FRPT - Earnings call 3 2023

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Operator

Greetings, and welcome to the Freshpet Third Quarter 2023 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Jeff Sonnek, Investor Relations at ICR. you. Thank

begin. may You

Jeff Sonnek

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

measures investors, today. Please the measures, limitations a measures. of information be today's with GAAP refer as accordance for statements a and those or financial laws. during on discussion will that reconciliation risks useful management's not Before cause to statements such statements. Please Form forward-looking believes and of implied management refer in on comparable associated meaning presented within that financial of how non-GAAP the of EBITDA, and refer actual These report a in with could are call, on non-GAAP the measures call, beliefs securities differ considered for with based statements non-GAAP begin, substitute materially the for forward-looking any press this results filed intended expectations most others and release or to company's to measures, in we for the today's expressed SEC defines non-GAAP could remember annual management risks this current information the release with described GAAP. Please from measures actual company the detailed the these financial course that cause and in accordance please prepared differ isolation financial management XX-K and to uncertainties such in may forward-looking press involve non-GAAP information federal while those as make certain among presentation the the from to materially EBITDA such of these note company's that to the today adjusted to provide is issued results made

of website. company's on turn that can presentation will results of discussed the not key the Cyr, Executive has walk the will over to be That contains we'll commentary and metrics a company many on investor that, like produced this Management's the rather a the Finally, on presentation Officer. presentation summary found specifically call. that through Billy? it's Billy discuss call call, today. guidance I'd Chief to the the With that but be

William Cyr

And long-term results we year, XX% you, goals. XXXX Jeff, resulting to in its like I business take start our on the message improvement and are is morning, XX% ultimate margin result, from the that XXXX delivering potential. annual Freshpet delivering call good new The to $X.X today's quarter out a adjusted everyone. net you for the Fresh sales a in our off Thank At show XXXX. and is beginning top away as that line Future the would plan the fast strong that and EBITDA goal laid in with promises third of of in growth we billion called margins towards

sales growth us business. For in were we that the the simultaneously record attainable our that net margins know while we continuing track plan, the this to XXXX, preventing strong of of fixing generating year that issues operating are committed first from

a due for improvements. we ahead our long-term also net We of XX% we bottom putting operational change in employing are XXXX goals. on many the our increases the deliver net and sales and the pace we to growth, the expectations delivering line in while growth QX, growth delivered step strategies of and targets of confidence to ability our line our building, sales profitability set, both year-to-date commitment are goals. In are We bringing capability that delivered the to we quarter. exceeding delivered top we ahead our required This deliver strong us our XX%,

is strength a progress, of we for the consumer towards to areas of focus sales at in has have built the adjusted year. We XXXX input of enabled adjusted quarter. fast capability proposition. As is in and team we've and margin goals a strengthened costs delivering deliver built we our our our rate are The start due that believe projections, our improvements Freshpet net our guidance exceeded raising and the to largely quality, both EBITDA the result us key and gross logistics the which a that organization XX.X%

and be has couldn't this the and is progress. This logistics true significant projects of in even measurable and spearheading Our depth these a quality testament progress that more our is impressive. proud to been of we more team

CAGR the sales is was and Our volume of QX of Freshpet quarter good with is demonstration resilient impressive, and confidence net net volume face growth our in added without needed brand of our our even even algorithm quarter deliver pricing. support improvement consecutive can provides accelerating of that to growth typical has a fourth pricing. also in higher the mix the growth growth how XX% the mid-XXs in the combination to been benefit our long-term continue sales we

increasing of seen. growth Even is penetration the more household rate encouraging have that we

matter measure measures midyear take next While the rate long-term to of We penetration for is It up. XX-week already show catch it is time household will to think measure growth time household have the previously, XXs the for of happen just seen will the that growth. approaching year. we penetration a low some XX-week that by

to still start, a are our achieve mindful While goals. have particularly that a margin great our goal, we we XXXX off of also are work lot to do to we

and the to where provide our margin capacity year. of the to to balance stay needs quarter, to We our with up the our will be. need Our while performance adjusted growth provide adding EBITDA simultaneously and outlook for key to it well over deliver. I it and few turn to focused our gross the operational we expect highlights margin strong additional from on then a to updated improving details the I basis want below below Todd is still adjusted also keep is goal XXX points long-term

in growth. largely consumers on year XX% strong First, net mix growth today. was to This net disproportional the grew rate the number volume ahead expectations. is the our in for franchise of HIPPOHs users, growth growth grew account was in growth Those heavy heavy and number we household growth call X%, their growth. continued and HIPPOHs. volume growth demonstrating super quarter of in stronger due have to buying even these targeted impact long-term Freshpet of XX% sales that particularly typical past and to in that HIPPOHs and the strong our target. the what due XX% improvements The It combination penetration equal our with The of our sales XX% was

up Freshpet, saw more XXX% unmeasured in of strong particularly than been also that new completely in net households, they channel. with of the offset We that large channel. to growth Club The the unmeasured pet What as channel portion XX% the particularly who such in slower in Freshpet than are growth quantities. experiencing in is in exciting buy the we've channels growth that channels, the specialty and is strong buy unmeasured more the sales

now multiple margin. We a record XX% and placements. X,XXX year-to-date, stores have second us large third fridges. our fridges XX,XXX Second, a for of by upgraded fridge all of or new, placed

growth cubic this a a that for X,XXX the This in well for already initial X.X to that year are represent a and innovative projected we significant million at testament We opportunity is leader pace the we have feet category Freshpet is that ahead our and of a retailers' commitment on as retail fridges belief year. to and place scalable them.

