know of And really because majority the sales really XX% will familiar sales vast information company, driven the year, to with increase the advertising is the the are by driven more it's in it you've have a course through there. think of become the we year, the piece. the about

to context the put important, but piece first. want just I that in is So fridge

to and like probably year, though to with other we the kind year second the but to We is, able second we're net the incremental to will of of of fridges we're thing total XXX that so quite new of course offset actually incremental - number course fridges. - feel we're the seeing this stores fridge that kind similar an we're the won't we're the of going contribution a out that from hit year. as overall our we over know stores, have the growth looking going The over that

that's I in, whole comfortable with everybody and putting into retailers precautions, kind some gets come as of And extra place. of consideration. obviously to to important the are in think back think more planning seeing I So, take the we're continue fridges we're environment, - there

even this QX. quarter, believe number installed actually fair or it seen not fridges we've into of And a through even

So I that like checked the will be double second with those we've and and think triple big progress people, some checked a we offset. fridges

William Cyr

Scott as it - other April done Ken, did to point XX. let one me is, we've fridges that said, XXX just we through

them a that good you capable of is of develops, about at Scott have what business are what crisis this but learning context look a handle in retailers So I this pretty retailers the But sort of a take the a long talked the model the are businesses pretty saying and is think big retailers if high want to starting our the we were lot of. discover be most what how of figure are they And allowed are categories, in, store. driver, consumer the what are make what really that in segments, sense. out, in to Freshpet now the are value to a lot bring that trip the

going retailer going So, we think out to did actually higher as a to they're they think about it. this, how into we're level the I of of than importance come can have

- We and I of before. value shoppers, now strategic see growth people value are to our the ever for us for valued but more did think than they

Kenneth Goldman

as there sure consumption be want is for expecting strong number certainly, you're second a of future especially on for more what just what Data. talking downside, also and a lot this quarter. surprises looking pieces June to are now. balance wanted shipments forward predict But of numbers the ask, one shipment in because right bit between talk May and total make you quarter, Nielsen about we maybe helpful. go And of the roughly no to should moving a very a I terms for there the I is no and Okay, know bit about I that's about June. little a and little did can May you

takeaway the beginning, can Nielsen on lag sense any maybe the wanted perspective? a just at kind But of to how I from get you progresses cadence might that that of

William Cyr

today, in of gave data Nielsen you look data that Ken, through all we the if XX, Yes. we published Slide way And morning. investor deck this the as the out on came that literally

on right it we're run that for quarter, So the of came a is give by but it's to had. started looks March come there big we big you back to back the through a normal end, growth there think we the We back we knows beginning wouldn't can and in that is sense seeing of back trough data surprised what XX, that. to up you what that if April the this rate period is out the see rate everybody but May, that about, of a end the like getting the we're at be don't of terms very in to surge

tell you data was slide, on what And where We're back consumption we're you we if line, towards orange in on that have on the this in there. that can for that headed lines at retailers, key But one scanner feel goes And visibility bit pretty line can headed trend and continues you a see look the consumption of and direction the most the back will is is line of that that. week we really search, as fell we the QX, we report, that actually but remember had about good you think beyond about into little it. what QX.

basically had that during inventory. got we refilling - trough, So good we a the

see bit May we'll then, in the And that little and a window.

this So funny total trough filling the up we this feeling QX shipments. It's later a consumption terms quarter. and have looking to like going first just resuming normal to in of think, QX, in of end then is going fund

Kenneth Goldman

so Thanks much. Okay.

William Cyr

Yes.

Operator

Thank you.

Our proceed from next comes with the of Jason Goldman line English question question. with Sachs. Please your

Jason English

sorry. afternoon, from [indiscernible] - This long. to day week. will too of morning if folks morning work good home the Good happen we good Hey,

a questions. quick So of couple

you million say you EBITDA guidance is that the your not through of saw that expense? the $X walk pro it for does to COVID can forma quarter, I adjustment First, impact excluded year? the this fair

Dick Kassar

COVID quarter. first we've couple of spent in $XXX,XXX expenses, what only the $X million to While excluded we've a

excluding EBITDA We in the adjusted quarter. third expect - in that balance we to and the are from the fourth And numbers. EBITDA the $X spend second and our million

Jason English

of to recession adoption That's some that up, of know the mentioned big up-trading. obviously a a give you business. - why things you the you wake right. to me going mean, growth, it. that the Got And recession trade that impact in was point crisis, melamine held I but premium capitalized confidence. I about last also you. risk and Can the concerned of you you're help is down your Thank not mentioned pretty

