Freshpet (FRPT) 5 Aug 192019 Q2 Earnings call transcript

Greetings, and welcome to the Freshpet Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Katie Turner for opening remarks. you. Thank

begin. may You

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

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

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

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

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

call to like turn the Cyr, over Officer. Executive Bill I'd to Now Chief

our I overview financial financial performance, business results. To provide provide and and highlights Thank will will then our everyone. of recent you, good on afternoon, Dick an begin, Katie, and detail greater

and be Scott to Dick, answer I, available Finally, will your questions.

the pleased Feed with in quarter. very the delivered the are the scale We that growth second sales Growth our benefits plan and

penetration in also years, increase in largest creating household a record several growth ACV for sustained distribution our strong in and We foundation delivered growth.

dedicate Based are these to Growth which our with of attracting of the Freshpet guidance, we Dick That retailers for and they our results year, a expand of are clear and more essence is cost are very working. from and on of benefits strategy, driving amount is raising in we Freshpet, detail. outlook the discuss the At are new to space XXXX our significant the results strategies virtuous Feed It will that significant consumers, we our scale. our inspiring balance number cycle the far. pleased thus added

Our way feed enabling to their the of the of in scratching we the way category, have of enabling similar pets change to is the pet pets parents to into that the their surface family. Freshpet We that strategy they food members is a us invited change their lives and the opportunity that are and many to pet other feed and dogs more believe just homes. cats firmly feed families,

grocery, XX% growth growth original up in XX%, the guidance of XX% measured The year. mass with us million the our exceed that XX% broad-based of sales box net result a growth delivered, and XX% puts outstanding innovation grew As and XX% and behind pet. in in on our growth in planned we've to QX track investments, retail $XX.X presence Nielsen Mega-Channel growth for big consumption advertising meaningful to was

accounted for growth. year-over-year the than velocity sales more XX% of Same-store grew and XX%

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

with like home for for Curbside quarter rapidly was business, includes through which in-store and key X.X% our up that and Our business. customers, business e-commerce network. than AmazonFresh fresh accounts e-commerce delivery the small FreshDirect Instacart went of and via growing More XXX% XX% fridge but programs our and services Shipt our of like

Freshpet Adjusted behind ago, in next increase in as the versus to that of of a pet food, generation quarter members that down you $X.X other one year the second for investment, feed you is due $X.X consistent the family. food your EBITDA in advertising was advertising have the part million million million, $X.X our campaign largely a positions with values the

XX% This advertising of began spending spending in has airing to for Freshpet. investment versus increases last increase is interest we the it advertising of year about strong total incremental the very XX% our driven at not year, media year. and the end amount about our the of in the for anticipated simply first May spend half, placed This total

this to for in of to historically. the return have as investment half expect continue second a We year, get experienced we the

good transitory we You impacted goals, will challenges recall progress XXXX. operational objectives strategic that we but that set our results financial we our made the against did for quarter. for five Overall, experience some

us pleased exceeding for the Fortunately, we are are and us largely they challenges our these will prevent year. behind from that not goals

against Freshpet progress consumer our first, goals the specific franchise. expand includes Our

distribution X%. did our rate marketing As But record up a than penetration while on they ago a largest gains, was our ago. year franchise, investments household bought more and consumer increase consumers result Freshpet the those the drove versus and year-over-year size we XX% increased significant year buying the in of of and

was Our ago. core XX% up household versus year penetration dog

rate the robust influx strengthen already growth retail but increases in phase effectiveness in bigger the consumers, up can the whom we data future so building dog presence. similar price versus growth, limited is was advertising consumers the there still even and our X% consumer many attracted, shows and buying more very franchise, very buyers the who at February, ago. year loyal core took This new As Freshpet's the it are the of more rapid of potential of a look to we've that expected,

second into increase strong our stores and driving several We second of momentum in QX, XX,XXX. the and ACV fridges. new The increase bringing our to retailers store added quarter another strong largest upgrades and quarter, first total quarter net net to XXX stores new behind years count year-to-date stores, distribution continued the new with XXX in

stores. quarter, We upgraded a XXX two we upgrades another XXX, the stores, XXX second our to or total fridges bringing added of XXX total with fridges more fridge to large to in stores number and our from or medium stores small fridges year-to-date bringing another to

biggest certain meaningful in was XX.X% of grew TDPs by stocks increase years issues. it a of the some bit late category ACV very years a responding of can are X%. growth our and encountered have a scale TDP quarter distribution clear our and growth. we supply on to grew then It's achieving their X.X two due strong in of retailers constrained now points, total where to Freshpet level that impact growth out is

is is strongest several evidence working investment drives Feed That Growth productivity where years. is our gains our drives This intended. as and that the in increased that loop, also distribution velocity driving increased distribution increased advertising

