Earnings call transcript Q1 2023

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Operator

Greetings. Welcome to Freshpet's First Quarter 2023 Earnings Call and Webcast. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

now conference I'll Sonnek. to time, this turn over the Jeff At Mr.

you now Sonnek, begin. may

Jeff Sonnek

Chief morning, also Good XXXX On Billy Chief Cunfer, and you. welcome Scott Officer. for earnings webcast. and Morris, Cyr, Q&A. Chief are Financial call Officer Thank today's and available call quarter will to Operating Officer; Todd be Executive Freshpet's first

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

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

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

found the and of metrics the through produced not discuss the summary presentation discussed of that on rather specifically will call, contains will guidance the be walk company's results That call. the company we'll be a presentation website. investor today. but commentary presentation can the Finally, Management's key has on this the that that many on

and we'd is in speculate Additionally, quarter. on will focused business today. Management being the results questions what of the topics or here reported your that the beyond discuss ask remain on other the performance not

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

Billy Cyr

and you morning, take in drivers and growth This key growth away Future plan, throughout you, in in everyone. made The that, still steady would the Ennis Academy the costs operating is plan. delivering in performance committed message investment the strong is P&L. on is paying strong Freshpet by the this Thank while today's are to is year that indication I call good with making our due that and margins Fresh we term long teams deliver to that Jeff, to our we line like from and that we progress of another the dividends the Bethlehem

mix net in trade The XX% was inventory net I performance puts for less on consumption are: quarter. few was the up the a some will our Todd for so quarter. will than in then XX% guidance sales more growth. the a share few sales balance included with in but sales comprised First, thoughts XX% and XXXX growth. consumption The was plan. of We we the net the highlights and quarter was deliver the on ago measured shared and to track growth. of of the delivered price on growth year consumption volume us quarter the strong growth line the XX% and highlights refill, Nielsen first provide our growth quarter, year detail our This the growth outlook

last pricing trade users. the this nearly year year, we much of and growth won't benefit but ago significant lapping from did our refill to heaviest year as our be be strong, with get particularly year much in will We inventory to appears as this

Second, adjusted ahead of guidance. EBITDA

that those EBITDA the be happy quarter say discussed DC. first last over is expected call, I'm in to Ennis and startup As weighed both year to our from X.X% our heavy are Dallas that fill we down in down the in of Dallas enabled very we by the down adjusted But the has very with startup that by Quality key are X.X% rates and focused costs the logistics completed were in sales, successfully both we and came gross much initiatives the strong were and on year And at perhaps ago, from areas cost of quality been encouraged X.X% and performance importantly, quality X.X% startup this better team of yielded came logistics costs DC. net more budget. associated in improved ago operational on margin than progress. costs. higher These planned sales, as had cost quarter. reduced logistics despite at on on our performance in

provides improvement opportunities the as margin it we as our execute strategy. continued upside well for As

more commodities in Input pricing. cost came February reflects partial from a% XX.X%, only of impact sales Third, net price between effective as a the increase. balance which and at

Looking our QX, input net ahead further. to we a% of sales costs expect as reduce to

reflect the that XXXX our but perspective, so QX until better than late not Many XXXX. pricing in for are and on XX.X% the the XXX the full experienced better For than of the consumers shelf higher appears accepting is XX.X% year performance the points the basis basis XXX pricing did far well. it in we retailers QX of points quarter,

its that Kitchen commercialization. incredible a due is is Fourth, to Ennis in start, supporting Ennis The large good training and the off part out to the startup. preparation build to team and

line the yet line, will are still the shipping a We're those line range and critical both of savings. producing up wide there lines. roll is now achievement of completed, SKUs will unlock off production on significant that product and but on be capable another ramping once that bag are logistics We bag

every quality produced of in Further, the the we assortment fewer DC to the significant of it locally Bethlehem. Dallas will we doing We as product product. integrated bit produced out that the the into product good be is assessment that is vast to the due are it our in facility's people majority the automation of we produce Ennis as product able ship using And of design. with our have

Fifth, strong customer support.

to chillers new and high XXX fridge fridges, we customer have customers many year. rate, QX, invest of XXs fill second incremental we And are that there coming stores. have restored In a more to service or this net placements. in stores later our Now begun XXX added to third in XXX larger stores, place upgraded heavily those

space by the on towards retail end having well of are feet this year. X.X of goal track our We of million cubic at

believe now heaviest our We We meal. amongst people in effort the loyalty most is number that XX% penetration was XX time this is period increase in that households designed was HIPPOs plus in growth XX% number household solid penetration despite who of bowl numerator Household super the main X.X users pricing. reflects heavy the increase high What impact to HIPPOs, or the as of encouraging franchise. growth buying six, and And rate growth. data. Freshpet our on have over past owning X% profit weeks our the million flip is heavy and our pet users use the and of grew that based XX%

see progresses. Looking expect our forward, operations to improvement as in I continued the year

team intangible us. and better of are increasingly experienced while a the We have benefits to clear and trained momentum more

focused tangible turn operations show to to our three the the see team we financial is We reinvigorated them are biggest the on lost years last up excited With performance. those, and input into recover costs sizable our logistics. efficiencies relentlessly of quality, benefits in and over and opportunities

own has critical is passing realizing benefits, progress team categories talent place these have we Although with each increasingly the timetable and day. of its our for to in the every obvious the

marketing the of first our elements fully in model key time being years. for the are Additionally, several deployed

strongest We ever in placing the at resonates heavy distribution with have new at of ship new or large products consumers. a are coming months. and on number advertising to fridges the the media that have in waves we air scheduled new rate Customers

shown years favorable elicit packaging premarket the time are they also our extremely several an We updating in the response. for testing graphics and has first

me to turn on for Todd? the QX Todd let Now, details results. it over the

Todd Cunfer

good morning, you, everyone. and Thank Billy,

this to said, good As Billy we really start a are off year.