I'd that - to looking a hear data So, lends confidence of there you're in set. is lot noise what back? that love at

William Cyr

want one? to you take that Scott,

Scott Morris

Yes.

seen, a you pet every Jason, three through food have come-off look growth bit really it's The may those one over last periods, a periods. typically at recessionary little So really of been premium if of the through the growth 'XX were each around typically but really top or that those was it and grown were was at pretty it periods. We 'XX is of one - but small, in very that we tough.

think the things moving-off people products. We positioned also our cost is, that you bit around more And of are a or some things a item, thing wide to of we 'XX. see of one pretty that now. 'XX little effective could dollar that pound some is some of highest per we I - saw range well we're that And have actually very the have think obviously

are That roll from of actually a obviously this standpoint, actually bit - more quarter, slightly been things roll had going one impact actually a rate has the which where a quarter. but we little is some margins accretive, on that's the business helpful [ph] dollars this buying

participated and strong. horrible has a it been had through it's, we've been recession, mean, We've if I the experienced all some have grow it's of on to So, in in think able really on of going what's marketplace. adversity some Freshpet. kinds And market. I the business really impact. could if historical pretty growth, those think have tremendous what's Overall, trends the despite I

data responding well the across that it and fairly different mid-XXs you it spike, customers at weekly, yet, so to there single-digit looks from we're won't even. teams, and from as know not see to seeing goes rate far customers expect of trough already. and looks like and positive growth the it typically but looking it the the go coming has We're we're as quickly all watching back we're won't but some it quite it's the much information, the share literally 'XX to I this I

William Cyr

about the loyalty once consistently how said to you the would you've that to there Jason, - pretty and adopted very think business as our that with you I this Freshpet, add think you - strong Freshpet that is if is and the it. a stick we've

a would have a were the that or existing little the still recessionary that my we not I one. background, they there a loyalty users pet attracting we that asking but X their think buying it are we're barking small as difficult. based, the It's everybody million is we million in sensitive with deal. apologize dog environment, And is in franchise on price bit change So the households total was XX more new into be not at promised dogs, for to If households becomes thing category food. nobody's

to the track you - but of goal for that's getting can the number a we're our it's doable, think for - little households that is We an million trying million very the people period. is of still X is from headwind. to So imagine five-year X if even over - the, bit it still there economic

Jason English

on. I'll Understood, got it. Thank you, guys. pass it

Dick Kassar

Jason. Thanks,

William Cyr

Thanks.

Operator

Thank you.

question from question. next Credit Robert of Suisse. Our proceed comes with Please your line Moskow the with

Robert Moskow

at this COVID their have well? a have see that I year, to doing of questions what's packing - people into calling safety you. methods is, then of higher even is XX% come excluding And is chance up thank if just cost means place how Thanks. cost secondly plants, business, feeling don't to have people you're work? on because tried but Are surveys attitude for we in couple next biggest to to you safe? of about I maybe at you become year going that, a challenges those safe just - the one guess as it think some And plants feel or costs guys higher taking spillover of absentee the Have a there that longer? that's Hi, the meat rate. the

William Cyr

Rob, it's one questions. as said we those our employees is number are priority. safety And the Yes. beginning, at really good our of

underlying talk first we XX% terms why missing, did who chronically an absenteeism to is the In when health creating to want rate. issue, person. ask who the do at for - with risk cases somebody there. employees In avoid because question, the why everything, they is some home, them follow can there of that we where majority the has to it's of When we are up and vast

And work risk. possibly so potentially to as they going view

we're - with are communicating And transparent with we're information, been what very seeing, the seeing. our We've just week, with what every we're been. we is transparent what of also that with results single about employees the all aggressively investors have as what we it were very employees, our

the seeing And and so the rate our one our this any you might doesn't broadly. fairly it, transmission within of up the exist But mean are virus part that we been because evidence But we're is to - manage as in we seem with they of imagine, to community part a employees where seeing and that we've But reinforce can that. keep absentee they're that demand. the able don't of northeastern have have evidence far, transmitting we employee no base. that community, we it of States. is no That in United have exists they