gains as franchise. sales growth velocity sustained broader some become In dilute it time near stores. consumer supports our productive takes produces The the and a to existing that net as term, new temporarily as will term, it longer stores strong

our the and to part with long two see distribution XXX our ACV XXX of and stores announced targets continue X% to X,XXX the should an gains of TDP or year rate expect growth on average strong incremental we fridge term in more We excess year deliver we last the annual ACV plan upgrades throughout the in of result as fridges. of distribution excess X,XXX stores, X,XXX top This XXXX. in delivered growth during of of more XX% and gains

margin, gross point, line now down is the in where adjusted margin in strength expected year-to-date to to our margin. with was expectations. we with gross reversed ago had XXX adjusted adjusted at quarter our strong gross margin year combination was be the and Adjusted Third, XX.X% basis sequence this period. and In relative versus although EBITDA gross in adjusted the QX our points XX.X%, margin

While experience a benefits, realized of we quarter. fourth plan later in our the gross continued in most to in the day X.X did challenges converted XX improvement the hour, line to our production adjusted we margin execute some mid-May. we Recall quarter and production

meet experienced few we with our quality scrapping did product on to related raw that also materials that that resulted SKUs specific in some not a conversion, standards. combination quality issues higher on In inbound short shipments costs and both

resulted constrained gross late incremental incurred total quarter our deferred in stocks points we supply with now and our resulted by resolved for basis XXX of shipping late adjusted now are customers June in Those part we're margin in in a that weeks of issues July. the out in processing constrained largely supply Plus, That products demand. customers approximately other the and quarter. costs our and in and to few higher

These advantage. building believe and technical our further fresh, is we continue to very advantage food to of expand of our match make We critical us out natural strength. our food of difficult in a training Freshpet is the not a it manufacturing. and have, to that expertise that for and level strive issues reinforces to easy all intend develop continued remind mastery our competitor producing investments backbench We and value manufacturing we that fully

of margin experienced margin a flowed QX, this and adjusted from because our for target thus believe into plan, three to are which gross continuing we issues place the That do put of our resolved the achieve a of XX% we gross While the ability and a we them improvement. is the XX% of and margin we some adjusted not year calls impact portion for drivers end improvement margin at in higher the July to impact expect costs to we year, of QX. benefit

in and of see improved First, line and quarter. we the delivering and a XX schedule price second, in price we started to The fourth quarter. our continue our fourth innovations; little very margin Recall, increases full labor utilization the increases; on second margins price are hour third, third higher sensitivity.

training are the been higher all Our innovations have absorbed fully in and the our production performing labor margin behind schedule. for now well costs increased market

lumpiness to the and of points gain benefit that expect investment we in XXX to we and versus heavy significant second in basis basis advertising a XXX a of increasing this year. the expect see absorption cumulative where the XXXX. of also see ended more spending, points SG&A our absorption to half We SG&A by Due year,

a basically ago versus result, year was QX. flat As in SG&A

heavier year absorption, gained excluding improving on XXX points. media versus points our SG&A, basis versus exclude ago investment SG&A Year-to-date, year basis you quarter in when in XXX significant But we've gained leverage by the media spending. ago, we

both to our track our cumulative points goal We're projected the on basis deliver XXXX. are total and plans confident XXX that year for by of this

we benefits accrue scale additional are there that can beyond believe also We XXXX.

was margin versus X.X%, versus the basis EBITDA Adjusted basis ago. be media increase ago points which entirely was attributed to up spending, can planned year points down XXX in XXX year

versus reduction the gross adjusted will margin SG&A ago are in SG&A gross improvements The margin issues adjusted reiterate, continue. And good offset that the adjusted largely to the year and news the The structural and resolved. issues temporary is are quarter.

adjusted development for due the past towards our in in back recall, four, of skew media and Number the first with Finally the significant as year. EBITDA UK. continue the plan two the of years measured year our line has our and to investment will Canada in half half it

are rates Canadian and media that growth market consistent and seen growth in U.S. loaded our We progress. Our steady in each those advertising see UK with behind investments the the we behind investment that have front businesses investments made

this that achieve further encourage same retailers to again invest and productivity that -- to this encourage Freshpet will take working the drive their and year in to and that next Freshpet of to distribution enable and later in additional several elsewhere. thus, has We virtuous expand will be drive next the year, distribution. laps seems cycle presence scale is worked expect U.S. the we for That have year velocity around to us that It it U.S. the loop and

franchise. the experienced of those markets. have done, for contributors both of consumer highly the and will these business we everything in our distribution a created far capacity to we've each support we a once markets it when both potential that success to suggest thus to And is of profitable foundation larger strong the have be have production development But major a

