4 th Quarter & Full Year 2016 Supplemental Presentation - - PowerPoint PPT Presentation

4 th quarter full year 2016 supplemental presentation
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4 th Quarter & Full Year 2016 Supplemental Presentation - - PowerPoint PPT Presentation

4 th Quarter & Full Year 2016 Supplemental Presentation Strategic Operational and Financial Update March 9, 2017 1 Safe Harbor Forward Looking Statements forward - looking This presentation contains statements that involve


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4th Quarter & Full Year 2016 Supplemental Presentation Strategic Operational and Financial Update

March 9, 2017

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Forward Looking Statements This presentation contains “forward-looking” statements that involve risks, uncertainties and

  • assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the

Company’s results may differ materially from those expressed or implied by such forward-looking

  • statements. All statements other than statements of historical fact could be deemed forward-looking,

including, but not limited to, the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate and any statements of assumptions underlying any of the foregoing. These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future performance. These forward-looking statements are based on certain assumptions and are subject to risks and uncertainties, including those described in the “Risk Factors” section and elsewhere in the preliminary prospectus for this offering. You should read the prospectus, including the Risk Factors set forth therein and the documents that the Company has filed as exhibits to the registration statement, of which the prospectus is a part, completely and with the understanding that if any such risks or uncertainties materialize or if any of the relevant assumptions prove incorrect, the Company’s actual results could differ materially from the results expressed or implied by these forward-looking statements. Except as required by law we assume no obligation to update these forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in the forward- looking statements, even if new information becomes available in the future.

Safe Harbor

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100 Day Review Conclusion: Significant Potential to Grow . . . but we have underinvested in marketing

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  • Expansion complete
  • New lines running at parity
  • Major investment in technical

capability

  • Strong focus on quality
  • Significant capacity to support

growth

  • High repeat & brand passion
  • Low awareness
  • Low Penetration
  • Strong marketing model
  • Outstanding message
  • Extensive network & scale
  • Established & broad product portfolio
  • Highly motivating retailer metrics
  • Established sales & marketing team
  • Significant white space

Longer Term Potential = $300 Million in Net Sales as soon as 2020

Consumer Appeal & Marketing Model Customer Support for Distribution Operations Capabilities & Opportunities

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Freshpet Lives at the Intersection of Two Very Powerful Macro-Trends in CPG

Humanization

  • f

Pets

Fresh, Wholesome, All-Natural Foods

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Freshpet Proprietary Position

Only Chilled Pet Food

Distribution System

Only Fresh Pet Food

Manufacturing Capability in the U.S.

16,600+

Freshpet Fridges

Proven Marketing

Message

Demonstrable Product

Preference

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We Operate Differently

Delighting consumers with fresh food & our company ideology

Environmentally Focused Employee Engagement Community & Consumer Engagement

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Freshpet Has Seen Significant Growth Over the Past Four Years, Driven by Both Distribution and Same Store Sales

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Distribution & Sales Growth May 2012 – Dec 2016

Total US Multi Outlet IRI (4 wk.)

10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 50.00 55.00 $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 May 20, 2012 Jul 15, 2012 Sep 9, 2012 Nov 4, 2012 Dec 30, 2012 Feb 24, 2013 Apr 21, 2013 Jun 16, 2013 Aug 11, 2013 Oct 6, 2013 Dec 1, 2013 Jan 26, 2014 Mar 23, 2014 May 18, 2014 Jul 13, 2014 Sep 7, 2014 Nov 2, 2014 Dec 28, 2014 Feb 22, 2015 Apr 19, 2015 Jun 14, 2015 Aug 9, 2015 Oct 4, 2015 Nov 29, 2015 Jan 24, 2016 Mar 20, 2016 May 15, 2016 Jul 10, 2016 Sep 4, 2016 Oct 30, 2016 Dec 25, 2016

ACV Wtd Dist Dollar Sales

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Recent Financial Performance 2013-2016

$63 $88 $111 $128 39% 27% 15%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

$0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 $140,000,000 $160,000,000 $180,000,000 $200,000,000

2013 2014 2015 2016

Growth Sales ($ in millions)

Fresh Growth vs YAG

Fresh Pet Food Sales and Growth Rates

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Increasing Repeat Rate & Strong Consumer Affinity