February, had in record we or had production pretty close to where in into got And March March production. We April, we - February good was. was production

people year If shipped ahead months. we deck came a April. that just constrained those And constrained the you what on trade of ago, where look more March our for shipments and we are gave both XX, capacity remember, Slide on inventory, today, chart in we on at the both on in investor XX% and put than we

rate, So able very we're level. ship out very, high even with to the absentee it

costs be to biggest these are costs absenteeism the - the all parts of to employees. and pay terms going In are recurring, those the single of the incremental

to wage does rate. the very for to cost external compensation be we're were if a The recurring our are And overall spacing year, added fairly in to significant paying. think that the to do amount the there to But we'd don't sanitation continue that that an as minor as and have to the compared next the incremental of is I bonuses nurses wage against raise them, unemployment, clearly, the and rate. backdrop, doing, structured a underlying going have become the where So we employees, into increase we have not cost. that

improved added I impact material it's long it's of do and having that's that wages winded a can effect, incremental without cost guess the nurses really line production way, biggest maintain and the been pay, sanitation. We the time. So the and the it's to

Robert Moskow

below, refrigerators what important it brokers actually extra inventory to makes to drivers getting low. get second thought and was to is, is into What And pretty have combination the now, replenish stores that they you it, running the sense. you're since steps are Got the running if that those element the do? I store take to to right it's don't - needed make into maybe can I execute your sure need or a stores is know

William Cyr

do that? Scott, to take want you

Scott Morris

Yes.

we if The the all with store, stores, from we lesson, if into we do every we on get send - or weeks a is different pretty different every a pictures to is - want full couple of change someone of what - don't someone the do a So cadence we slightly on every every store have different cadence. the But inventory. slightly set pictures. we reviewed

in a people going then is like. to is that where personnel So inventory are just then the as the as there good to the store make and taking help sure actually finding room there they're warehouse, not we're behind, times care ahead the so trying and into sending and of store we're What we'd replenish. fridges in the are that inventory we're back

a work we're always partners. steps with the one that working it's really are we our those with, So of third-party, broker

other fridges. help to get of put pretty stores where that of to and those and of in And need with, retail pressure, broad work the that we can It's assist a we get number some us couple a cover. stocking folks

Robert Moskow

in so you updated, we'll talk our person. keep a of second research market Thank of Okay. getting There's one you. dog, household

Scott Morris

big I trend. think, of lot a we think Yes, I [indiscernible]. a see yes,

if I I might [ph]. is analysts, least have correctly, remember a at gotten that think, I there recently puppy other one think,

Robert Moskow

it's you. Thank for real. Yes,

Scott Morris

Yes.

Operator

you. Thank

Peter with Baird. your Our Benedict line next question Please from with comes proceed question the of

Peter Benedict

Hey, guys.

the some specialty competitors, think mentioned in pet you as Difficulty]. [Technical one, placements, Difficulty] those I [Technical First Australian of

William Cyr

that. hear couldn't I

Dick Kassar

my was Peters? if know phone didn't I or Yes, it

William Cyr

we Peter, No, couldn't hear question. your

You broke up. of kind

Peter Benedict

Better now?

William Cyr

Try again.

Scott Morris

it the Australia think I from competitor around mean, I was that...

William Cyr

we I I think fridges? buying think, the him said - he are say, heard

Scott Morris

are will the amortized of actually those end those buying being up rate, at that so owners fridges we actually fridges. We

William Cyr

Peter, still there? you

Operator

Thank you.

D.A. comes Davidson. the Holland next Please from Our with your question. with question of Brian proceed line

Brian Holland

wanted $X advertising. So, ask I the the incremental million investment, to specifically about in

data expected advertising? pet a back adoptions. have would $X So, million, that you is - we've obviously, be do surge comfortable to moved tied first X.X, of question much with how you Kitchens - starting then to And how in get

forward. you've or a addressable So as ton the I've it's you I've pulled you're it bit positive capacity this a of wondering sense constraints? watched to advertising for actually whether pull market to about forward still And the think not be market pet addressable the a been news But I to towards trend adoptions, guys while makes that.

on which of you is walk the kind getting the shifting X.X with primary that to comfort through can obviously the catalyst So timeline a that for spend, ability your increasing and incremental advertising of with revenue, bullet? support maybe coming on

William Cyr

what be. about the more the in ship talk the XX March recognize talk the is to to the to and go me April, back we how, capacity to you if let again, will going advertising were Scott ahead ago. Brian, that advertising, partner and of Yes that to you Slide in a able But cadence XX% year

year XX% we up showing South and inventory, started in the line be tightly of brought running we We're will on remember a got shift South January. March because really trade you the and in with Kitchen I of middle we at second well. bringing rolls The the But by Kitchen XX/X, surge capacity that February. that we're X. We've in came incremental think to there - on XX% March. in June an We constrained. was running number back on April a is in and in are problem that low brought

So, that we're very ample comfortable will to our capacity have meet needs.