Fifth, accelerated build longer capacity capability term expansion. support to

keep know single times, we capacity growth our demand we many ability enough exists limiter Freshpet. said to is to the As the our for to consumer add have with biggest fast up that

we continually We for also start in talent minus Bethlehem expand plan advantage, as of on that on budgeted That making Freshpet our believe facilities are to Kitchens the and and In a and in in X.X QX why, to that technical yea. plus is Freshpet is advantage. scale investing planned real expertise late and project our invest our food cost and track million. ground is to XXXX that campus we June, this both within broke we of or $XXX up competitive

we this for need If our Additionally, site in search the year our the to are a land good site continue we making to leader facility up XXXX. near progress and and sometime facility in next at current our in production necessary acquire that hire future. the expect running and grow would be rates, to of

capacity our support making expansions. strength also bench progress good support at further operation improvements in to We're to adding technical existing and

key announce to our to a weeks. expect team We the few within addition next

makes and career a appealing Even attracting having us this in our and clear help the offer our growth are attractive work. very Freshpet, and market, to motivated talented not team place of we trouble we growth rapid tight members, Freshpet kinds achieve of can the mission who potential Fortunately, the labor mission.

challenge focusing of integrating our our is training are energy. and growth. we time not and attracting our up talent, one rather employees keep That one enough to with Though but is where of

In is another up be to strong Freshpet. for shaping summary, XXXX year

and is growth XXXX to strong and for sales adjusted on guidance we exceed Our meet net goals. continuing XXXX are and EBITDA term longer our track our

ways planet. with providing At that are all doing our the mission And good time, people fresh, and the we pets, pets their fulfilling foods so for pet for their in our same with that our lives are and for parents. of relationships enrich natural more

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

you, Thank Billy, afternoon, everyone. good and

two up sales million, quarter indicated, the net $XX.X ago versus Billy XX% were period. year As

As $XXX $XXX a guidance our than net result, million to than from greater sales greater we are million. raising

net striking us $XXX goal. This deliver million for within is deliver puts $XXX of that the achieve in have we would sales sales represents believe of million our distance $XXX achievable. XXXX XX% in growth XXXX, goal growth net in year we to our million very this XX% in and If XXXX. to We

of result consistent in growth continued advertising In improvement our the advertising made the of is growth single strong continued this is our presence we year. product the biggest investment our last of in particular, strength year's Our a retail innovations. Strong and with increased and drive best, plan.

XX in second to the This mentioned. continue sales May, to year the U.S. it advertising year, growth we committed at strong in We to invest and net have we the the added as plus percentage generated of rates the of our advertising this have end message program, years. over past Billy have began two

are compelling benefit of now Freshpet the that is can budget support benefits that media to generating depth increased One its scale equally second is we the of and message a our story. the

food pets the a run and need well. tests changing advertising campaign complement their fresh campaign. for in reminder on our and is natural as Our they strong they new campaign powerful they pre-marketing feel - Letters embrace their is emotional pet powerful advertising message which conjunction was to The more parents our that Letters existing more with consider food it feed as they is very to this to families,

distribution. of related sales investment, the expect it the gotten over gains, evidenced the in and believe into a front of to year XXXX. loading increase spending order the growth We to budget we household result drive behind record messages media invested we have drive net XX% all exceptional by media QX year. growth total balance for distribution the UK now As return our two we the of and our in heavier the of an in that and And in Canada penetration these for as spending have

believe are the in and prices. return we price fully we since quarter XXX in increase basis fact, The are items took place we've growth we one in Feed began advertising the seeing our we points In improved price to contribute where little the and our now gotten the the sensitivity very on has on sales we of each net increases strategy. the year Growth quarter expected

proposition. pound the portion our Kitchen power further believe important note of of growing the also demonstrates highest is price is item, our Fresh We also that our this fastest per the line. From to business Freshpet our It

is loss our mentioned, not it added ability Billy our while the impact that stock to percentage quantify sales exceed of will net is precisely X to difficult X that projected Further, it the the quarter, hurt they the by growth but year. current our in from likely sales for sales to points

gross basis elements ago contributed those the was positively three but Adjusted margin All XX.X%, margin of improvement quarter the quarter, more year from actions points adjusted are the down XXX plan in period. gross some those margin our as than stocks. well quarter. the in offset challenges adjusted how described they we our and production as contribute of challenges by on Billy later to impact gross their experienced out for

path on As create the remain possible, adjusted pet to committed will experience and XX% strength, bench to which developing gross have our our margin. bumpiness we parents at best way our continue pets this, we technical ensuring our toward fully our on times