Third, e-commerce.

store-based pickup pickup, this delivery a on E-commerce continue year launched We our delivery year fast is that see grocery our accounts we to channel, up strong to define year grew for DTC. item Instacart, adopt as and like number of XX delivery a top offering off and pickup E-commerce will now to in grow and X.X% our the with ago. volume large XX% of of and XX% product e-commerce consumers of fridge in stores a it option versus growth in dog curbside via which dogs, services. Fourth, total we goes and which through network, velocity this expect as convenient XX% curbside these where volume continue results start is the within our expand larger or of distribution. this believe next ago, a year. sales Based a dollar were into increasingly ability distribution strong innovation. either items versus this to reach We to our expand and its it and earlier new we limited

Additionally, we experience at Freshpet Complete October. good launched value. in roles Nutrition point offers Complete a the entry Nutrition Freshpet

consumers. Fifth, will accessible quality, year. make X,XXX We expect stores by to the but more and interested, to value-conscious think more in costs. end We input than more Freshpet this be logistics of the it

the our would As be year, at In quarter, of year than better ago. basis beginning year collective XXX Within making and areas we points we of the versus to good the by quality the basis a these costs our points focus progress. improved key we improve were that, we operations as are you costs a costs XXX our told these total sought ago.

versus in year improving ago. has XXX progress basis points logistics by a been Our exceptional,

we remaining from only to than whereas our directly taken. have capacity trucking is due the lower due macro about has year, that to and of While are benefiting is we X/X X/X which factors, costs actions we for believe less environment, demand the fuel last improvement created those

days, we slightly perspective, staffing last order logistics the of the pricing miles and to size we'll There's scale the fill we relative capacity. in QX the positioning resumption lower thoughts payments, category. variety rates, category year. that line of products past was DC. about We've foods of willing a demonstration support long-term of believe product despite our we the growth are our Phase Further, budgets over by well and than us higher growing. and product of producing ramp-up clear gotten have added next we well year. In commissioning believe interest And more of demand of X year, has support sixth, we track capacity paid the increasing anticipate to algorithm making begin or discussion we adequate to is high-quality in pricing due bag is to XXXX influence still types those by impact my pounds ahead and the food available track will after of Construction was than growth the comments QX the XXXX. Phase suggest and This we begun total, begin delivering total QX factors on by of that macroeconomic year. And bullish line end for for schedule For number have built volumes of the would our meet ENNIS rolls an presented QX near-term end incremental be necessary the of rates over positioned to and incremental year first good that producing shipping category bracket student freight to capacity previously. leveraged of is been X XX%. XX% pet in with such lots and capability in June to at of on of have larger as our support to number of on rates and we wide summary, market the is XX given lane second in of the pet will in this household the results like of in get to of is have ENNIS we consumers higher of down very I in some our overall X implementation the is loan enable all pay that second the past for production This progress underpins on very the going and sites growth rate our today and and to current are successfully us forward. In lately demand end on to our on inflation. Clearly, remain increasing the and prospects. the year we a

shown across believe age income or that in food most the all you are important CPG important true you household feed amongst occurring, things not be kind you? cost bifurcation day pet you how a the to that the your our amongst what income strong are and brands. for in health cuts to seeing groups of about the is with narrative that has but feed performance expense per over when pet only their high-end is who this how to age, tight. When wider volume is We HIPPOHs, also dog. That your for is a we XX-pound dog group dog It downward well-being. The that determining of differentiated times of fastest-growing cohorts variables pressure heaviest with average less someone And and there happen the growth or focus on from users. $X time high-quality food about and Freshpet concentrated suggests consumer last is our sliding users, is contrast and our down that increasingly their our budget becoming category be much trade

our and year Freshpet trend to We of that high now and satisfaction our of year. now they X X in view over That years had per million business making for consuming mixer. we ago, We favorable, $XXX account main a number double has almost the of meal grown business. levels have and our be XX% XX% increasingly HIPPOHs demonstrating past are of of the franchise, group they average topping instead or an

Within users have we a brand who subset of XXX,XXX size our becoming increasingly group year. described of for about more year We out about the buy are more franchises has $X,XXX user heavy we and per account main of That DTC HIPPOHs the some the seeing of the Group, volume. Freshpet past the XX% mainstream consumer as than meal. over XX% is behavior total grown than

cohorts. quality discussed loyal consumer food trend future feed resiliency This we've next that data of premiumization a about driving pets the is of care the our main a encouraging concerned of see of suggests in in and mainstream, humanization is but period food this growing food slowing, pets higher and users every quality the are Thus, long-term more thus towards is member we over generation quality more their providing highest valuable across ages market This income rates, becoming higher believe of of of see fact, amid the and interested uncertainty for the for we in that their increasingly economic of the is even that total and has trend pets, that buying are more feeding the last in they consistent tested Freshpet. the being years, meal. that the are extremely the behavior family. franchise. This trend very their becoming we interest We this fundamental and highest is consumer with and and that strong, all creates and the driven the franchise X we for is decades. Nothing the pet we

brand With and the to category, this potential. realize ensure the backdrop, we very we in that believe growing to that Freshpet necessary has a and potential are taking become a we steps very large that large

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

Todd Cunfer

good Thank morning, you, and everyone. Billy,

adjusted our performance in to strong and said, Billy continued and this that As we saw the raised have QX, earlier year net sales EBITDA we guidance strength. reflect