a came million, year at it ago. in up versus $XXX.X me bit sales down further. Net Let XX% break

in the pet broad rebound large lap was pricing versus That quarter. year. February in XX% took growth price in XX% versus increasing prior which we consumption based net Our our growth ago will saw was of year the increase in the channels, The drop up including business, specialty as we to QX quarter X% XXXX. across

a strong plan performance pricing, aspects of the in year team This Adjusted up above slightly of Ennis, factors, in in gross due expectation. our our operational on. margin QX, is increased above improvement quality was ago, base cost that of and and XX.X% our improvements improved a variety to was including all start the focused

to will as improve we elements drive forward expect We these move margin continued improvement. continue and

Now shipping capitalizing Ennis, from that no on in startup line we longer the we any are are line. bag that product costs

as us XX.X% in were the SG&A period. sales gaining So of XX.X% expansion. a up XX.X% in in production. long XX.X% is the that year SG&A sales, excluding margin QX logistics of adjusted scale net ago with the media of down ago P&L our they Consistent trend Total and on term quarter. resilience from growth, G&A, net costs in sustained we ramp through versus will our was to year flow putting But path increased and

a spent ago, quarter. XX to sales XX.X% also this due logistics below spent by largely healthy to basis in We and slightly we gained the very quarter costs partially a the the in was points rates XX.X% of the offset high startup year improvement in Dallas of media costs DC. related net year We ago our in and efficiency versus fill

in logistics. Adjusted first below the had EBITDA of capital processing cadence to stages spending completion $XX the change recent facility spending in the some strong of at no primarily and project better expenses at production we considerably continue in this than we chicken provided year which Phase expectations million. There construction slightly million QX, X. due early in sequencing the quarter operating most was outlook and the the related $X came tenants COGS largely due is and in that building, performance to the initially to for our sizable of was in to million, Capital is $XXX of

we our of of that net call in existing investments. $XXX we from greatly participated is capped Our support quarter, factored and offering. the we at $XXX proceeds shareholders After with our option the We convertible the and of cash appreciate position the in, million term very had the In who short conjunction end investors million reserves, of cash March. realize in cash completed other in debt is the offering strong. cost

coupon X% cost invested will the debt across These yield of have invested in rates series of and we above with fund issued. We of that are institutions XXX a days. maturity greater instruments several bearing in interest no the funds [indiscernible] interest a well than conservative

we largely cash flow in the interest cash XXXX remainder interest expect and be to other. and each For growth adequate offset We we income expense our the will have to believe year, fund that through fully positive XXXX. of

also believe traditional forms capital We if access in gap of the XXXX non-dilutive to have will we it bridge occurs. that to

balance business sales volume terms increasingly growth XXXX, driven but the growth. In for pricing growth net QX, the growth of the strong continue expect demonstrated by our we we to the versus cadence in of will be of

XX% that of the volume into around the year need end and of quarter, it high and rate was of beginning QX, the At By the up around XXs to measured growing. grow the period. believe rates, to should teens deliver We continue by to low have continue was will sales XX%. programs to rate end QX the innovation growth We support Nielsen growth to will distribution while marketing, relatively the trade our that. our lower year inventory in and ago the the to due plan. sizable growth QX QX refill mid-XXs net and be our

quality, We price in our see improvement in benefit of expect February with particularly increase. logistics to cost continuing QX, the in along operating and the full

slightly line second year. year-over-year the operating result to costs of a due this in is of come of Ennis in margin However, gross that net adjusted until performance to full expect below margin to cause XX.X%. QX full that The lines our XXXX’s underutilized we capacity, and later production which achieves headwind lesser absorbing extent QX be QX bag half we the gross to in the will

dollar SG&A contribution EBITDA, to additional should be difference sales. that QX our is With investments QX basis QX the net adjusted that to in an respect in absolute of similar of the higher expectation offset with on by some

would slightly on and ahead our initially first our projected confident sustained and to our commitments strong to be the start be the the Looking at half, for year we we of quarters combined at year are the performance we based the where of deliver of ability in we underlying seeing. expect the midpoint

our that reaffirming year adjusted of $XXX for approximately sales the at So net EBITDA million. we and $XX million least are guidance calls for of

year. performance. In the back in time that closing, to the we facility. and of Academy. Further, improvement start we the improvements year and made in driving train the in steady in September The are are announced very team the capability operational we've investment our operating invested the the the Ennis of significant that startup money encouraged improvement Freshpet we during we And prior to solid seeing are by

remain of We the us. are even ahead more encouraged of opportunities the that by magnitude

as to to deliver The capacity the growth, leaves announced part and support improvements our projection. the provides to and long believe for Kitchen Ennis us we that very We Further, up track both long our Future plan. total, about our and margin are operating feeling future. lines long we facility term that deliver us we opportunity is bullish on that the adds to significant of required, for business on margin provides term improvements upside Fresh with provide the versus into opportunities targets our resilience the term margin that efficiency In needed designed expansion. the

That concludes our overview.

be a the take focus reminder, question. questions and now glad quarter will We operations. And the on Operator? to your please company's as your

Operator

comes proceed from your with Michael line questions. Instructions] Our with of Lavery Please Thank you. Sandler. [Operator Piper question first the

Michael Lavery

Thank morning. Good you.

Billy Cyr

morning. Good

Michael Lavery

Just wondering little unpack if bit. the you a guidance could

in course guide You've a the consistent quarter. you the Can year. line visibility the what the got on top of acceleration of kind pricing full have with just there? a you what that But driving level benefit that or side of year moderate you to expect first you some pricing volume have will point might of and terms over

Billy Cyr

it. Yes, I'll take at a shot

QX we've said shift the and on there. seen it at less scripted As -- growth began pricing, from that XX% growth, quarter towards volume at comments the the continue quarter ended in seen and to we we've grow the so we we volume XX% at increasing

of be year, expecting that last of end to growth. end -- growth accounting the year So of biggest we're pricing end basically like X% by up the net the volume the our will for driver is driving quarter. sales the the Because the going by something in

volume going So and to see seen an shift we've already it. towards you're increasing

Michael Lavery

the that all there the is advertising volume what the step helped And the Or side? by in of up mean, in above? the or distribution key factor gains what's just terms I real accelerate or