on Billy remain the deliver margin a able but year XX% and issues gross customer lingered we'll our now XX% indicated, We us in in of into this adjusted and gross a to gross we're XXXX. for largely margin production As adjusted margin July, way average XX% behind confident meet demand. to quarter are four adjusted

lost margin that benefit is by intended with has confidence of little fact very the volume. indication our pricing Our supported delivered the

and contributing product innovations to are performing Our well improvements. margin

to XXX points in four XX and gross total from basis adjusted versus XXXX. margin improvement quarter the bringing points one, mix versus year and mix basis Combination to of the quarter quarter pricing pricing this contributes

fixed productive. is trained our Adjusted $XX.X of allow XX.X% or increase the quarter year our net us and an costs was versus new will SG&A more of million $X.X to than now all better the investment. media addition, versus flat and That ago of in absorb period. our includes year's sales growth In million labor last

Excluding which versus XXX as ago, year the will roughly by media this basis percentage spending, we sale points year a year hold SG&A improved of constant ago. versus

goal of Feed plan our taking XXX we basis total XXXX. to of end Growth Recall points a the year, is another us since began of this the at deliver XXX the SG&A improvement points, basis to

decrease of quarter, Please note exceeded of XXX that due during although compensation. variable to the points timing half will we the already goal have the our leverage second the basis during

believe year's expected of us XXX with that to of by XXXX. to points basis we final SG&A and track well we were decrease, deliver total we a Even XXX the on will improvements basis the deliver next position points year will need this to goal deliver improvement

by This meaningful the EBITDA in of quarter investment. the Adjusted virtuous is from Feed $X.X the Growth plan. essential part down was year the period, the benefit driven increase an our scale in ago from in cycles embedded million, media X.X

Based That and raising increased million greater on to than our date $XX the million than over bottom net from versus partially our EBITDA growth we our to this to sales strong current the to expect greater our by excess net guidance, higher means, line net $XX reflect sales are adjusted through we guidance a growth. in flow of rate line sales. XX% increase strong growth top year adjusted ago, of year EBITDA

sign the are to Another scale. benefits beginning we increasing are capture

million the XXXX bridge line approach we incremental for provide adjusted should as the quarter outlined EBITDA the sales begin indicator to be Our of do an at flowing we end and one. bottom ability that to also $XX this support

flow, million greater $XXX than we greater EBITDA to cover our million $XX.X drew here in than and net from working greater greater than and $XX adjusted $XXX facility variations normal capital our to X.X. guidance investments are of guidance Kitchen our We million credit cash to than our funding summarize, million sales million. seasonal our from the in $XX So on increasing today to

invested total is $XX and capital project against million today million. our We that this of $XX X.X on year spending

annual flow positive expect from operations. to produce continue cash We to

to cost agreement quarter, credit is XXXX. the all meet the base be in accordion early new to our and in through and finalized agreement our lower of credit capital needs feature the the We new capacity agreement has results

In expect for year conclusion, strong Freshpet. be another XXXX we to

Our the will our of fill benefits continued financial growth enable changing out us feed financial and strategic is will realize also us mission delivering their pets. to people numerous goals that the way help and

and people opportunity lifetime we to company a changing natural their grow food. while a get in industry pets helping And team do fresh To a that is once our feed and that relishes.

our concludes That overview.

will We now your Operator? questions. take glad to be

Bill [Operator Humphrey. Chappell question. Thank Instructions] Robinson Please with state you. Our first comes your from SunTrust question

Thanks. Good afternoon.

Good afternoon.

- guess, year spend versus one what this of the was well last marketing half of housekeeping, the first Couple, percentage XX% in year? spent the I

Yeah, last XX year XX. we spent of

Yeah, we and said XX%...

XX%. That's

Got you.

guidance - make was and you be the I more the that and you're So up expect the those back or do with the to for now understand -- that quarter through of in go but all half? margin had number gross trying year. able on the raised hit of we coupling to it to cushion full stocks, to of the kind understand - cushion sales as that layer out then that your to I mean, just not you EBITDA year EBITDA

So there just a what pieces in couple described. of are you

first start at with of So end the me quarter. out of the the stocks let

three did lost have we a one we very said, -- We lost points to believe somewhere between sales. Dick July. of As we strong

the So might part about what and good line to of lost guidance. have top we top or that's getting recoup ability effect very we on the line, feel our the to

halfway to we we point But quarter we better the not quite strong in as than on -- year. In and little margin, the the we bit second terms balance, quarter. said are where adjusted a probably of gross would we first be at had about thought a script, a the expected

raised sales have and seen then July, with room - of a target. little a these that. that be of goes a the bit we've more much to that deliver as as us, we we have than so guidance we we then little behind issues think But higher into on tail said, net bit we so a pretty believe enough it'd And

are of just owner So from it like else understand stocks out the how quarter? in but pet because it somebody understand something maybe just the to to next profit, of back lost bought trying - seems pops kind somewhere else,

Well.