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

quarter by our in pounds low pricing September, operational in growth, ENNIS, improvements grew we of due increases added from and in ago price than cost over The consumers channel XAOC channels higher stronger which was benefit, factors The and the the migrate through XX.X% volume This on. gross was points. Total was and positively including above variety was X.X% ago than well of growth the almost and year as took increasing in NIELSENIQ impacted performance was trend base been price/mix non-measured focused cost priced was than to the a year XXX% in our year was in measured margin have the took that greater to XXX we to team across all growth channel of plan net XX% X measured points our channels. Adjusted more versus which consistently of but versus last pet XX%. expectation. benefits the a was lineup measured has ago in in in February time quarter, fixed our the unmeasured X.X%. improved price/mix and slightly much improvement up dollar our in is X in a XX% growth Our items mix X more also better totaling in a and seen we aspects leverage consistent channels, a The as the quality, XX% ranging basis than a our QX, specialty broad-based February input late. of and points in

considerably as We margin where sales, down have improvement year forward continued increase ago. ago The sales scale accrual this we into basis that performance, move We XX.X% enhancement, in improved grow $XX.X XXX the points. had primarily net reflect of trued improve media which sales. particularly gained quarter, the initially we QX, a due performance of from points. Adjusted expense strong the increasing operating of is logistics, planned ago year provided as expectation we expect the year's up on net will was continue we of biggest X.X% basis a did by EBITDA some our SG&A versus in better logistics, We in the our these than represents ENNIS drive unfavorability and and million as was bonus to XX.X% versus the $X SG&A million bonus in we in net in elements operation. Total was to to was the quarter. COGS spent year XXX better than and and an

at cash generated million around versus We ago. of change remains was for the year-to-date, $XX the adjusted in is $XXX expectations There For have year of EBITDA quarter initial this million we spending we the capital outlook million our date, the a year, to set million. spending of in the which $XX well $XX year. Capital delivered in ahead $XX.X improvement operating outset in an million. flow at no almost year,

a our of with As is the very at position million $XXX on in the result, quarter. cash cash strong end hand

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

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

inventory in to sales we refill inventory demonstrated growth net the believe refill closing expect to year. be we trade look We we trade strong $XX million consumption the continue in completed ahead and $XX by we inventory of in refill As any the consumption XXXX, in last but large to we QX, in impacted not will the million that net growth around XXXX, QX of totaled year. will of in while expecting growth will remain have XXs. QX the Thus, XXs low are high we trade to this be growth sales out QX

rate to from extremely club coming will growth is We an continue see unmeasured as increasing channels of doing the business well.

a September. of price took be will increase we X.X% the benefit losing We year-on-year last

The we supportive already improvements So the and now versus strongly. year of our primary benefit be quarter. have mix ago growth start the Thus, will year are we the deliver drivers volume net will of from mix and sales trends a in are our only of net growth. points pricing and for sales seeing fourth we volume X continued year to goal need the next

seen to logistics delivery we our Ennis strong quality. in see the already continuing and and build continue improvement operating in in in cost QX as have We we scale expect

will in added XXXX that gross of experience have in will staff we the demand QX. the QX adjusted in anticipation and impact meeting However, we margin manufacturing of

We second backline Ennis. start-up for will in also incur the costs some

adjusted will but below a gross above us year media fast investment In [indiscernible] XX%. investment the of versus the As off have year a QX, result, get And quarter, quarter margin fourth we sizable we expect reinvestment help the XXXX. in in margin a slightly start dollar well the will be that ago. ago will fourth to

be first margin year, had However, level providing QX the the incremental we rate of the benefit. of will some media spending in half in below the

turn the me to year. guidance let Now for balance the our of

raise sales date adjusted to performance is and it of and we to strong gross far, logistics. believe what margin the appropriate so on and reflect seen to better-than-anticipated the our net we guidance performance higher QX have Given

turn me the of let balance guidance our Now for to the year.

raising QX Given the we what to net and it are far, to at $XX from is our and reflect we believe EBITDA to seen we sales our and by million, higher $X have $XX million on margin million. guidance strong date performance better-than-anticipated net raising raise to performance our logistics. sales million of adjusted Thus, to guidance adjusted the we so least and are guidance $XXX around gross around appropriate

you an for targets ready expect focus to our against are us and to strategic and XXXX XX% I give guidance growth. We XXXX rate yet, for formal on of growth should continue delivering but compound call to not our planning margin profit increasing

gross It next fewer have scale improvements year, year. quality continuing further efficiency of benefits important expect facilities, remain continue manufacturing costs and outsize our will to investors And while come start-up we'll benefits that business next us. We to resulting SG&A. to our in growth our the continue that in and note capture priority the is capture the and on deliver margin restoring improvement will to scale to in adjusted have in from we will profitability

consequences significantly construct stretch achieve ability our growth meet we and we and However, It can our to new delivery balance our stretch start sheet. lines now targets. must design, that over demand, at avoid impact the margin achieved up scale to ability to rate have of has our our

levels that are consistent with thoughtful In managing this target. long-term our regard, in are at growth our we very being

our Our more goal anticipated live have within resources. demand so than to and always to much that, we is existing that meet capacity our adequate not can

capacity. for to process new cost fully of capacity Our we has planning checkpoints multiple committed are the before new adding

install line commitments and and X by Ennis that the space the already demand be need infrastructure, them. X XX lines out new making storage Pennsylvania. South X have lines Effectively, are site mid-next becomes add building capacity Kitchen months that in South at at that X means our of capacity in need it. Pennsylvania, years. Ennis, the we will not another building in beyond sites only already within increments when cash from and we point year we'll of have from X. projects the only XX in our that to and we we days to this we for very will buildings Ennis We a while X more to invest our year. We of new existing closely need completed updating adding space, next infrastructure that we all gives that apparent it when current simultaneously and space constantly for or developing forecast only few Kitchen And Kitchens the the capital in in believe are we commit built of that We are and Phase plan when in Phase are or have the scope can developed capacity our next out are staffing the us flexibility to scale managing Because

operating needs 'XX. flow, our Our start With flexibility and on discipline, added remain balance ample and we XXXX have to some cash spending capital towards improved 'XX will will our goals sheet. commit our and good we for better strength provide that also fast liquidity margins convinced

power amount We expect support enough XXXX and more debt will of financing to to require than in traditional have a that. we small earnings

deliver of XXXX path have that way. some focus goals to year beat flow our giving on that are They the closing, to happy us need we very made absorb continue the added along we and optimism glide any cash we increased out. in changes to the our both The way put can that issues We we operational management ahead cushion positive in be our turning September short-term we parents. XXXX improvement believe with also will are and the the is XXXX. In meet goals or some those us