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58% 60% 62% 71%

2013 2014 2015 2016

Freshpet Consumer Repeat Rates

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Our Biggest Opportunity

Freshpet Rachel Ray Blue Buffalo Purina ONE Cesar

Awareness (Aided) 35% 52% 86% 82% 70% Penetration 1.4% 3.6% (dry) ~8% (est) 5.2% (dry) 3.4% (wet)

Source: 2016 Brand Tracker, IRI 2016 HH Panel

35% 52% 86% 82% 70% 1.4% 3.6% 8.0% 5.2% 3.4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Awareness Penetration

Freshpet Awareness & Penetration are a Key Focus

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Key Learning: Time to Shift to Rapid Scaling

  • On trend product
  • Reasonable margins
  • Low awareness / high repurchase rate
  • Ample plant capacity
  • Financial flexibility
  • Established business model
  • Proven marketing program
  • Installed Freshpet Fridge base

Opportunity Capacity Capability

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Organization Capability and Focus

DISTRIBUTION FOOD PET MASS OPERATIONS SCALE & EFFICIENCY EDUCATION AWARENESS RESEARCH & DEVELOPMENT

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Sharpen Focus & Drive the Core

UK Baked Refrigerated Pet Specialty ~19% Refrigerated Food/Mass/Club ~77%

Focus on US Refrigerated: 96% of Current Net Sales

% net sales breakdown by class of trade/product line as of 12/31/16

Freshpet Net Sales by Class of Trade/Product Line

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Strategy Tactics Result

Drive HH Awareness & Penetration

  • TV & Digital Advertising
  • Accelerates

Penetration Growth Accelerate Fridge Placements

  • Change Selling Approach
  • Make Freshpet Essential
  • New Fridge

Placements Growth Accelerates in 2018 Strengthen Gross Margin

  • Convert From Building to

Optimization/Efficiency

  • Drive Yield, Throughput,

Reliability

  • Adjusted Gross Margin

Grows Several Percentage Pts. by 2020

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Investment in Media Velocity Increase (+Revenue) Distribution Increase (+Revenue) Plant Leverage (Incr. Pounds Produced) SG&A Leverage

Cost Savings

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Growing Into Our Scale

27.0% 25.2% 23.4% 21.6% 19.8% 18.0%

17.0% 19.0% 21.0% 23.0% 25.0% 27.0% 29.0% $150 $189 $210 $240 $270 $300 Infrastructure as Percentage of Sales*

*- Leverage adjusted for projected inflationary growth of infrastructure

Sales ($ in millions)

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1Q17 Strategic Tests Implemented

Advertising and Communications

  • Strong and consistent returns driving POS records

New Selling Approach

  • Developed new plans for several top customers

Cost Savings Opportunities

  • Identified several points of cost savings opportunities
20 40 60 80 100 120 140 160 $1,300,000 $1,400,000 $1,500,000 $1,600,000 $1,700,000 $1,800,000 $1,900,000 $2,000,000 $2,100,000 $2,200,000

Same Store Sales Growth & Advertising TRP’s

2017 TRPs

Advertising Model

  • Advertising

has driven significant and consistent growth over the past 4 years

  • Q1 testing supports model and provides us

with investment return metrics to build out

Same Store Sales

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Over the Past Six Months Growth Has Started to Return to the Business Primarily Driven by Advertising

$2,300,000 $2,400,000 $2,500,000 $2,600,000 $2,700,000 $2,800,000 $2,900,000 $3,000,000 $3,100,000

IRI Multi Outlet Weekly Dollar Sales

Rolling 4wks

  • Adv. flight
  • Adv. flight

Q1 Has Provided Us with Insight Around Additional Testing

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Growth is Accelerating Behind Advertising

Latest 4 Week Period IRI Consumption +23.3% vs. YA in MULO

10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 50.00 55.00 $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 May 20, 2012 Jul 15, 2012 Sep 9, 2012 Nov 4, 2012 Dec 30, 2012 Feb 24, 2013 Apr 21, 2013 Jun 16, 2013 Aug 11, 2013 Oct 6, 2013 Dec 1, 2013 Jan 26, 2014 Mar 23, 2014 May 18, 2014 Jul 13, 2014 Sep 7, 2014 Nov 2, 2014 Dec 28, 2014 Feb 22, 2015 Apr 19, 2015 Jun 14, 2015 Aug 9, 2015 Oct 4, 2015 Nov 29, 2015 Jan 24, 2016 Mar 20, 2016 May 15, 2016 Jul 10, 2016 Sep 4, 2016 Oct 30, 2016 Dec 25, 2016 Feb 19, 2017