So -- with any bit, Obviously, back. shift of or stocks is some all, so to go hard had a of capturing somewhere the the else first we product, how if X%. inventory, were where of starts had to the they if pantry drew -- that consumer very was. little it buy big we to short out we're it to that's say of It's go that that how That's why loyal it. -- to they exactly range X% gave a down

We had can we very a tell as July. you strong

to we $XXX we would feel run of on. we with than out got feel can't the that So sales, gave we stocks, guidance like hadn't if where comfortable is getting be and But I higher million, we good tell we in very the rate that we you, that, it's not today, $XXX had about million back feel very the the precise.

the And other really first -- it. my we question time Got heard stocks. then help just, is me of out about

just comfortable do quarters? as we that online, mean, the supply a so couple your soft the you have capacity with growth I coming growth increased outstrip I don't demand And to or landing of and that accelerate doesn't -- how going that have I look next over get

need to you of first XXs. with service. so all, shipping high that are we customer It's to today know demand in Yeah,

the we're tend our expect the the second at to for and from to come quarter, of had the So very to that. us. we the have customers of back now have quarter service third we of that very customer end levels we a standard the high And beginning that issues the --

XX/X be we our is taking the X.X% that this that XX, of did say line end piece of second The at we would final year. from

So between on capacity more facility and us. of increment in quarter becomes we available bring have the one that to time next that that year, the we third now our new

turn around, about back diligently to have very Fundamentally, restore our feel faster working And equipment, it And there. have. We our more previous you the also the we ability your on uptime more about had turnaround you our to productivity get X% that good we are we the line. lost. on have time pretty get that you to

have gets third things, us meet come also to X.X capacity those that But we Kitchen before we next caught don't on plan quarter. needs we and -- do in we demand had will working outstrips with live our ever year our that know not back capacity in be If plan short. just we're us the a on B gets you should case the A,

Got so much. it. Thanks

you, Bill. Thank

Thanks, Bill.

state Our from comes question next question. D.A. with Brian Davidson. Holland Please your

Thanks, - the second. too a I maybe $X fair for of quick high? get just plan for back dangerous sort outlook admittedly more is big me? you above that maybe like with or say shift which EBITDA spend that Is to the here to million afternoon. into of QX. that Yeah. fair or it math, to good Starting is envelope going just Is back the

about $X.X half That of front from It's the back the to of half year year… the million. Yeah. shifted the

front. - front back to from the From

We half $XX had Yeah - going another $X.X were spending spent we We million. it. early it from But on this year. it's new of the went new EBITDA, plan, In it media and the had before kind the was we thinking quarter. in plan. XX% spend half media million we of back of $X.X of of XX% of back the the a the an million decided year, additional exciting to into

Okay.

on by $X you a $X shortfall, fastest you've had - the is EBITDA record. by you miss that $X.X the it household So a EBITDA million the to at And $X you've look the million, penetration million quarter. about but if relative So got that second million, raised pull forward, consensus and bump I into right? moved

line. the million get the then that's So you can media up just and we spend why bump. that's $X EBITDA the -- is where shift have into a And confidence and top back the going

So the part. first that's

you're as to as it to But still is that it part gross miss did The the we're it, way? isn't obviously, would big Bill with really, magnitude looks it EBITDA had frame margin optically, the that you the make you comfortable Is just it about up. on shift Because revenue that is margin, confidence. really this got -- a clear. sure to bump you've in and on that much mix fair what you've that second and take implied, strange there's but a gross therefore,

right. Sure. That's absolutely

consumer the through I lot line And second with we encouragement becoming rate of going the then first us that point, Bryan, equation. an part know, a incredibly as the franchise, quarter that of your go are gives the high to the you process top and of large fact repurchase they which would say about That the exiting as Yeah. loyal back users.

more myths so myth And we're it to just anything the we the came reverse is where the a of order on would else. come. the thought be gross Bill, the said we year, margin, I that midpoint in And as at than we'd thought marketing EBITDA the spending about

Okay. Thanks, that's helpful.

continued A But Just catalyst Blue of legacy sort brands kibble e-commerce been obviously the into moving where curious Buffalo the you at really landscape, some of as well. Walmart lot at strongest has obviously look is gains. growth look of of coming dry the outside is front, the a grocery, your nice if which core from. struggling, on there the just you -- distribution even conventional

out? growth telling them. that retailers I further end we towards I mean, real distribution as obviously capacity estate ability know accelerate extent. to growing your of can look aisle the of kind accelerate as are Certainly constraint some their to there's even faster faster you your is you being sub-segments? what that pace on that But you something a about maybe in shift one of

you forward? like we or years, accelerate conversationally? kind that look have the just XXXX out next line any Do continue two can going sight distribution of over three But as or the of pace you of gains