As including much chicken XXXX than a and we we year operation. is are up were we in processing ago. the Ennis end head XXXX, into running, X and stronger position

operating has of solid continuing dramatically almost Our and evidence improvement improved efficiency see every day. we

and is HIPPOHs faster. have customers that is Freshpet Household amplifying And a of investment. nicely and growing main new our becoming are penetration our meal. record Our even are more number growing mainstream more advertising fridges added

plus that, team we is long-term of our the have for All the made recipe success. to additions our

our to bullish very goals. are our That overview. ability and We deliver long-term about concludes future our our

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

Operator

Our first Goldman from is question Instructions] [Operator Ken JPMorgan. with

Kenneth Goldman

up not but you're for for the XXXX next sure, idea you're I know that XX% about did generally talking the I few specifically make aiming CAGR wanted I bring think yet, you over just that to years. is expected, general, if to going target at year, is for in on in XX% XXXX. things the come messaging if there but do messaging above CAGR next in XX%-ish you're as all, you're

So XX% if into too still that. can in still sense to reading get trying maybe I'm kind number? 'XX a and do you just of there's below I'm in any get that if to underlying messaging there much or

William Cyr

that, message current support of volume into you're our is growth. XX% reading little and mix The think that much run Ken. a would I rate

calls long-term Our algorithm for XX% growth.

no to good can fully part today. so on that's XX% think plan. what for about reason of us There's to the expect very We We're good would And not the be going growth deliver to see based next we business. we consumption. year momentum the seeing of feel

Kenneth Goldman

estimate follow-up. quick last November, I were And digit basis with if next you discussions into this I Todd, updated missed a call, roughly just for said What's you on quarter. your been some single early it, then an vendors think low inflation presumably have on And about COGS now thinking underway. the but you're year?

Todd Cunfer

Chicken to early is it I pricing component. biggest mean too the is Yes. tell.

will looks we'll that pretty gross good. like. margin flattish. Right QX. next about to But We month. what that look, very I things looking the in you going we more Obviously, expansion report year. know mentioned will Don't think it's next we on when have know color are the confident I be call, we're now, exactly give

We have from we'll the logistics. some think feel think fixed I nice continue to quality cost. decline, will about cost leverage great

So to very be costs margin expansion those dependent It's confident about some final next what really level of input on are. year. gross going

Operator

from with is question next Astrachan Stifel. Mark Our

Mark Astrachan

just maybe to start. Yes. Thanks, I and good morning, guess everybody.

do bit of on So breakout, similar you breakout have or on higher have 'XX? there a on of recall those? historically. half. and I you ability little how the points about track a much don't sustain Is with of previously, so curious first it maybe And into sort a much on talked think on how than the a sight we innovation. and about you being to X in contribution talk that you untracked line go-forward how specific can more to And at you manipulate each mix the piece, How basis? bit that contributor was do about that mix opportunity why sort think of and for about

Scott Morris

it's Scott. Mark,

historically, has maybe around X definitely of So typically a contributor we've year. is points what to seen per been mix X

kind of starting So and that's seeing. to and that year. volume you our too. that part non-measured thing that piece, that's add part other what online of expansion we're is of we're And of then all the this majority historical. the but also And channels. see club, starting the it of to obviously a We're been of is kind that's kind ton see of again to the And

William Cyr

add just me it. to Let

mix oftentimes of is a is of reasons this hasn't of couple the we why most our of good lineup. finally and And dictated product because our on of as One and in-stocks mix our been has premium been by that. have more Historically, discussion good years much capacity. have own. Fresh of year, the last over to their the consumer our it our From much the supply it's of been part part frankly, the And choose fastest-growing available we, lineup, Kitchen our --

is the through they franchise able platform And as migrate through historically. to up so the or have consumer the brand naturally

Scott Morris

more to in. kind piece that's us people then bulk Billy or And nutrition. to with mentioned bring think, I'll some it starting we innovation And additional We the think that, then opportunity that's, time. portfolio. buy to as cases into also in is complete introduced we're add the rate great of over called mixed -- a going introduce call, overall one help we we've to And

expansion consumption, help addition see of buy with in And us expansion mix actually So going see we'll of with kind I probably as that, overall that's and rate we think to to penetration. that.

Mark Astrachan

sort the And HIPPOHs. you nonusers on of to know them and And recruitment? the the of just about on generations talked you maybe what there it. do you piece many building the on or Got And last about and in think terms in continue of of competition growth. How what do incrementality driving terms composition there how out income about are to users? related

William Cyr

younger. mean, first likelihood the in fairly the the that Obviously, I attached Freshpet skews been broad-based. of is interested Yes. we being presentation growth group has highest you'll all, the that of in see

that's Zs and the the Gen And forward. in and making and the is Millennials going progress. from And U.S. about where the most So dog it's of we're for that's Zs I the obviously and Millennials where really proposition where Gen the account our coming ownership think today XX% growth resonates.

the think as Freshpet baby is I that is. a Z call choose to I number likely twice would as Gen is boomer

to so help good quickly. tailwind expect So -- demographic more we we to see that's much grow haul, that think expect this. a going the cohort And long us with that there's we'd to see very over fundamentally