Billy Cyr

Yes.

just back to said, comment, my in reality want But we doing add you some to. way the we business color Scott, now give the will as me Let business it. is, we're probably

upgraded new products, fridges, lot full we've stores, advertising, heavyweights, the got So broad advertising assortment we've better got stores. a a fill more at more air lot high rates, of a packaging, on

model, work. to continue will and from the coming working to come our is want from way model we growth it the marketing So our business

Scott Morris

Yes.

points, got the Billy at really, it of the most in Billy the or like really super We heavy, ICR. really We introduced that to idea intact. overall think say aspect, on hit from script. HIPPOs growth. growth interesting The about this We I perform group. but I penetration strong is the talked that most and we would see these heavies mentioned continuing It's model we've of an our up will Those a to group portfolio for number all-time we'll larger platform in and fridges us continue rate It to of year buy place number expand this are that. be gives year, like to fridges of extraordinary. core, place we that this consumers. appeal will record that consumers. company, Their The of the substantially. our is the core be total which

we in store is it know the then the we're and feels to thing coming position. of really fortunate record it to converts a together is and that which people really which to couple I with that all working every on like So single And website, great hitting eventual brand. just cylinders to traffic all advertising our know we all locator, into you platform continues converts drive think

Michael Lavery

ad quick sorry if How to is Okay, quarter similar on the know And does the the if but the that's don't -- this. the over of course that play spending just second out the Is I spend. great. a follow-up missed you said I'm I level first? as as far it, trajectory year?

Scott Morris

the advertising in fairly be heavily weighted little year. of bit Yes. year, at out QX be will be front the split will don't way, will if the half XX% so? I QX know the a XX% or we've half to it that level of actually over and but to first similar

Billy Cyr

in is last our Yes, we year. then QX, actually a tails slightly very of projected spend year second to the expectation amount in and unlike QX the over the But we first where as two heavy little QX in well. at will half QX spend up quarters, reasonable down be it spent is, in

Michael Lavery

so Okay, much. great. Thanks

Billy Cyr

Thank you.

Operator

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

Bryan Spillane

Good Hey, guys. operator. thanks, morning,

Just on slide, just One, the two EBITDA guidance a XQ. me. ones clarification for quick adjusted

You're dollars, talking similar to absolute XQ not that growth? you're in expecting to be year-on-year

Billy Cyr

Correct.

Bryan Spillane

meeting can I household been Scott, Billy, know -- just then some out about again, you getting concern maybe you're back now little up bit. zoom curve. of there's And Okay. if under guys just and kind a pressure. spending, maybe consumer maybe to And spending the

as better, is about heavy environment you as Is you're product playing in to the your Is how there now whole into attracting So little in market? Just more your new to barrier bit any the a households? rates consumer? more? more beginning expectation can and macro are growth product fill you the of add -- kind it market just just using observations are the users if back talk the about your

Billy Cyr

Bryan. Hey,

the market And in concerned to think around the that a I that talk mean from expensive I like case. that discussion understanding there's that have they been and we are we we data very, where of goes an there's look and literally concerned kind et exactly lot going dynamics think have I have have a we inflation, are. about they of people there what's it cetera. yes, of about think standpoint, down -- are been I exception couple very at And -- on weeks, pretty So, consumer about lot a been into that really economy, deep every this what close the fairly

We some frequent sure that kind of continue the and seen heavy those us, the buy have are to ones non those and focusing started are move HIPPO year make of that to kind definitely consumers kind on and brand focused are coming into of et our in really weaker beginning but consumers of out, the cetera. we we of literally the

around level I So, a the lot of on. around has there think category going what's that discussion been

think for fortunate we're had that. I that getting types that this year consumers from been much course we And not really and on we really in. impact we've the a terrific have of like right feel

that the area. we to work proposition to as affordable do that has and on and see portfolio are in cognizant the that -- always bringing make and in accessible as to also we many to be really continue an eye that We consumers to brand keeping we're we're possible interest and as trying continue the always of And market. entire

Bryan Spillane

Thank you.

Operator

of question. is Please coming line question next with The the your Parikh proceed you. with from Rupesh Thank Oppenheimer

Rupesh Parikh

my for thanks and question. taking morning Good

I year? just the just if basis XXX margins, we expectations saw as to up was expect Curious look indicated points. more guys you the than margins gross you think for quarter at you that last same your curious So, gross I

Billy Cyr

projections. great that off little Obviously We for Look, came at little quarter. a than higher Look, start. our the that a timing. QX probably inventory will this the in in really pleased to it's bit original A in of really more a got was built point. early. quarter, second back We're that bit come QX. We do capitalized about

just the it's too year. to so, And call remainder the hard of

haven't yet. the in change ramping still we're expectations this processing no And is at really up, pleased. there but we in started facility this chicken that really point, So,

still we Rupesh. the on, of going got card of but bit wild about a So really good little the year, start feeling

Rupesh Parikh

then subscription And launched you I one fresh Great. [Petco] food maybe with just a know (ph). follow-up question.

that know that's it's Just is launch just this how curious if juncture? already how it's early, at in curious progressing. I and stores going

Billy Cyr

this Yes, point. it's XXX in literally around stores at

remain and visibility super high think, start that We've chain point. gotten, everything of kind it's about really super to enthusiastic it a from We're good at really and of of literally we early. it have couple specific standpoint kind potential the I next It this support Once supply we from early. it of we super I like -- the flattened weeks. kind out with product. really, a of response So in down is a and calm think will

it So we'll then. start to support

start kind think at a broad business of type over to for consumer we'll like that point, get what interest, of consumer just time. feel I be interest, of real that will and size --

Rupesh Parikh

Great. Thank you.

Operator

from with question Truist Chappell question. the Please your of next Our Securities. is line Bill with proceed

Bill Chappell

Thanks. Good morning.