ACV Wtd Dist Dollar Sales

Latest 4 Weeks Ending Feb 19, 2017 Latest 12 Weeks Ending Feb 19, 2017 Latest 52 Weeks Ending Feb 19, 2017

Dollar Sales % Change YoY Dollar Sales % Change YoY Dollar Sales % Change YoY Total US - Food $6,611,633 25.0% $19,105,230 23.6% $76,773,072 19.2% Total US - Multi Outlet $11,884,581 23.3% $34,626,176 21.1% $139,945,312 17.0% MULO + Petco $13,297,545 20.5% $38,762,540 18.5% $157,836,080 14.8%

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1. Better align with key retailers on their strategies using their data to make Freshpet more strategic for the category and store

  • Help retailers achieve their broader objectives
  • Create unique and flexible assets to drive business at each customer
  • Freshpet Fridge as a beacon of quality

2. Leverage increased media investment to drive velocity and support new fridge placements

  • Increased penetration from media justifies expanded distribution
  • Demonstrate that Freshpet sells well against a broad range of demos

3. Deliver exceptional service via remodeled Acosta relationship and fridge maintenance program

  • Reduce out-of-stocks and improve in-store appearance

Revamped Selling Approach is Gaining Traction

Freshpet becomes a strategic necessity, not an opportunistic luxury, in the pet food aisle

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  • Increase:

− Yield − Reliability − Throughput

  • Drive simplification and standardization

Drive Cost Savings and Adjusted Gross Margin Improvements

  • Adj. Gross Margin is a non-GAAP measure. See the Company’s March 9, 2017 Press Release or 10-K for more info and reconciliation from GAAP to non-GAAP measures.

Goal: Over time, increase adjusted gross margin to pay for increased marketing investment by converting technical talent from building capacity to optimizing efficiency

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Strong innovation at Freshpet Kitchens provides revolutionary offerings and a broad product platform

Freshpet R&D - meeting consumer needs and driving production optimization

Rolls Single Serve Treats Roasted Meals Shredded

  • Optimization
  • Improvement
  • Efficiencies
  • Scale

RESEARCH & DEVELOPMENT

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23 5 10 15 20 25 30 20 40 60 80 100 120 140 160 180 200

Growth Rate TRPs

TRPs Growth Rate

Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016

Digital Support Plan TV Plan TV Plan

Accelerating Growth Rate

Investments in advertising, distribution gains and new products will accelerate growth rate throughout 2017

2017 Advertising Plans and Growth Rate by Quarter 13%

Change vs YAG

20 %

Change vs YAG

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Future Economic Model: Profitable in 2018

FY 2016 FY 2020

Growth Rate 15% 15-20% Stores 16,609 23,000+

  • Adj. Gross Margin (1)

49.6% ~52%

  • Adj. SG&A (2)

43.1% ~33%

  • Adj. EBITDA Margin

13% 20+% Media Investment ~6% of sales ~9% of sales Advertising Payback 1.5 yrs.

  • Free Cash Flow

$(13.9)M ~15% of sales

(1) Gross Margin adjusted for Depreciation and plant start up expense (2) SG&A adjusted for option expense, CEO transition expense, and warrant expense

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1. Accelerates growth rate from 13% in Q4 2016 to 20% in Q4 2017

  • Proven advertising campaign investment drives the growth
  • Strengthens the company’s barriers to entry/competitive advantages

2. Improves the structural economics of the business

  • More quickly absorb the fixed infrastructure costs
  • Increase the adjusted gross margin run rate by 1.5 points by end of 2017

3. Sets the company up for significantly higher revenue and adjusted EBITDA in 2018 and beyond

  • Year end run rate adjusted EBITDA will be 50% higher

Summary

The Feed the Growth Plan more rapidly scales the business – creating a stronger and more attractive company in 2018 and beyond

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Rapid Scaling

Delivering Sustainable Competitive Advantage

Established & Broad Product Portfolio Impeccable Consumer Fundamentals

First Mover

On Trend Brand & Company Manufacturing & Distribution Scale Installed Distribution Network Free Cash Flow Marketing Model Operating Expertise

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