Operator

Parikh with from Oppenheimer. is Rupesh question next Our

Rupesh Parikh

on well? just there regards plan initial in as as be you how efforts, next marketing. to year, to then marketing just just any for you XX%? your the any spend, consistent whether plan And to curious the So responses thoughts Or to look towards your thoughts

Scott Morris

I'll I'll response of and the the to piece, it over kind answer marketing to on planned spend. the turn Todd the So

the the have consistent we've really growth you we we over nice, and and of see bit place. it, as that brand portfolio the So see the expansion deliver been incredible and put Billy been Todd, the penetration marketing I'll the mainstreaming bringing to to a little And this really and call, able mentioned to to Freshpet in time, idea to talk We continuing concept. time food pushing plan penetration, of that communication. in the kind responses really basically, marketing and really consistently advertising on I over about spend. kind of refresh mainstreaming of the let think And and able

Todd Cunfer

number cycle And for Yes. excited next will that that it out, way at million our I'm will percent bring media start largely it we're early plays over still be years. really bringing of next anticipating the obviously That's in $XXX the I able which a to we'll as 'XX. spend for with point, over the for few us down the year. mean, little grow on about. bit a sales year. sales planning That budget

to XX% years. to budget sales. about able to right now, that the know, media from the really confident is we'll with in And But you do get out growing As goal I'm to about X%. enough be our have in

Rupesh Parikh

maybe And question. just Great. follow-up one then

cash very So your strong operating are flows year-to-date.

do that. thought already guys and you point to X at think $XX above could I $XX you're million million you

of Just to for balance think about the how the line any updated year? on expectations that

Todd Cunfer

capital. Yes. QX. strong we'll I final -- working very obviously on mean think be in working We depends had capital I

last of that is can a I for operating put EBITDA, discipline million one team timing, bright spots, year. I only look, the the but in but net doing was I I'm $XX impressive. think flow we're really bit the think, do not cash that mean least anticipating sales much the job of little has the there. has better we the year adjusted the this and And a been at and

we're off good to So start. really a

Operator

is with Benedict Our Peter Baird. next from question

Peter Benedict

first So here year the on placement big momentum. in fridge question, 'XX. Obviously, a just

the that second about thinking as move we placements, into but kind you're the maybe not also fridge of third how 'XX, and just placements. new Just

are how Just you about thinking that?

Scott Morris

fridge in with. really and just progress well third placements. made a mean, some we're year, record it's it's even doing this And cases, year year. for a we've It's fridges not I first Well, incredible a second banner fridges.

we stock the of portfolio and allows power some weekend, lower some current kind bring -- second on do kind of out things high-volume in we're piece of adding market. continue construct to out overall on of into a the holding future as it the many on, to us of innovation stores. We our but really we where expand the have We that we when that, in sometimes expand into also over that the inventory fridges big being see lower

that's of So really think kind a really important and piece. fundamental

we're to the XXXX historical over next would but but ready any to and fridges, of year And would numbers, I -- up not kind more Going a I think forward, levels. for expect return I put maybe on we'll of incredible and kind were we what in XXXX benefit business even entire platform and brand. to the years, the an out and X X have company able us to to the of build the do give

Peter Benedict

that, got No, follow-up channel. with the lot be of not are you've mean, that makes equal, all And created club I to a sense. and Scott, momentum I a -- new would stores guess

that, of kind at within club would of that terms this and duration expanded you fully point? channels of you kind of of durability curious or Just maybe the the presence in say else anything partners penetrated not

Scott Morris

Sure.

benefit the to first best look, great the year made yesterday same-store significant expansion delivers is the So we've decade growth. club. it in going to joke My last that constant every increases progress. years. put multiple for as time had a year, in single that get We've is We're because this for fridge of on Freshpet the and sales

will that or extent. to I oversized supersized be it benefit of the channel and get think So we'll the some club

of same-store year, XX club might sell. if will bridge go be on a average higher an that that goes or on So rate after basis, points whatever will sales it typically a grows a it XX% kind at that up if up

we that. like So

a to a to thing and opportunity -- for and there, but start deliver different have a partnership We their of time obvious really very clubs. is The customer, it's Sam's. X other see that appropriate think, over tremendous is at type great developing a out we expansion Sam's we over I for mean, opportunity proposition us really are Sam's with time, there's

Operator

English Our next with question Goldman Jason Sachs. is from

Jason English

about in the take estimate us for consensus we're growth to XX% year. to X lines first think which questions, confidence all trying top the going the I'm I with back next of to get

you're see. that confidence see data, don't for know based and It's the you to tracking below, mentioned Nielsen the big particularly little harder box used on us we not mix a is the confident or sawmeasured see we contribution get the we everything strong. You which because to is pet

on I So opt already a product. mix component, launching and you're make think pound a obviously, back addressed, points Shouldn't into expect consumers hit for really I of want again to price but per come turn in them have headwind, that coming that therefore, we mix, nice question The one. they're sure because contributor, some a we your important. lower and been to back to X

XXX basis on And other two. then know tape. There's I'm Mark this, points, Costco the news question And the distracted. sorry, asked I the was contribution. I but

net same year incremental the going It to neutralizes add getting and above. to are over You start growth build-out stores doesn't number to of got as this next and just you that. year, the cycle continue

that So what's do the points basis incremental how source of Like keep the we coming? growth? incremental XXX

William Cyr

Let at me take shot a this.