Billy Cyr

morning. Good

Bill Chappell

understand of the year some you little I maybe as differentiated pushing where in pricing [Kibil] a talk is you the standpoint, pricing understand back between two. or maybe still category pricing back we (ph), there of we do can I than product with a on in back that more What you in dynamics through this terms get pricing, but come that cost competition? the as to the but gaps stand and half expect have the price pull you're a do about environment. promotional -- Just you successfully the

Billy Cyr

pickup It's We've there actually levels. and even it's I yet. say would could slightly possible where this at traditional Bill. levels, I really and be would of support you some haven't definitely below spending point seen and historical promotional environments increased any Yes, this closely definitely certain been activity. in -- that We been imagine watching

as that it I hasn't our of business the back in on will brought some past So you come a had impact think up. tremendous

players and pretty in rational I place. it's that a category pretty think you think have I rational

appreciate it think rational category. -- that profitability it. who be people going I to of much drive everybody or which they suppress including the the think it's be either really I that behavior pretty retailers, will think And the I the from one recognize

So -- seen at time. don't happen But [indiscernible] not irrational it I I have in year. point, over to speculate in gets what that mean, this it see in later categories. hard exactly I it's could the getting some

Bill Chappell

the gaps where with But them be price competition to are want you now? right

Billy Cyr

we're No we volumes are we till of watching seeing prior really think periods, grow. like thing And that consistent matter -- growth. it's the out. the literally to beginning way you was Yes, yes, and which year at called where that. we're we're I biggest look the nice been look our you continue volume at Whether really, from now, it,

So there's case at And on dollars [indiscernible] pounds. going I'm this in looking with much pounds. so when

If this you're great what we're doing. -- environment. type doing in the air. units And work we We've increasing go you're and pounds of seen on that's back

which continue we go We on think our through don't progress air are anyone and better. in have for consistently advertising first any we asked quarter, pounds completely anything type see of QX, very low back I to the levels could

is, So of and what money is a and come I the us. spend into acceptable price where like us are continue the consumers the they with brand think are gaps to lot telling market

Bill Chappell

XX% there was, market you're know there some just be in digit keys talking West ago, this more are about penetration several penetration Are online, understand, and But next great. that is capacity household do share unlocking color to as to share to X%. Albertsons, can then close market Any it. not to where you Are now kind close Thanks. markets single as think thought or talking are of the year Got of low And stuff double and nationwide, Billy, like being that? household Coast had but it for I you trying door -- penetration the also matter comes like years barriers? And per mean, we guess such and will digit? any that, I I interchangeable. go? had you fridges here

Billy Cyr

get HIPPOs the a rate. regular consumers, a don't the the the view is lean you did answer to all main you've person watch as to of opposed the been extra the flip bring bit hard digesting the that dog growing backs habit an if in issues our is little we been yes. whose or XX% healthy gone market, and the want or want of of the recognize users, people as might at. that price closely. you of as business to all on more here that one to to side the yielded consumers have indulgence discretionary. occasional continue on look willing us exercise change, Obviously, increases with It's on four a us months, increases us who the or new person I very to is, user meal little who heaviest to into who If very those have a what that rapid Yes. the uses the meal actually of very, people benefits, can XX at have the get less main an have are who basically a that The or a from uses to you habit has where is, seen price as

You can to get want We we to just there. get back we bringing at first than the a longer do more But it the rate over haul, in think reported aggressive where quarter. the much the users in we're X% new user it you're pricing when adapt. adapt longer heavy purchase through a not as takes go of many cycles for purchase new for just a them that’s and to them the the takes to couple don't in cycles They market. to

being to see the double number like digits. So, year, I And that I'd see like by in range. end sometime the year, frankly XX% the next this in to of the by number

Bill Chappell

you. Thank

Operator

your question Benedict next Mr. Benedict, your questions. with line with Please from is question. of Baird. go please with The ahead proceed the Peter

Peter Benedict

guys. that. about Hey Good Sorry morning.

the specialty So that acceleration the just there velocity better in that? the -- of the kind that first drove get were any you channel, doing anything players saw that channel Was pet just to on in Was better there. think question, help you there? of stocks,

Scott Morris

end Yes, even our through pet QX in very particularly specialty. were the bad in-stocks of

return the full just fridges. So of

piece a I big it. really, think of is really

in not this will continued Secondarily, kind be course are course fridges, help. help the the a expansion of really point, the nice of that we seeing be It's but this of year. specialty That the through in a over at numbers year. will pet shown

Yes, those in as the is making but only we not the sure can I on the stock, aspects, and Peter, really two that pricing. being think also represented as in products being sharp well are portfolio

Peter Benedict

maybe then And just quick Understood. it. Got two for ones Todd.

Can a up gets the taking year. commodity kind on from should you us remind speed beef, locked of just you you've on that, curious on be the to Is that stand, line, kind at of for D&A first costs. get we D&A to the that? this then, annualized And expecting chicken that you in, you. got input high Thanks just Just us year? what XXs that look what quarter where

Todd Cunfer

Yes.

So steady as goes it commodities. on

around So big XX%, we're no swing. in locked

we're couple better So still last of seeing mid than kind we've in single-digit years. of to so inflation, seen upper much the

get will positive. pricing allow the with there. to in us we some margin expansion have that's That So place

think So good no big swings we're pretty in commodities, and in I shape.

to and XX%, closer around the rate D&A down and in a year. that the for up yes, the be total, below run gross From margin both perspective, should

Peter Benedict

Great. Thanks very much.