As the Fresh is the issue South I making our that, call, the not Kitchen From said on is only Kitchen the product. of capable

have of business and overall meals So the at tight end capacity our From QX, But inventory on roasted the will Kitchen QX. the more bag we could enough get we into business. heading on Fresh on the than

the the specific will very given to the end a overall the But bit maybe of up, a bag to needs more supply we're the item base business feel that - it than ability ability to probably be in April, meet start as opposed our of been of June. to an caught breather be the down first So catching week fully to month I we've limited about we'll bags. by little a up good of May, now - of

Fresh to From And advertising you Scott, and think, the once about be Kitchen. than on that we Kitchen why and little think bit bit on idea. a a at South, talk have we we're of the can other added there the good capacity in we're good a I shape, little it's cadence tightness going

Scott Morris

to mind, or I just literally keep want full. a more XX% don't that inventory But wise takes getting sure our very me Make is ability couple week capacity figure towards looking was, And and build fridge come come trade we've two conversation of producing gentlemen, the to produce them. the So, the - we're is we're advertising, when advertising that's And we has and - about we and that, to this recently. a levels. of it before, that - continue bullets have all do or our and inventory means coming the inventory, in of been do in-stock still online the what XX% of incremental you kind to [ph] optimal trade Alamo will to coordinate at continuing what need when start-up, think What our where are really online. and to a trying and we're that, - fridges remind up. to to will we in trying weeks

now, effective. So point, is of, also is start. right there, into it's time we're I rolling effective would to only kind media balances say - it, at start very cost trying There appropriate layering getting but a it's and we're actually not at we're this a

So cost order we're getting it's a great to very response in media. run it. the effective to But also

people possible, that of to don't empty. advantage we fridges, that want take to as are want also really as we much drive to So, but

you, we I perfect slide. if they're the can all people which going mentioned, put we're of to make every e-commerce So doing trying addition, those retail in Billy we're where be find we're putting - them in in going couple in We're can. those activities, will and frustrated we they the it's to out tell a are everything additional some have sure case, and coordinating that to e-commerce And and are but to not programs trying help it's programs some mentioned that product. place, we

Brian Holland

you I forms? I with insight to maybe or point, a do composition level? adopted who just engagement parents curious what is then - soon more too last these these wheelhouse, me. you through have either customers, right or guess adoption; have And spike consumers, the the any is maybe of pet second might in know. what premiumized that pets those younger website the base not a the the this to into of pet home? about this dogs thanks. level have this that to yet you one mean bringing smaller at know I new if other any understand - they're for lot likely respect your extent spend new this that's just But from in But Okay, the may even maybe to at or just of had

William Cyr

that be is seems It group pretty a broad to adopting.

to where unique have a added to home Everyone parents adopt are family it's it and the to home home, to kids the them spouse able is be be so what or professional I over-indexed, home far, think it tell for we a people whether both more looks time part. or home their home, of et cetera. It's group it's from most their the little can the there pet, an their seem them, a where and the time train of a are like their to unique for can in them able where be was dog. they bit

think of people a it. So advantage a unique it's are kind of and taking opportunity I lot of

I is going be lot to will that should of for. be think a people perfect that there be really

it's those pet of dogs, involved is the And perfect of right lot we the pet, people it people, The love in second. to other not highly adding smaller they're see of for seeing, really spot is actually lot first households, thing kind a owners, multiple of typically a especially a we're target. sweet our

them we developed, called that - spot but go, and which mentioned great about got too, Freshpet we now advertising them into it by brand. a the was was that's So, and the can to We our imagine bring is tell launched very job what going that's agency There's spot, in too. future delivered. actually another being you near about, be And team called home marketing to the terrific. the

quick and to environment. very to And launching really into trying as we on this, are going we're to of the what's with that what's COVID nimble in out basically future. not can. sure really best going respond we're positioning the So I'm ourselves on coming of we and make be out just as

Operator

Thank you.

Our from line question. your Oppenheimer. comes the Please next of Rupesh with proceed question Parikh with

Rupesh Parikh

Good questions. my afternoon, and thanks taking for

William Cyr

Thanks, Parikh.