part, all, stores. still of first we're the collection So of the not Costco on Costco in full

of XXX. I the think Costco we XXX were of like end quarter, at around or the something like the

we're grows have rapid early long very we of they're And then that rate, a So still and runway at the stores stores. life. a in relatively new in their of each

quite that a for expect another are they trend make. certainly that I in that's for yet Sam's, to when would as us that opportunity mentioned, to Costco some with they So but play continue we becomes not that time. And just decide Scott like

the migration of to that mix number migrate the to the yes, new part, some expect that so especially on of we've that, gotten other and product. what far Kitchen our we the as see But consumers the more products complete we've than nutrition From franchise, some seen distribution is we've the premium added will offset On by is the lineup. of do complete Fresh more product

So mix be gains a on rather continue than headwind. to mix balance, we there's believe that

the market look product not the complete obviously seen through still like, the data dilutive. what the in the we sales end We've feel We've and we very Our nutrition of is it showed September. in comfortable October. data, had that you

Jason English

I way, by value-oriented great sure product. profit it's to appreciate And or the that I to see want open I congrats those sticking That's strides, should good recognized. neutral, margin stuff. with penny profit you operational and the driving new obviously great because the improvement, on that. make that penny margins, all dilutive? on making neutral, are the margin dilutive And Is more

Todd Cunfer

margin It is neutral.

Scott Morris

has the the to those lots across We're the able lot adding already. and opportunity. a portfolio, and too. end was up called of have think extraordinary. other been the spectrum items there's I has people with portfolio And great to open are far, spectrum. some it dog bring items. great watch trade-up keep more that going end so on We're think higher people growth extraordinary a a seeing consistent the out on example available. again, penetration, of on new basis. on then the that's Large And excellent. Those it performance entire more more mix of our . that results and where is we been So very using It's we're been portfolio from Performance into the things

we've cases as going all And So and the got that start change the of these business, and and it's [indiscernible] to, main to meal. mentioned going bringing in kind earlier, dynamics of adding it going eventually then like these packs. to more more I and we're mainstream

Operator

from with Lavery Michael Piper is question next Our Sandler.

Michael Lavery

by XX%. weeks up the growth this end XX penetration household nutrition at looking have Just And household consumer already the before in penetration lowest last bucket. income that launch, you complete

how you with how And you higher about there's of If really do that is do already magnitude good the see much momentum, that this that launch, And go? should much a what's think driving that? guess I some pace? where so we up kick And think that? faster to

Scott Morris

part also we our looking incredibly offerings for in strategy that we they're and make want as benefits and So sure products have really of price consumers points, wide of portfolio look, an different to to different products. what time, over span different

out to So sure we there. have everything make we want

One And point value-oriented bit of of that some out. a bring the sometimes, more products opportunity we get now we things and and scale, do to to price shock that for consumers. is as is are piece the even what have more opportunity that we little that we more a the know is initial build the have

them every migrate single So use time of the of over and kind let into is goal to our the bring products day. up through franchise, migrate more them then and

Michael Lavery

helpful. That's Okay.

of differentiation or this of consumers' I'm it with as complete good others, your what and proposition these the understanding, conveys nearly way this would And message. the value slide but be? the the nutrition to package. understand portfolio. for what's the doesn't understand could Obviously, some point do But for obviously, bit them different and distinctions at the rest almost how right Just how the that price between say of looking they're a been they have

Scott Morris

mean based lot I people on products, of times really, a on price assumptions make points. it's definitely --

one leading out I getting of that's the off. kind is incredible which have nutrition bit aggressive we're this but and into be more of subtle, going But a piece Freshpet, that dogs portfolio. on So and keep of, proud standards. It offer meets whole feeding an in. rotated standards. of people grains, Freshpet probably having very into be incredibly brought exceeds be high on and my a it's complete we it's complete also value, is the but #X some out carbohydrates -- product the an our is little is It's point that It's can it small and can called front. the our product. And to And key price indicator of kind and a can it. very of to other we pieces It's we've it focused. will

Operator

with Our question from of Spillane next is Bryan America. Bank

Bryan Spillane

is I but want increase One the X really think in like all on in is inflation contemplated. make you terms another It me. made, today ones productivity. think of just where quick and for and Actually stand price I sure doesn't -- sound just cost is inferred this based clear, to commentary I

just correctly. I hearing was as I that that, sure make to want So

William Cyr

obviously, chicken, sure. pricing we least read the of suggest can't part mean, our be say taking But I until our the year. will Yes. of for not price in we that not at [indiscernible] next first we would

commodity a costs we've from about already comfortable small locked. feel and on portion the the we So our markets where commodities sit that we perspective based of

Bryan Spillane

balancing you little what the can second make Just about demand demand? like XX%. does in discussion dials do you, And don't was right? chain, the How not not the the I of to how about So of Okay. Bill, the know, are guess, you're the remarks, stimulation right, a more you that? with question, the bit how like? actually do supply there look what basically, sure prepared kind you terms overheating in turn talked overstimulating about you then talk bandwidth, exceed much And could just I dial a

how of Just trying to get kind an approach understanding that? you of

William Cyr

predictable do reliable of Yes. benefits I the promotion, CPG. and is businesses don't trade business of probably I've plus the this years any one in that We discounting. my seen of mean one no XX-some it's of most

of and comes driver growth biggest advertising by single the from vast far, the So the investment. majority

contribute investment. it you dial and meaningful see literally our you And the not volume on, if will users that adding so months. over you the It's you advertising but it, turn turn coming on tomorrow, is it start

literally so which needs advertising we can way that's going our spend we And bulk the going spending control is And that's of where are time the be. to we laying the demand forward. in think capacity our what against

of a we So or in capacity prepared X would year closely it fine the or give comment kind is would you're fairly the a in dialing the put us line and on made about would the in it. that us X it years X ago, we last and reason remarks years

a quickly of in at capacity than through we've scale line the a Now a can burn when you you that put pretty in, achieved, the line less year.