Operator

you. Thank

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

Jason English

Hi. me sorting A for good folks. in. of couple Thanks morning, questions.

there? and to user outright rolling we back? would which perhaps X% last declines even back your XX% looks through having actually XX data suggest over actually deceleration, driven sharp volume, with to penetration year coming it now the really suggests months. fine? April the declines you shared math sharp What's such Bill, the decel new guess, step dropped The And comments. last Why X, and do a I three First, outright year-to-date the put how will

Billy Cyr

good Yes, question. it's a

First of household on to all, the penetration you net remember have number the is number. a

So or up your with if purchasers, you number discretionary of of not are sort end purchasing consumers frequently. some less who purchasing

see added users. down can number whether of that go you've new regardless You

we discretionary for say in the what a users, of we're continuing purchase, it is critical some whom a there same who but think purchase. my I bringing had out to more there comments at continuing not the or are so, And seen bringing that, Those were not new that of rate was number still folks are users, are this new was before. not in people intended

side more most than me only what pricing meal even people they as part the flip before. they beyond be. did the encouraging would absorb main who The been The have increases, to not buying the rate the became was, us committed increased price is, buying the

XX% the we're So, getting in that when our heavy dollars in users. data from showing the we're super increase --

continued encouraging. bias and to And rate. people so, who've that are the we're It at the says, bias meal main heavier decided a that's

funnel I more get the the the we rate. -- to of haul a bringing to front the into in we're it though, long do at the think where end over need point people rapid

the in of I heavy super shook people more people the months, curve and focusing new in that users XX the out bringing think who increases who going are now we're to and for some become price move are discretionary future. buyers purchase in on along

Jason English

many few as So year-to-date as bringing last Billy, it months, is you're in? right losing that you're consumers

Billy Cyr

I on – I to think at don't that's think look date have but don't that. right, the that's I'll

Scott Morris

growth. moderate some been There's

Billy Cyr

Yes.

Jason English

despite all Okay. And been sounds better then, in talking leaning longer That's not Your would in, headwind, -- everything clearly no lapping retail you you've to on we aren't packaging, of helpful. lot in a you're acceleration better great. really it's shipping that that availability, And more terms advertising, seeing we're look why better. shelf going XQ? guidance more more suggest, like, about presence,

Billy Cyr

stronger rate not QX growth in the why a growth mean QX? you is than Do rate

Jason English

in Yes, point Exactly. have drag right. It's given on given a volume, given Yes. acceleration the shipments? two longer cycling no investment prior that year we the that's the

Billy Cyr

shaking sort we're we'll given said seeing, ends where said about it want we in the see trends when feel We but we done. trends we specific see a mean, through. all I of mid-XXs, the seeing, number haven't up we're play you out the it good to Yes. like and we that it's all

Todd Cunfer

wanes of -- And are is And QX. nicely. kind Billy said pricing volumes that in coming off the as in earlier, obviously, really really, is there there some

good is, feel rolling it's So strong. The good the up. are news obviously, all benefit bit in really, gotten total, still our from about But a really volumes of way pricing. we a we've

Scott Morris

for to to the it a with consider impact. months Jason, in, is, fridge when fridges have mean, only literally I it thing six takes goes significant

banking the for in can half dollars So those to start of even back that the contributing kind fridges significant on adding really they you the that now start of incremental year we're putting and where the business.

Jason English

sense. Makes you. right. All Thank

Billy Cyr

Thanks.

Operator

next with proceed is from Stifel. question The the question. line Mark Please of Astrachan your with

Mark Astrachan

increasing last versus will on always elaborate through Anything everyone. Hey, been to increase, the today there. XQ. follow-up helpful? growth? just how The about is would little sales to it Is of be especially I line I'm return expectations as good Advertising guess been strong. strong in I that levels? as curious spend continue questioning you're morning terms very -- bit advertising thinking to could there of you guess, historical spend the the it's correlation how a has

Scott Morris

Yes.

economy, this seeing think like is wash in I there basically also -- through change of I really, them the Billy businesses were out right? group moving were that in too. Freshpet just concept, we're just a consumers they basically. out. They of through, are don't go So kind are some there you And that touched when And think of like the that on what There come a are category. certain in are

shown in what total it So is does number. the that's

advertising productivity we for to real to and And the XX way those, of And dollars had where kind we you your people so, years like and low-level -- see to model get to start these that in -- got the the you're of think in you've through some that to and were start losing group you occasional then buyers. the CAC, return you we've consumers we about that move of as it. that spend core get

transition some et casually period have So stimulus time, may of that I cetera. gotten were where out that through for of economic period think us enhance flushing going type may we're that less a of savings some have we're a consumers committed had weaker buying those

going we're that's we're think I seeing what and So, through.

So consumers when know. you getting to We of XX the brand. What's people of people the ask come We again, the about by ever the return, we leaving. able to go we've kind believe into TV those going less years, see store we're being And best response for tons and getting we're -- advertising. we some dedicated know getting here's locator. we're know to that of been the through historically, what masked

back that So near this has term, it's for hard on drive when to similar calculate in that through exactly periods. that the advertising really move changed return, we'll we believe but get returns of kind in we've types historical really, of new spend the long seen we what as And will to right -- we nothing we consumers. spend incremental

Mark Astrachan

consumer from out, have household and you're have And lost And the it and kind new them that get about suppose I non-Freshpet in left, going you standpoint of opportunity? households not that it. Or after reduced a those back? then is after that going come the longer-term can just does in today. Got

Scott Morris

Yes.

I think globally, at presented -- two to important are that that I we -- that. I we think think things ICR

changed don't that. trend food total I this been really year to that or is, addressable like where five direction And them has we of six and there's we continued anything for is One Freshpet can of to see think demonstrated that's the the -- market expand. see

I in commentary think some the that, referring I short-term was which is just there's to. disruption

been I to really that, -- in and to So grow any will think it don't continue grow time. change continue there's over

am, think Mark. I I that's So where

Billy Cyr

happening that as But an we become built are that is that not brand some those it an to we main committed. recognize meal what whom we are more buying of are it. we're where seeing rate what less recognizing people in committed at of for increasingly growth. business be committed. people very the -- think just would increasing are to as who the I those will what -- point, environment people driver of as Mark, the have not item, add Freshpet driver was see seeing is, become their I discretionary a they're out. That's to critical model. very, the growth it a We're And just purchase, It's

Scott Morris

on it where times we're call couple a in thing idea Yes. that's we of I'm other And HIPPOs. to the sorry, that buy I of ICR the we -- this where, increase on rate. seeing but an the targeting touched about the meant only households talked -- We've also about mentioned not the really group,

year it's of we really in the in to the playing put -- well. seems that be place the So beginning strategy through