Rupesh Parikh

guess I household going I stores, new hey, I to acquisition, to, guess obviously back going grocery back it's just Just into challenging go days. it's more Billy. - these

look So, just that that flipped sense you do get how is obviously on household just side of a the guys consumer experience it's out? media new media you curious bridge to efforts how senior versus important bigger, acquisition at - want is in-store but if like

William Cyr

thing the things, It's close air match can our you simplest on the advertising, a it's and darn up question. look it's at is a take in hearing way. a our about that if multiple the combination pretty Rupesh, you goes penetration advertising when good visibility a is from say it But awareness, store, creating when to of see friend. they obviously, up,

you go indicator go and of a is advertising household increases the pretty data we at driver can we look And on there clearly not seeing the a out weekly air, that in the So obviously the is the see penetration and lag primary penetration. basis, weekly - effect. up. best on start But get that, household we is we

a for you did your include aware is be preferred is, chart going to it, what way buying of though to The that's these once next referred it? put easier buy We and designed interest want in store, they want in I is question you person become why coming deck it it who it's talks try there how in of the together programs that's that want into of and a bit a to interest find on of an ways. investor programs. Freshpet to Scott bigger collection There the we emerging that even this. to, Slide an to And are is go out was it's but I before, little don't about is a our says, and X, obviously really variety how it's different make e-commerce, and that a changed can

some our options If you website, you see can to go the of available. are

on going here do the it. which that, driver to to to need in be think want available make is I but way So biggest we buy advertising, it the the they

Rupesh Parikh

And - go ahead. yes,

Scott Morris

model beginning the ACV that were fridges. - And driven. of adding they - we is, I new lot added So about that [indiscernible]. then, lot we're the Think so exactly think lot fridges of fridges effect. very adding went were And or the They fridges, year, into a high a things a overall the multiplier were - works. Walmart. fridges, we're right? it's a Walmart addition on in a second in two And definitely to fridges to of so the that's I is than add advertising think how the It's consider of fridges, we the - fridges

on away a you if fridge be total the with right basically year second the our new actually take number we're fridges a fridges. just, incremental if be, second, - For to you for storage installed, just going would where

So I got that think we've working.

work was coming really there a done have this was we've data into means, the advertising does there earlier, How, is stock any the to of is big thing within again, where addition lot at they basically weekly are is how at how to in. drop coming been like this trip where consumers off. does, brand. able Billy Nielsen, spike, when how we've can mostly what data And consumers look as second a our in by And don't exactly, retailers been like but The are a to which - I see, like mentioned advertising, we've exceptional environment. how up look

again, And penetration at can then, the some this the is there though point, to XX, start we're see even actually build seeing is to starting penetration literally We residual advertising XX of days not effect. really ago. we're in as build

air, as the closely, So the back has on been advertising response advertising best watch it seen. web we've the comes to but we'll the ever

Rupesh Parikh

line. Okay, the Thank you. pass I'll great.

Operator

you. Thank

of question. Chappell SunTrust. next line Bill your proceed Please Our the from question comes with with

William Chappell

in. squeezing two Yes. questions, around both Thanks me for guess I guidance.

in Is lot at top you room. I that a lot $XXX least the with a But guess, I sales. On know of million comfortable increase - of you're line, an think that's just past from where three trying over to or months we three stood tell? decrease ago or kind early the of what too environment? the months to I'm of that understand means

Dick Kassar

stores, and kind like million, to greater guidance programs, incremental ensure as we be that the it's well, But given in probably confidence is investments of clear environment. capacity full with came $XXX fluid the put about as science it's not that We as was north have to to and crisis real it also Bill, than adapt taken in we level beginning And and it's is, would our a for to it we made others ability make to Walmart head at would our the won't the of as over-delivering our the guidance like, and precise slowed number. use as place $XXX for back we've And kind it the this So and I'd the was a things. just us. though, Frankly, to down where because come, has million. new try us environment we beforehand. advertising bit. say out that. had deliver of you of the consumers remember to to up year, little order the - It get we of go having of decided steam we because picked - saw us

we've And to the we're for us. current breakout place we the where got, out And think against that that and program the and same come that created that you Put things that you of proven grow are it momentum year. spend excess we're in charge out you went metrics into this just And that's support our that, things of plan that it. and with you the the calling reflect ahead. for come that data environment, we million so in $XXX why plan, you