an planned thing because XX% and have basis, XX% the this can't won't for infrastructure so just in on afford And place. have to we ongoing deliver you

installed. the have equipment won't just You

our do are Lead can might to we we're don't if or construction going staff to last takes have we XX want XX ourselves by equipment that. in points find suddenly could done of But years, up X again, couple is we times shipping days. the quick. expectations a Staffing long on short time. long, as We over outperform

headroom very XX%. top planning it, want headroom bit pushing plan that, be for, So on point, certainly little at a growth. and but call a of XX% we we're for of on top that, of don't There's comfortable this we little to bit of over

Operator

Bill is next from Our Chappell with Securities. question Truist

William Chappell

you get and year cadence normal more back is do some probably especially taken there of year. forward? going pricing, next on some pushback more far? you've every to bit just a on two, importantly, think I know One, then the pricing some little Or doing to so you a you And pricing do promotions you have move Just going of attitude? product mean Or we to the in line than as the kind into different even at kind see a may the the side But I of move everybody think you your change 'XX? hold is that goods. premium pricing competitive increased landscape dry super premium, do

Scott Morris

softer as me we are let so kind the first. looking Bill, about talk of have at I volume it. category -- gotten has

William Chappell

Category volume.

Scott Morris

not strategically But I'm again, very we haven't some anything historically, of yet. the that been seen that someone pricing Yes, we of kind promotion, as we kind appropriate it doing. people Have and are keep do of in, waiting the have pricing But over start been category some we kind not but like of growth increased think targeted there. take and it. think our and lot. From I think try it, see all will volume we seen you'll little very you'll for really bit point, in I some Yes, a At softer, of is to Yes. when I we're everything a dial. standpoint, very, seen it, very on gotten interesting. has see layer and kind sorry. of not It's pressing there's what

how market. do just higher we the of always just is pricing or we little products in kind from the opportunities something bit we'll at. be price that's increase. X% portfolio that levels. the there? we to basically across modified the And will of and changed and to But different in on a or price do It probably going been here at put We've of brought a couple a Yes, time that the and new of items into look kind that pricing. So points over we've lot an we've have X% hasn't board order done taken

William Cyr

could margins focused there yield, is that us would I over opportunities last, on expect we throughput more really in whatever key efficiencies it, the the also to some much to built just that was fairly efficiencies the supply that now you organizational to sizable strategic year driving is used buy manufacturing we sourcing. have more on do and the for increasing capability in take call improve have we add from of gross throughput, Bill, available. And bidding chain ability operation, competitive whatever driving that, components much the there's get or to to

at and could all mean but elements great. will the some we mitigate for for us won't the to those of So pricing won't take pricing. try help need doesn't it further point, It be need some as

William Chappell

And Got And channel. back of you've got know months, it. give we've then seen lot store but of the switching to we on changes the the mean us few club over can questions of mean are. I benefit, where maybe idea some an at I any past level, the a you I

more if you, not I'm XX sure of like way. I want than And think seems behind front I'm looking regions. just you're opportunity And I the to there's but in at every make Costco you has it sure store. in right

Scott Morris

tremendous there's that believe We front in opportunity of amount of a No. us.

store. pretty This you X, year has pretty the and year obviously, all, into a amazing get been of First expansion. significant

year. going call the of into really Plus we're to way benefit have Costco through QX. next the all of the So it, that X/X we're,

opportunity other But be think the biggest food in consumers for going really into and in Canada and more to even another into helpful. that Sam's. single shop to we're even I Costcos be this areas, provide -- not then is some only there's more the come another Sam's And then touched piece exposed over there's right pet in U.K., the to So group domestically, that time, could Sam's, and Costcos. like Mexico earlier, proposition X and and we on but plenty of us at

Operator

is with TD Our question from next Cowen. Rob Moskow

Jacob Aiken-Phillips

then quarter. Rob. on Aiken-Phillips question. broader just clarifying Jacob is quick have a questions X for This I the and Congrats

was cost Or said million spend, go second stay where And today currently So and media Is freight it normalized be costs, like still the $XX then it levels? you would and was does half. update your assume guidance the back are fuel they or that will Or an for first, last for up true? include? to it that? more the quarter, that logistics stuff in to that

William Cyr

media Your question on first.

approximately up We'll yes, about a spend, QX So up we of in last in QX be $XX only $X couple year. were million million million year-over-year. dollars

we're minus QX, excited So spending we'll million about. plus really be the kind $XX range which of of in for or

QX, between see little as not some off a us sequentially we importantly, We more QX of give seen a will we've XXXX. Logistics strong and big but bit help it other had uptick to a QX. cost, an get little significant, think change We've in go but holding don't of diesel us in some areas. I a a bit favorability steady. in into start been

And good about very expense logistics so the now. we're feeling right

Jacob Aiken-Phillips

to back Awesome. media. And then just more broadly

like are it's you'll You of next you media of and forward, kind it that to But you year, that $XXX kind million to sales, media above my X:X on expect growth. understanding it sales. try with close said grow maybe sales to expect sales rough your going But leverage math. then when

how in generate media the with So sales sales? expect growth to percentage lower a do later XX% this of as you years

William Cyr

certainly scale out. as further we There's get benefits some further and

seen that amplifying things more you build the is and of the your One the we've get the network out advertising. visibility you fridge

amplify So stores advertising. fridges with X the X and

lighted think in new thing, the a we had go of to value sitting the successive triple or net excess our And every the effective fridges, fridge so increased and driven in was that advertising visibility. of continues amplify fridges has doesn't base we good what double fridges, And of Yes, year. away. but of advertising the a that store, is because retail installed for of so the growth part gotten planned reason that

benefit, some the frankly that's benefit get think get there to the we well. but also media. where going We'll So in scale we're of some as