Mark Astrachan

you. Thank. it. Go

Operator

with from the of UBS. is next Please The line Ross Cody question with proceed questions. your

Cody Ross

than taking our to it better came on in EBITDA I want just because little to for the $X about guidance Good question. morning. dig million million here. a $X bit in Thank your you

trend? is have cadence little explain us And unpack for then just follow-up. half supposed to bit the a you. to think and are? margin then decel what I gross that you expect mentioned sequentially back those of that I just us a you Can here. how through drivers the the And you Thank

Billy Cyr

Yes.

let mean, me first. I down So break QX

input actually So basis versus improved just kind direct points. by pricing XXX commodities of is about cost, like

starting talked to inflation, get how of about the we're couple we've we've with of back. years So behind a fallen last nice that chunk

then points that cost to line absorption hurt really to we an of absorption is us favorable There heads place. saw will up get as Everything Ennis. that in there. a some in kind costs we particularly hey, progress to by basis everybody bring in about look, points. QX. points in a We're And on, year, going bringing bit be half That incremental news. actually first basis were of full Quality that's that feel continued about XX seeing and lines on Ennis as higher good we QX. So in the XXX going XXX new else, basis It's great about. little through QX the are we that's gave issue we second of

as we volume volumes our saying, has the of been into into, as year, half nicely. As we've Ennis the in up trending build of we grow second been the

that be volume year, a last that half the second of of into in little those year. costs bit the facility we'll to and build lapping leverage we all more, As we'll start

versus -- in for the expect headwind QX slight we a -- half. and to in again, stronger much So it QX, be then second

Cody Ross

a And have then follow-up I here. That's helpful. Thanks. just

Thank last trial the price if Can repeat category, purchase just over two you took of seeing the in You've trends change and new rounds you year. in any discuss you. and behavior? the had some entrants you're

Scott Morris

there on touch entered, maybe first. that a people of have that track that very, very amount we Yes, have tremendous I'll been closely. And and

a and in months out was at And there about XX.X% of fresh we're pet So a us food. year XX%. few and today, frozen we ago, what talked having

think about you if lost we basically, So months, few the it year a a tenth. course of four and over

the really probably There way illustrative have I our think share ton They offering. of in that, most grown haven't So about. entrants. a size. that's basically been to the of we think have And maintained

think subpar I and of -- performance say really, I early, what been I but almost kind early, what mean, excited -- retailers all would it's So very very can of about from least would at I them they're has think tell. I of the make it,

So that's important most I think aspect it. of probably the

with have time. have still where fuller pockets fridges in and make that products products that XX I the full that not the of look it's across There our we that's HIPPOs that do recently, particularly opportunities they are until the better the been it. trial is More And the it's [indiscernible] it getting at past. driving and we past once repeat, were at that, We some we and made -- buy get still have I think when our sure where illustrated stuff I we ever like the definitely like to the look some better. are talking demonstrates people offering. it over about the So thing all days, easy to of people we been to the work in for up for plenty want rate the extraordinary And literally think easy just the made XX, almost mean, it consumers we But more they to and not much business. they particularly and have want try represent U.S. driving than dedication have before. naturally area. It's really we're the

Cody Ross

Thank you

Operator

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

Jon Andersen

that about Two talk -- the during if year. quick wondering I new the the ones. was fridge the of morning. placements Good could you you cadence Hi. expect

stores media your net for the of number a up then was what your again, think full quarter. on as expectations also on But year, for you. of spend on a new media help first the there. sales I Thank basis? percent are the cadence And X% year in

Scott Morris

on quick real hit the then touch media sales. bridges percent Todd can of and I'll the on

this we a it's is actually So actually new of really year fridges the have for and the year, fridges. placements. We'll same number will is And then the third or just the second QX third second note laying double And out part. and ads is in fridge, and not up new a QX worth be important the most high-velocity way a second almost biggest think our outlet to placements. for end a the a is, I new third thing bridge as fridge in with

third impact think for and have. what out to building fridges a second So that food. out like us we're And critical continuing build that dimensionalizes fridges are component hopefully Freshpet the again, the it's can like to new I --

Todd Cunfer

first call, the on from spend somewhere earlier XX% of a the big spend more we will in this change to past sales -- we that did half year. of back half will media spend this perspective, second a And XX% than And to close mentioned occur. And half, the I is XX% net lot as QX year. first in half, the in we'll

Jon Andersen

Thank you.

Operator

with line JPMorgan. the from of Please proceed question. is next question your with The Goldman Ken

Ken Goldman

though, just focused for plan talked I I morning. There's and come a Good because bit. the did HIPPOs some about the numbers attack only, this the back questions on was little -- want And household terms of sure we a get shipment bit little rates great you're from guys penetration, wasn't year. this of I the what and to Obviously, -- buy users again, your to on it. trends. non-HIPPO Hi. overall especially in quite you perspective. talked the

hope things do? ads, guess? of and other targeted the I all what packages? introduce that of to do kind can't targeting ahead for trying Are pricing I strategy everywhere and Can idea of sort should sort there You -- plan of path But the the what now the for numbers you smaller shock, of for at just Can you the mean higher of the phase. what is advertise guess, once. to of just be get you we an is is year. rest household kind over expect can more I

Scott Morris

Yes.

comments. on I things expand So probably couple few that a will I a on, mean, Ken, I'll touch hit but of we different

area -- the be HIPPOs. at ICR, we're their we now at that skies did that pet advertising attract advertising about putting dry kind the And on year, strategy this pet. focus had dedicated of look, we you've about direct where seen piece things we're take is, we HIPPOs. what at a picking we've been not communicate. think demonstrated you're the whether course, of set on change. brand. bring of are the we we're one to we're air, things that's some and like food, that We only to point seeing to core that that our in idea this seeing knew the really mention of but year, out when And -- going advertising in the a ICR. what that on the We to -- we in done in think more want So into of now. earlier really focus aggressive on willing where was kind we're comfortable consumers really, to We're talking to we're that think to the a doing And HIPPOs long-term these we trying will basically has I that and of more and And we're you're