William Chappell

second way at within you've $X you - few mean, lower you So, maybe is, Are look the question. without by right may what half? gotten it spending the ad the my is and past $X of you saying happened have would out some because, that to spend have not I spending then touches that positives, look million that these And million, quarters you're kind rates, it? some back the incremental just more to to other talking pushed that to about

that is that, one I'm two, So to and $X number. to is, a And understand, it it $X just our is net of million, to we a million? to million trying $X extra is to positives it $X million is net, hit number other is negatives needed kind EBITDA to that there get get or sales

Dick Kassar

we and the reduced they market. the had two goes was the bunch it, work. out the of to with always The just and puts that, you delayed and then Well, having already are about investment, not with a that if CapEx delayed created in things all product we the the But that there. the and think delayed, takes of R&D P&L new fridges are of items. that in stores, in We that we are things products, the the go number there new did things them come getting are are that ready

the program. those no support, a buying P&L to for is there the there replace is things. with the doing e-commerce third-party so, going But getting advertising them, savings there the doing P&L that's into advertising, from expense of And stores, is some the

higher this other have this, had - go your of just we we and you retail We So, very question some it's some year. investments we in in was, this or but had new we plan, were exchanging think there, making feel But just that would disruption. - this CapEx we investments to a degree gotten about wouldn't items changing the getting way with we're do previously for the we is, are those preferred It's to way, have confidence made things a delayed. answer have there, the if were good feel other very would plan. clear, hadn't related

they are We want they will us get get get later just at we'll those, believe them those, retailers in telling it, this we'll category, a time.

And are grow use our best making why so that to the us those that's we interest we available thought to capacity, and it's have investments. and to in we

William Chappell

Okay, great. Thanks.

William Cyr

Bill. Thanks,

Operator

you. Thank

question. from America. line Bryan comes question next Our with Please Spillane proceed of Bank of the your with

Bryan Spillane

It's afternoon. good Hi, Spillane. Bryan

William Cyr

Bryan. Hey,

Bryan Spillane

one So, just from question me.

to a maybe it in getting mentioned just store the talking cooler. make - You've stock the couple of times, about, merchandising, into the people

And [ph] just clear at are good quarter. now, we're in right what to at maintaining completed they - an first now? me, wasn't I at by I'm just in-stock or they the in is, all issue get guess So store? issue levels your a if sales to being And an trying are stock

William Cyr

that take Scott, you do want one? to

Scott Morris

have would what but Yes. kind being it was you impacted in-stock were it really - unquestionably. we in many can We - of say, levels distancing had or definitely bigger COVID and availability. number products stock in, pictures we been would if those of you had it's see in the before we ways social track that levels and QX been have would our - whether I unquestionably, knew a can

January a number. bigger a that, problem. on now, would add kind crisis low I surge February Your them. that and being you right COVID, the and of we've been seen it and the top ever behind, And would have inventory exacerbated are worst, the say fridges On of the really bit that being

were I significantly weeks. they're better to ago. the weeks next seen. three over that think where worst unquestionably getting they're But ever we've they'll two from progressed And think I the

as frequently that's back of another I'm in But are two people didn't it right in days, people I not I'll they this shopping are happening here get like it today. general. here now, because in cycle, And lot didn't A quite not will go it purchase have - then. times a to at Some item. have like once going people typical - -

and bigger less So trip. they're baskets, bigger having trips overall getting they're - shopping frequent shopping

at have list the the is And they feeling mix we've piece this retail And through where of next So is up. in to get we is The that. growth, to to the team deliver numbers really the back order pretty I it's be the quarter. of XX/X the got get [indiscernible]. build next will improved working accelerate able kind We've inventory to be to and think piece mean, the do get continue think and us positive. the hurting into and advertising we're got are, and top to I

Dick Kassar

week for then. down users. having users of that wanted. would it's was the the XX%. item In it April, search on XX% And metrics weekend, finding [indiscernible] you, as of Bryan, tell they the it X% happened, of Freshpet Freshpet of when they to were second you January this By difficulty

be, bit it's what was But level back a it we it have little still not we gotten feel with. time a until that to to So get we want we comfortable still to go, better. - of we

Bryan Spillane

with just that a very store help that's you bringing previously gap is in I merchandising. And some then you're think closing Yes, function on third-party the - mentioned - no, earlier health helpful. that more call, to in of the

aspect really those coolers? that just getting of hands the gap? Is that of that is the So, closing in sort after physical