Scott Morris

on Yes. XXXX country, sales, reached And XX% expect to spend, goal I've mean, the said of a we of CAGR. before, million $X.X and just down basically X I we that's and resource in we which brand, drive for if this X% the think $XXX get X both around media powerful media spend as perspective, billion

Operator

Our Salera next Jim question is Stephens. from with

James Salera

in in that like expanded in on I the ask fridge? offering the front does those? the store, of put as taken in retailers that fridges wanted that What to to a the in kind way complete to dog which nutrition. of large offer that look to distribution as is well replacement out SKUs Or dangle get of second motivate them

William Cyr

It's space. have the a out discussion new deep about we second as up a It a adding fair fridge. typically very really Yes. will -- with build takes we of amount products, retailers

in to shelf You're in fridge typically least X full feet it dedicating order a of at a packed get kind to on out. a

up takes fair a it So space. amount of

never that well. out kind take extremely to You of are items performing existing want

even it really our third time. some fridges big fridges really, is a second over into of push our and go So to

James Salera

XXXX expense as there. And helpful. on maybe of than kind but just piece, forward? That's And you people we Should logistics guys think touched think I then, results delivered Okay. that better on a impressive the ongoing Todd, rate follow-up. the guys really X% of an you sub that sustainable moving I current -- on of logistics know have just of maybe kind you delivered basis? target the

Todd Cunfer

to I in out, laid we beat we've of already of Yes. is laid one X.X% February. logistics your back Obviously, target. spots that a we out point, goal the mean bright

this be what being below at from diesel good we're right feel well. we costs for as reasonable there's now, changed, from see rates below X%. year if spike will think something big diesel time, about X% time or in that And we long periodically term, higher. to the has with we X.X%. sub will drive we or we but a So and very next could obviously, yes, it point can be long term Obviously, that But lane confident

James Salera

in last I then And maybe one if helpful. could That's sneak question.

to growth that? an consumer And On feed? are value bit kind would see then by been. the was premium us from surprised you breakdown budget that of I be income a consumer is what you maybe much a buying a SKUs it's as give a tighter pet low of just has still the proposition Can guys honestly that of that household offer rate as of idea income, driving the little perspective, up

William Cyr

Jim, Yes. in all of significant the our in income the if always household, income I reality struggle treats is funding a data the they that things same have that lower it left they size single with in of nest one fall is the providing it's so of have bucket by is number might households, and may them be, in dog. the the might who be and income a consumers kids the smaller are dog sized the that

fairly younger in that the but the in spouse. the most significantly discretionary have Z dog they or despite They our have who the Millennial Their expenses don't income. And available towards low SKU so are have Gen a bucket, have relatively total consumers is is income significant overall they relatively given life. households, a important whom their don't the of thing and are car, for a number we higher confined. And thing narrowly only

Operator

William Our Blair. with next question Anderson is from Jon

Jon Andersen

X ones. Just quick

On the productivity you're work, congrats on the benefits there. delivering that

Fresh getting margin the XXXX, Future X% to look like to closer goal by in XX% perspective. EBITDA looks this it from year you of As margin EBITDA to an come will

then gross kind When the lower follow-up a points going are the the you in it the be you to inflection Is do margin little So the that than talk of years. it where ramp hit in forward? next did frame? see mentioned during margin an expect sustained improvement line? the Todd, percentage think path you of you I Can years time the think expect fourth -- gross that we improvement you is, you sequentially to the point X quarter quarter. third sequentially what bit drivers it straight and about some Does ramp XX there? And over you've got out about

Todd Cunfer

question take let's on first your So margin. EBITDA

need of So basis basis each which to. terrific. obviously going We're and to yes, not EBITDA is to this don't look, year, every get XXX year get margin improvement we're obviously going and points points around XXX

that mentioned going So come next that where you from. is to XX points

X have has it gross percent gross about margin obviously, to come of for We're So margin. year. to going XX.X-ish from this

go. to have basis about So we points XXX

strides grow in bit half couple of we've comes leverage. hundred little quite more obviously, the tremendous but about a as a little made We there. half So probably the it. that We sales, come not than Obviously, percent then from of basis room SG&A or more got bit spend points. logistics, significantly. down a that's frankly, will to And a it, of just media rest talked of

XX%, If do growing more you're high than head to other need expenses and grow digits. we single not count

a of as leverage tremendous SG&A So amount well. there's in

we're nice cadence to to confident scale are well, that, to very is the execute with think good our lines a our those have look, the -- too and really to got that And So commit Again, margins we'll business improvement, we be really, year. Obviously, margin we EBITDA productive X hard but and and execute and and a margin of I'm we XX I efficient more to I some predict. to part early will ability it. cadence have visibility gross occur. The it's really in to the components. bit that both get on the trickiest little we'll number. Again, -- really years the points. debt have Again, can to confident gross next

chunk EBITDA predict. to think very is another will year. So margin cadence next exact that. average the we do But got basis points XXX to on of of I Again, hard I confident that get per we'll year. nice get But

Operator

further There like time. I to over comments. any are closing to this Billy floor for questions hand back at no Mr. would Cyr the

William Cyr

yourself everyone. you your which appearance dogs. of Freshpet. keep up about much feed in leave patience to They reward listen an the you, The I'd Thank for conversation, interest. themselves, Great. but them you being humorous you while this about Thank with and and thought. talk you talk interested very I'll we add, them [indiscernible] the never to about for

Operator

concludes This today's conference.

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

Freshpet (FRPT) 6 Nov 232023 Q3 Earnings call transcript