I the when and been pricing food pet and the it's get finally overall gets and get more go through, is XX not behavior. digest people these the people that grocery years will. it's they pricing the even when and with do pricing, their comfortable it's mean they I normalized more past -- When when my this more of eventually, that category pricing to bill, grocery bill. shown things pricing where over comfortable return think all

lot a about get I economy is. of to where little consumers concerned are that those a more going think the we're

normalization XX of XX into I them flowed to again, see the we're not just But as back in some doing valuable. start And we're the before is, do sizes. products the getting we meantime, get be model, key price the and think we'll entry we the could they're think points possibly that this we aspect we offer, months on is what to of which as can as to advertising, that brand. the especially every I sharp valuable. as They're this not on have base

-- more couple bit, products a kind and limited we're more calling also And little a them, a products. little ingredient are launching that value of we're oriented of bit

And We months basically those are of things that to six up, one dramatically packs. in buying of think the packs, to including offering we'll offer in start up starting the kind it bulk will XX those we products behavior. is next bulk change

been that but demonstrate next at four, start on it's And packs. able where are one think top over food, start they to that look bulk pet across not a our you give are able time. year. XX they eight a we We test for been in doing to the If this. Freshpet a in we single the country wet items ability product six offering buying those not now basis at someone the at portfolio, time broader two to were out we We've and buy time, items, expanding the success introducing will there's or to or

what plan. So new brought, doing what we innovation if the the feel on is But really doing, pieces, always over portfolio to the we thing that's we're that of products with well great And look, we're just these back works, definitely brought works, which is doing get piece time. a about the other we're the the that fundamentals we've works. other the business advertising

Ken Goldman

quick That's can. Great. follow-up, if then And a helpful. I

of was expectations. that, again, ahead quarter You mentioned the your first

much I of But inventory you capitalization. Is way of about to reverses think any of that was a from in it "organic". little was benefit some there mentioned quantify how and XQ? there that think a most bit timing,

Todd Cunfer

approximately about from Yes. We $X that. had benefit million

also non-media had marketing from miscellaneous benefit will about million some we in sales believe $X spending, We happen expenses QX. that and

biggest the pieces. are those So

Ken Goldman

much. Thanks so

Billy Cyr

Thanks.

Operator

from question is question. of Jefferies. next proceed with line Our Corey Grady your with the Please

Corey Grady

the your Hi. add Good decision second step-up to what to placements you comments for I a And or follow-up fridge candidates? from on Can third are fridge? of volume fridge? morning. question. wanted stores your second benefit portion of taking you third us new thanks year. fridge on for process your if current, And what the And you see the remind Thanks. my can, just or

Scott Morris

Okay.

I'm going and can at when this to a answer. multipart high in we is the like more detail and -- So probably address fairly it get try we one-on-one a a question calls. definitely then and level, talk to

have when highest like of velocity. retailers we what we volumes. typically, of percent volume and a with highest with a different a But the fridge we'll a at look there definitely is off would put are retailers there is, top So that take every retailer, third start we or retailer, that -- XX% what different stores is the threshold different in. -- a we'll And for do second

for stores fridge. top take a XX% we'll second typically the the first are and those of So candidates

putting is, the time XX. first in progress, in retailers XX% or over a taking as and sometimes those seen we've are interested the fridges what second their and of then third And XX% even next

important dollars we've see we it we to to look store increases what week that most see time, to per starting we're dollars that continue is, progression. core week, is really in store per per is at the consistently aspect aspect. And and -- if So over the per

and to consistent if little and a we're that's second going for you a more of Hopefully, bit more seeing third fridges. per dollars it. open that's the to giving up store So network feel those entire

a network put And when there's eye or end to for way to these applicable. to something is second big fridge fridge because four I what -- have out are can either third willing second the in tend would of a our the on be where a we significant. second it's feet having then reset cycles today, half up or say a bridge and opportunity we about retailers the take on pretty wait pretty third to is touch And have a of

can probably store that continue And that's to year think continues network. open think I we very up week. it. dollars and a and sales to increases same-store way broad that's And the So year about see per more more after to of per the really

cetera. So the rate, standpoint, grow advertising do from an penetration, we buy more can et

and over we'll opportunity fridges. for think have second time more third I the

Corey Grady

this a to just then up know That's I really helpful. ways, been Thank asked few on household you. And different has follow but penetration.

is up pricing from think And we saw as to mean, should Just the expect be growth about kind X% rolling off? then, with of I your this up back I more weighted? expectations And benefits by quarter, year-end? you to household half get for plus in Thanks. mean, penetration that that line you XX% to do making

Todd Cunfer

Yes.

HIPPOs, we focus that. to consumers. Like see like I focusing. think on when we deliver started We January, again, planned the had started way And higher was it to in thought at higher-value penetration. we want we we would ICR a we little these these talk overall on bit

anticipated I we buy of And really we're overall it's they kind would where of the category what's upset and we're category -- happened like slightly I has overdelivered -- what looks is The But where you are. think brands, just amazing really the budgeted And is, what with honestly, category the and I like if think, amazing. a think it's little what that like, doing rate -- it's penetration. think be the like and is, look is we've we at doing. some very also HIPPOs and seen what's higher had overdelivered from I planned. kind

people a little have you bit. and stretches happened think that I little what's pantries And deload is, bit, that a

and aren't that consumers buying of dynamics a economic that when some the changes have stimulus number getting of You they're some consumers.

think I to once going a we much in more So go kind penetration. of kind of we're this to cycle, growth through return normalized

progress And be something I it our if think revenues. would on back like that of normalized the more we're see expands it make year towards on doing, penetration. could overall HIPPOs we be and kind overall hang of could the we'd that the

Corey Grady

Thank you.

Operator

the comes question with of Jim next from question. with line proceed Our your Salera Please Stephens.