William Cyr

XX% the above it you where customer elements We're build call first is it the weeks getting now able is In internal that have the to inventory, the supply this of and - Scott the you have trade starts four our ago. been But it Well, level, start essence, but some last [ph] above year supply. Nielsen as up So the rent we've plus to rebuilding Consumption our able in a for supply. with to the at get our right. supply. that trough now is, produce to XX%, said, we're do is,

get up they pull to time, have their they to place. the into fridges all get increased it to the the retailers that they put are position what the sanitation, frankly is, more a that that's you've and retailers right, - the it the labor, keep product employees store higher The to needs the their to to have in protect the the is, Because get are through, second and the able it we got, can the scrambling want with where to incremental get demand, effort shoppers.

we to be like back And the is the was then to that's the right to of We forward. want the and happened to the supplement third carnage out sort through where That's into it pick-up in gone about get be, So that. consumer that we to pantry get part needs, place. it it got that. of going We've done of trough, right pretty feel inventory back place. come the good would

the getting stores be And the is in it next or and It then supply in So will in time. call the there. there month two. be in sometime will some fixed weeks next, four or so,

Bryan Spillane

Thanks Okay, great. for color. that

William Cyr

Yes.

Operator

Thank you.

from next Our with the question. Andersen with of question Blair. Please line Jon comes your proceed William

Jon Andersen

Thanks, everybody. good afternoon

Dick Kassar

Jon. Hi,

Jon Andersen

availability And or inputs, factor largely broadly side? about of here of kind outlook? some the parts see swing important the you look both ones. and pricing proteins supply as of ingredients. to of that cost on kind of supply to talk of this One of couple what quick Can Thinking extent the factor, are the you Hey, of full-year on also risk as key you a your goods. potential

William Cyr

Yes.

biggest you as price chicken we we input a is the use know, chicken, once Jon, So year. our

the So we following price for rest, it in December year. for the

price our And so chicken have locked. we

build-out couple lengths of base of supply. also great the years, last over We gone to have the to our

of place the some had cases, the is in supplier a go backup to on, backup in we've our who for do one had capable proteins, areas who we that critical needs. - put suppliers, late. to of particularly in place our suppliers suppliers, in So we've of to put of every meeting And

We in available, obviously the to bulk some but do end keep also the protein really strong we use time stores inventory, frozen tight. like with case, up frozen we of - the fresh, we

we our this up been have have issues at you availability. look pricing -we've on pricing point, pork. any an productions oil lack things are interruptions of that of But be costs be will we'll potentially things same see like with energy we interrupted we some the it. potentially keep see that at might the other at, offset. or is But or offset, have we had to that beef So time, the to flexibility haven't maybe which we able by and costs could going it the or any There an

Jon Andersen

Great. One follow-up. other

pointed interest just I with On vis-a-vis the your part characterize or the it's but business position of e-commerce purchasing, relatively know in of a kind today out. And modest wondering part for as business, so, you your additional your X% would rapidly your you of growing I'm online how talked of competitors. have But you to COVID, any color about It's these of could been initiatives, put they you efforts because the where that they the more of prior new, are some product. different planned around fresh accelerated? the you, nature maybe

doing seem your to this you capture make And this then, of because like of kind more it growth just share you're fair it's does what permanent. sure Thanks. -

William Cyr

that? take to want you Scott,

Scott Morris

Yes, yes.

Amazon So a the as up we e-commerce And we you from initiatives about that think my initiatives we cetera. Peapod, Direct, cetera. home delivered et where the out did are Kroger, of break Shipt And it's to all Fresh thing we into click-and-collect, then Walmart, scenarios, fair delivered first immediately my those as could, at et amount home Jon, have - picked in click-and-pick other or if Curbside. Think or them about or underway. e-commerce Instacart Fresh the

that program, did we DTC we come we SOS literally thing we because trips. into and we call push more typically as will a that little accessible, direction bit from to the with we could it's The actually existing shopping next as we consumers much know implemented, did where was So, scratch. what

to wanted program Monday, I'm to going put know was are very going that some say consumers week of because it's we're product. to we think just we of to consumer have actually And I we next actually on into finding still and decided, direct having the select a where at March do launch it this time. for period probably, going number trouble XX, that launch place, for a to we items,

our also with evaluate deliver dealing through programs dealing with - to can at we're And and it, piece. then, we look potentially products So we're through. continuing that that are we other e-commerce

piece the which ago, is to on which putting we're We're that's advertising, on actually a - be all will at on, it have going ads, literally end of some I deliver. called the Now to or services. coming is those the last mentioned that home a have of retailers my have And buy, click-and-collect. where the all at click-and-pick or delivered show moment logos those

or - through increased the online that. several delivery that online to has past say been if consumer over would years, you grow dramatically. able We've the home I to direct So to

grow rapidly and confident make bias we to our I that accelerating still can that but we're that want we're that work the very well, anyway available, think sure, also wants we're we area. consumer in

Jon Andersen

much Thanks you. the for Thank detail. all so Great.