Hey, Scott. It's Bryan.

we're what a much is distribution and stores have to what that to proposition continue of planning new they're demonstrates we're of pretty that the conversation we seeing X,XXX, cadence interested And continue concept. with the that and every from in So kind X,XXX retailers a standpoint. year

when And scale I think they behind now little to every a growth of bit see quarter start that they the it. by, see and goes

positively I doing think to it them predisposes more.

which the piece obviously gives there's And store so ACV. us new

kind an growth, or kind a on important that's communications to really that. more. are upgrades contribute anchor is significant I'll amount component continue growth of our advertising the more be Obviously, And going and time of our and think the media. over advertising of to piece the chiller second we the component of revenue over But the tenant ACV that time

of time. But from ACV of and depth to kind an retailers, more that over continue it to standpoint to and contribute like piece climb with I distribution, up will as refer

So of people Freshpet really think a lot are growing seeing interested we're I business. that that their in

or customer heart what not one from some I'm client. as Last a consumers of diets Scott. from your also links the just press Thanks, to grain-free only as and heard about know, me, recent disease analyst, curious you around you've an I'm

we what us to as we what feed knows comment our and to dog similar vet know heard. same Our you the made

about what some you So mentioned just your view consumers weren't that's hearing surfaced the far even though you're is that months? sort as blowback, past from and York in Times what as I'm concern in of of New couple article, any sort any research The of curious

So tertiary even done testing in obviously, industry and prior grain-free the comment always mentioned internal from it were was recently a -- passing very greatly FDA's we've The a an thing fortune standpoint. is it wasn't most once complaints comments. And release. product. to it's concerning XXX We

mentioned. all that a from what's going more take So they're be there really that were on mentioned. to no on were brands from bit -- of This mention It is were industry. Freshpet consumer little a tends kind just at focusing standpoint, the at brands my the XX

think grain-free over free, their time I not vets is it's clients what Secondarily, and grain not slowly telling we're of they're exactly are sure. kind thinking because all

step from safe grain-free. And be away maybe to

really happened. So that's what's

and whatsoever no We've that able seen of kind even we've been impact actually grain-free have looked track. diagnosed to our really We at items.

We kind seen skip have not whatsoever. any of

takeaway, been really shorts we The only we've has June-ish we products, retail have not that period, gain-free when that where whatsoever. some some some kind shorted those we in a products skip of that on seen seen of impact the but actually of any from had

approach. You know, good about unfortunate, our always nutritional feel but it's we really

very I what from other really they're being some of We've gotten validated calls testing very, to done has companies. complaints think I've all that, around we've the heard consumer any compared low that it. numbers not at

of around -- I I calls with know double-digit if a even Freshpet. DCM think if had number we don't concerns

causes of unfortunate So I But of think a that really it's to concern. and think bypass we're and be in not to able lot consumer hear really good I part we've position obviously and been foray.

Thanks. Appreciate the color. Best gentlemen. of luck,

Thank you.

next comes your Jason from question Our question. English Sachs. with Goldman state Please

afternoon, Hey. Good folks.

Hey, you? Jason. are How

Thank I'm you. excellent.

the the through aggressive, great momentum. of the continued effort. summer. It's -- You're sales Congrats year-after-year left. on season expansion, there's and only strength some but of earnings going back Well, of little not Obviously sales a pretty to on distribution has a still bit come see. kind enjoy marketing

of keeping momentum this XX% looks As sales on going in down we the we take do the media because of it of and the balance and of XX% spend the will over how last half put that think back modestly be year's planned forward, math, media like risk quick the at pulling you envelope spend about year. year, back spend back spend

'XX X% that any, of your growth fiscal ratio if that sort predicated know suggests I media year. guidance And is modest, pretty next on

momentum. looks it to spend How of period we've anticipation little through continued going got the sales we're like run fit a growth, quarters six those next do but media So where to we two? no over

customers out sort for that let the broad business. and that those the that we way converts builds supports about is the prospecting So think role it product into rate out business start repeat with users. media the me in advertising and is then the our The plays just And folks investment of the new overview. buying the

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million We need grow XX% only next to number. the hit year to $XXX

rate $XXX investment we very business, it's easily that if year making. especially media it, they on feel we with is a run exit users add we The that new very number of the about achievable, So rate talking run million we're this with call need doable the that range. to

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about sort with facility. But up thought is what until low operational can cost risk of we you into help now, get me side new because ramping the went I've the kind of right processing wrong understand

caught was I little is risk would flatfooted a low bit having still issues period for and what I a consider So operational some by you.

make would immature but reasons, is way a with continue Yeah, invest it's in I why the we That's is say, that in so capability. in Freshpet phenomenally relatively bench good the -- or a strength one technology of to technology. product, let me start is which it also we still,

in and we have hire there we will capability to have difficult said meaningful with because the keep best will want advance the to further And up as a product, couple help strength prepared that not term, we weeks want our remarks, only be I announce for technology, in to long new to the the it next very of develop our anybody us.