Jim Salera

Hi, morning. sqeezing guys. in. me Good for Thank

bring incremental that increasing that second third third Just wanted may does don't at rate? these fridges, the and new go incremental buy there more Just Or fridge is more buyer? that is a fridge or opportunity that adding second the retailers incremental to usually in their the ask as that buyer you're looking now be they're see are a you they busy there's buyers? user, availability and there's high-frequency

Scott Morris

Yes.

weekend. it the fridges. actually there's power can So aspects some literally we to gives a two holding probably major through get retailers, us second where enough In

highest afternoon, six some out. items on of our stocked get pound example, like like. literally, our some unfortunately, which it's on So and buy, come are users volume And like Saturday in sold as loyal don't they'll as fridges we well for of most would our roll,

it holding them additional power cases. some So some gives in

So you get a buy rate pickup from aspect. that

few kind fridge. of over somebody than, make companies. sure I second We as possible. And to us to it as inches else. certain we to items certain differently second about add our as really is to from add that CPG The we items trying do we've allows want is in. It's time productive a a the space and able get demonstrate bridge, We're just think been not thing think,

broader of find a and appeal group. different to is, we've offerings, products group as to the So consumer portfolio a slightly expand consumer been able we products do we that what or

it penetration card And aspects, some store. see encouraging does to shopper that So that's within many individual they of And extraordinary which when help of on. what's expand I data those details them. those retailers all think have

second new for the of of In the when details driving cetera, them that buy for data, factor the rate, the third category, at frequency impact in, consumers holistic to aisle, some in addition fridges. the they to kind some the final deciding individual high-level the in around of those overall et that drives look put and the it is

Billy Cyr

our very display the of and an virtually fridges to the add and that, as have value in whatnot. power large addition I just benefit, or manufacturer would there's Think to off-shelf holding every the provide, kill CPG third of assortment to would it second advertising. that a extended amplification

foot of And lighted amplification in one an or see data. meaningful a number wide, can We second on that forming aisles. when the seven stores, of It an one, has value Nielsen it fridges, island the it And sizable. good-sized four reasonably in a retailer caps. in third a a or foot actually we if have tall they does is very sitting advertising put end in

is there And significant that to a benefit. so we added the is advertising. think that And frankly value

Jim Salera

if last one And maybe on can I Great. that. follow-up sneak Okay. in

talk you that there's that in add mean I the to the Or about significantly them provide second less products a just landscape. that whole makes bridge, does aisle of the competitive does a in kind shield it competitor third for that availability? have get third harder the pet or We bridge, there? has mean a if retailer as no availability or expand? that a does As aisle for a you around pet

Scott Morris

means have food their there that think pet helps the own out. of is referred the have I I what's a we think really recognize category. to. they're areas building first And is, that benefits as few added that think their it fresh has all in fridges either but it as periodically. strategy in their been to out a to they store and the strategy, think in And years of aisle. and And putting now want happen fresh retailer some that -- own piece food Look, want about first out there. expand anyone no of limit to I it's flipping does see of food, came put starting we And -- and in. retailers they're other bowl they Billy building mentioned about want part meaningful fresh retailers with coming we their to them think a of it by else the advantage, It's sometimes from or five fridge ago, competitive the think way was, a the up pet we or change that fridge consumers But core

see the to So encouraged they it's want us, and I great to think think for build some do else what it's to retailers up I segment.

Jim Salera

Thanks I'll guys. on. pass Great.

Billy Cyr

Thank you.

Operator

proceed from John is line Lawrence Benchmark the The question. from question of Company. with your next Our Please

John Lawrence

for partners. you expand through you've at. now lot morning, in. when and you look period these mentioned me the retailers know what fill you rates that little a got what's Good Billy, a category a these these time are these some went they're time? the people fill back. new time decision you've there and -- you've restored better Can retail on in lower a with fridge? guys. this that rates? been discuss Hi. just that They bit they're long of and looking of as talked those sqeezing and and rates coming are for you what like to matrix retailers, I first mentioned that for what really after Thanks maybe up, happened would And since second you've But come coming those fill back are that the discussions are third at you've about for

Billy Cyr

Scott to closer that let one. I'll take Yes, that. He's

Scott Morris

XX And were Yes, that is, once and willing make it's retailers actually literally are last excited no and think in actually we have having there a what of many -- third not had even to a current discussions more think, maybe to were the other we a think around think exciting to that they last really it's for been, period expanding some those about to it. to long for dynamic And few I store supply where that said retailers sure mean expand coming to the are conversations. I mentioned additional to we we've that second I I there and they [indiscernible] almost were days, -- few be us, us, retailers retailers, a and open like up the the there to to in retailers few -- which than be I going were had times receptive of pretty see. able we see them. But were had very enough have broader very, XXX to time. sometimes

that it. started would have I and encouraging there, offering. type open in we for want we of should something -- consumer to we of But up. can that product kind up be not may of out anything club we some have type stores we should it and we stores feet the all but be grocery able when in you a they not the offering them to only We you those XX% boy, either. majority didn't that stores, be was in see And typical space of interested -- there, Why offer want in all to were taking of can't of to be It stores out all where mean, in fridges believe some supply, of mass, you're almost not add weren't with eight you to there's sell.

So see that. I to starting think we're past

anyway, develop. kind kind that we're to So excited of see of

John Lawrence

Great. Thanks. Good luck.

Billy Cyr

Thank you.

Operator

of time, question-and-answer our Thank you. end session. At this we've

Now I'll turn the remarks. floor back to closing Cyr Mr. for

Billy Cyr

I and quote To unknown, that for very best Thank cannot apt. source it's with is, this man's them but which reply, quote. is feed is quote their of no The reward very coincidence The much, to like you end everyone. I silence Freshpet. them it friend Great. talk. a always

Scott Morris

of of Angus; -- that to of one was our Pinocchio, four the that of Gray; build advertising; pets in actually Macy R&D, and develop on Freshpet products want many it There's dogs and one the the I'll which that. Head the I our way. And dogs family Rocky, us in recognize: dogs and was the who helped along

Billy Cyr

Great. everyone. Thank you very much,

Operator

conclude does This today's you. Thank conference.

at lines you your for disconnect Thank may time. You this your participation.

Freshpet (FRPT) 8 May 232023 Q1 Earnings call transcript