William Cyr

Okay.

Operator

you. Thank

Mark your with Our the final Astrachan Please from line question with of comes question. proceed Stifel.

William Cyr

Mark?

Operator

check mute? please on if is your line Mark,

Mark Astrachan

guys hear you Can me?

William Cyr

can. we Yes,

Mark Astrachan

versus so expectations that before, I like question On guys. by listening with what what of [indiscernible]. customer your note, in let seems he terms you wanted in were? related. Sorry acquisition I questions, afternoon maybe, know the do Good think and the how that. the but have bored, of in is, about it looks your original to the to you first one, very way it's that room Customer maybe current environment, sort two costs Scott, about the

kind internal to your what And how to growth; ones kind your bucket expectations what of We about XXXX, in do does where terms things rolls in had bags then, what were in buying capacity rate sales wise come relative all of like then thought. other that versus you as of versus out. you said think about we you what have about think and

If you and think kind like those kind that, puts average walk wanted where of of would to about XXXX XXXX to in we're those lower the to XXXX? end It just I on numbers, seem takes. and of the we be but get through would between

Scott Morris

seem of the it be very better response attentive. spending tell than and had people to time we've advertising, more reality we're just and little people advertising And the the what high of think mean, to cognizant into we lot TV I be is piece, the watching part advertising can this. part I ever think responses are And more I from is our it. but of of glimpses more that on a with this a So very pets. bit that's to couple we've creative, point, seen. very, very, at seems And of

great, we've rates. So great response seen

to us I significant The it new lower seeing lower acquisition consumers, I anywhere XX% between cost cost. mean is could media the yet. number per place new that media other costs, make impact XX% a have don't that and which a thing like in be how we're are It what consumer in attaining is. looks

of I don't potentially would to we handle is. down, think be it's point. get another of months, be neutral I know kind couple it a on going to probably that we exactly until really would good that where this that expect just at but

kind single will be rate we've interesting we buying I that although was how to those an that it that, is was When way-up it we plays spike the really have at because out. saw COVID actually rate see on the weeks, week. that thing incremental of think consumers had buying The literally then this every piece, So we seen and stock-up, watched point. it

Then drop-off buying during of of of move the month We of and we and kind saw up the March penetration both kind really, saw it and into April. penetration a And piece. to kind respond back drop-down. it's rate starting of on looks kind early that then like

through did, that we have mentioned going been rate be, on products. expensive somewhat QX, which been exactly as have when are buying it items So, I are it our honestly, bags, scarce we've been some as the quite don't and where the most items to that up shortest well the of really held it's know

So I - ahead. go don't

William Cyr

on No, capacity point. us Kitchen actually and we that South was amplify to tied we that reason the thing just have were put small dog. - place, our last I Because the going no, in we

basis. it household, multiple consumer supply as price the and the pound it, a We rate, dogs have tends a a because that on replacement. penetration and it per has item buy premium fairly a it's the And big complete to for oftentimes are in now buys a use been very dog fully back and buying driver and and us they in on small

though much, there a we households. they those get fairly out is rate So eat even of buying as don't that good

it going XX% And we and last grew was even when are now mean, XX% year fully we supply, constrained. I business that back in are

we're on to Kitchens item, for contributor constrained going South place Now not us. that's big in with that be a the that being

Mark Astrachan

Great. Thanks guys.

Operator

Thank you.

question-and-answer the remarks. would have turn call session. I to management We to reached the for end back of any over like the closing

William Cyr

thank all unusual Yes, just your interest. you - for these time. Obviously, are

but Roger dogs that's whole. advocate, the and lives make So writer. Caras, I'll not from our thought, whole one photographer are life, leave And you with our they pet

for lives So feed them Freshpet, and their be time. will too. whole Thank you your

Operator

Thank you. today's This teleconference. concludes

disconnect participation day. you may at Thank your wonderful this and have lines a for your You time.

Freshpet (FRPT) 4 May 202020 Q1 Earnings call transcript