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a Thanks Great. lot.

Great. Jason. Thank you,

Stifel. Mark comes state Astrachan Please question next your with from Our question.

everybody. Thanks. Good afternoon,

Mark. Hi,

kind to go wanted last to. ask way that back different question of to a I it

terms like in on getting spent So leverage my media of actually cost incremental acquire to household. you're incremental math, is the by an it dollars seems what

driving B, so So I is do households A, the leverage with what guess to that of get of kind in speak? the purchasing you agree you and that kind additional

levels is of about into do spending you how meaning go term? and about not that growth longer the a are of year you I years, kind into how constraints, longer of if that where period more, ability of penetration the think what lower the get you're kind does And kind you the as -- as and time how capacity to next do the the the into and be out fit opportunity you know a think media that rate spend of to to right because year you but media household going over about leverage think kind supposed spend, of

messages has that we're think of them Hey, buying we've effectively. cost way added exactly of the do out. also We've that consumers six more faster ever part We planning Mark, think I past communicating to added media, over before we're with and actually some than and the right. our you're but the months

are what's of big helpful a great is and fridges contributor kind we more retail visibility, that that. In when to fridges, very bigger addition, have

So that a think costs, of you lower which is that consumer a want gotten -- is us all of those kind way, if the advertising it acquisition components directed. have where to about to really

is at we'd love mentioned come as And repeat the the continue incredibly thing in, that these be franchise, come once earlier, to high rates when Billy our people people into level.

experience we repeat which get it great buy once product again. encourages it, these So people people rates, the to are using and

hunt advertising more contribute constantly more over the by quarter. to to quarter people time and in and is the So

six So months results. happy we're first with really the

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beyond would to long XXXX, the term of the provided that, guidance one explicit us what that we you add of beyond haven't of several asked things the have about I XXXX. is sort sine is

can early that'll big out investors business how market a be? this year. sometime very And doing we're piece research that for good Freshpet or help so next And define of the us our

you we've that But over do hear process have to we see is, What mouth benefit. of this you if you phenomenon at, and acquisition quicker one dynamics in this the we visibility, a helps through acquisition and the that the it look gone rapid curve. more consumer What again, firms at kind that users, where higher it been questions of that of over talked brands what if find look word higher of it because the rapid there's we've research you in asked get like? get other this you of does and that growth really efficient really availability, of new look getting benefit and categories,

has intrigued it the that this somebody occurs. to somebody has feel used snowball it's effect a experience. or trusted brand, like try brand now more there's had a you because So else But else positive you're

of the sort frequency saw didn't or the any it didn't whether you're variety bottled really in people adopt about the of that's or of talking Uber know of use so you things, its and about increased And other of water early where adoption life, it.

we'll ahead big still us over driver, and years We marketing But that And media adopted investment five later next rapid us. will that's driver. the could significantly you on rate significant the of growth while that the made, account for people think than be and we much opportunity that see it based a think expand more a exists won't rate. on a you the opportunity was for can it be very only

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a So add we're that of excited consumers. lot we

now X.X%. is penetration at Our

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say goal something new hit a million to But had about you you I'm sales open longer me XXXX hearing didn't term needing too by So it an correct just targets? million, of that $XXX by the if so like $XXX your in strange, the script something facility goal XXXX. unofficial you're was to talking previously

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our the is think that. may business. on Would more, We stopping don't of million? frankly be we $XXX that's maybe depends But we beyond million, significantly a at point. We at think mix be the $XXX at growth potential

you. Got Thank okay. it,

& Please Our question. Company. with next comes Parikh Oppenheimer question your Rupesh from state

taking my for Thanks questions. afternoon. Good

to what that I performance So live guys I from so your different topics an double first terms consistent channels? whether you to was on get cover, in and few update a across hoping perspective of is key seeing wanted fridges, are

-- fridges. we're we're some the in data, it's So at XXX second of

We XXX store, -- target the have an XXX double for target fridge year.

been period. a we've for these track is on That's What talking within - about how we been we're continue that three it. are that. see back So paying to year

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that So are is second get for of much fridge. point, to the fridge in fill continue out the really that and that At to much, portfolio out we fridge optimize will plan that the more products into the productivity the future.

retailers returns. So we're results. have The happy it seeing that done typically nice have the been very with

into think more We and see to we continue uptake we're more But about that know potential what more anticipate and out And filled to and talk is that continue seeing of we really second second on kind fridges exactly won't the bridge. those. until we retailers full I get more the portfolio expanding to conversation. of

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and for second way, the the minor becomes mean a I league in -- fridge of kind Freshpet too.

opportunity fridge to can stores, filling graduate that in up second In them instead in of and test things at XX,XXX stores, some expanding X,XXX point potentially in so and terribly us the first we distant the to brands, into us take fridge to It a the out productive being have most have first also. the second from fridges portfolio the will it into can addition to allows fridges basically too, future. more even can X,XXX not which go the XX,XXX, give

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retailers. more the more seen where frequent into comes acceleration we we've Buffalo and more into potentially of Blue some consumers in more some as a on they're distribution, So retailers, actually have because bringing basis

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color. Great. for Thank all the you

Our comes state Moskow Robert from question. Credit Please question Suisse. next with your

of the I the very of what say are the Hey, Hi, an is big. they haven't was the to dollars or of asked them what have through. breaking Billy, seen a couple wondering brand the I have brought ad reason ask thank spend the to brand? was that them impressed things, very advertising percent that in I grand you you consumers I'm And not scheme introduced are you. and I dogs. them

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track Are investment little then one Got it. that still you follow-up. And on this $X to spend for internationally year? million

it first the in half year. the of spent we Yeah,

done. It's already

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investment good very a too. was it And

that in those that markets, kind and point, as the that had over opportunities this here return anticipated mostly strong entire dollars it's and completes rate, really seen creates at both U.S. incremental seeing we UK, it some of those into distribution us Canada the get and markets. had response and it we're that we of Yeah, time the gives we media spend encouragement really in model type will

internationally? are sales your what said you have And

No.

growth the quite business. for I markets, we those be I small mean, very mean, small this -- they're where significant they both there's a point. at in But a -- can it's, significant accelerator demonstrated, there's potential

All thanks. Okay. right,

Thank you.

Please state from Allen James question. question comes with next your JPMorgan. Your

your of for more all? if results spend customer preliminary them. effective ramp seen for you've like rates expectations you might time study, if endorse a is if the to sales the about wondering thinking for or in longer Just up still acquisition longer -- causing term XX% they media tamper had I'm that that

pets business there that food. a can don't the at between want of fresher people behind very themselves family we're the you into to of the share I that to because next other is what tell phases. believe is that in feed that feeding We'll humanization pets we have But -- are their in year. people us significant members, of can we tailwind we and and fundamentally changing the way the what and So going preliminary beginning get we're

bigger as the will think much as And fast than gave beyond we're XXXX. told fill is we capacity interest think to that for it million And as us it $XXX we that. need said, and as guidance And we the opportunity do available folks capacity XXXX. going to I to have our in is we we we best

we've quarter, take this look got a that would very bit pain, too a take little careful away bit if that what it can is, you kind you of growing -- to at from fast, be do you so of As it little experience rate. you about managing

us because that's there's as that expect we proven range I'd spending in both XX% it's XXXX, rate, we've Freshpet and for be grow us that at fill as available. beyond But capacity, can and well to to expand the as significant opportunity

exports morning Great. Tyson Swine just meat already costs. to on about this ASF, commodity and starting African spectrum had talk materialize. prices of kind the across And Fever We related then higher have

they long sensitivity, margin there last, a pricing would exposure, of your if So contract how just was on what increase, big curious and resets, your your be? timing strategy cost

is and first our chicken year. single bulk biggest chicken Yeah, proteins price of the once cost a of all, we so on

any we're year protected price we quickly end replace expand year would at Obviously -- very very, this and production. for export the XXXX. the for that can So to again of the chicken supply

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little we that us. above indicates headroom have it a So

to to like a we barrier that, pricing, we really to want that don't like But if because would we we're think having take don't said the we adoption. to let need we in. not be position that consumer And price

at this carefully and look very make So on it is it. a we a decision the at bit But picture murky. too would little point,

much. very you Thank

further no Thank to you. it questions at for remarks. I'll Ladies closing time. back management this turn are gentlemen, there and

Yes. as would conclusive of next we interest Columnist much Thank you talking chance if for dog's you a said, you've to which and that Ann don't in evidence close. dog you but admiration look to Landers forward your once to getting feed again I wonderful, The Freshpet, accept add, you're better your quarter. Advice your

parties All This today’s great conference. day. concludes may Have disconnect. you. a Thank