Freshpet (FRPT) 5 Aug 242024 Q2 Earnings call transcript

Greetings. Welcome to Freshpet's Second Quarter 2024 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Tracy Ulsh, Vice President of Investor Relations. Thank you.

You may begin.

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

remember and these and issued differ uncertainties statements. Please the refer differ will that could on risks release to those cause company's Commission with the and of Litigation begin, a and based today's expansion today. Please the certain during EBITDA, of annual press statements, pace made Form Freshpet that XXXX. related estimate, include Reform refer Exchange beliefs those will in and forward-looking described financial new Act please call, timing company's the such project, to guidance. statements. These meaning expressions growth, Securities others. report detailed risks of for on to course within adjusted XXXX involve to intend, statements strategy, discussion any statements and associated forward-looking to of in among statements management and Before goals, are from the those materially Words this XXXX guidance, as our with including actual Kitchens XX-K non-GAAP will today cause the management's management prospects could, and actual believe, results materially such current results could in that expressed to we from intended of technology conditional similar forward-looking make forward-looking implied are these Private goals on anticipate, long-term EBITDA as or note Securities expectations and achieving or may, such These identify call, measures, for expect, statements that

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

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

today's on you, committed take this to you from are everyone. I to Thank The like away would is good deliver we achieve to year. disciplined the track that Rachel, message and morning, call growth we

business. As attractive more to category-leading our with is win. you years, drive enables will do disciplined operating consumers know, our shareholders And about X we customers even in learned But the and growth. That win, if Freshpet and XX% us improvement improvements managing carefully past we we've aspire as deliver profitability. growth growth over to outsized to making well, win definition effectively, more will cash will our manage and of that

results, rates. strong XXth improved quarter specifically and over came disciplined we XXXX of consecutive that bulk progress quality we limits, it of second growth input the within exceptional EBITDA in maintained totaling We goals. so and of existing and to basis operate capacity us adjusted XX% of towards strong enabled operating gross growth. effectively, Our service costs focus elements fill the an input, demonstrate delivering sales operating and very results key cost, XXX of so adjusted margin making our customer some improvements. Those logistics, margin, key areas points gross adjusted are did quality our and The net exceed operating we efficiently That logistics expanded the improvements our margin. our of -- quarter our and delivered

achieve in As XXXX are before as a long-term results set we targets. an well We even raise guidance result, stronger we achieve position our exceed consistently to or prove this year. our adjust that we our can to for as targets need these full of still

driven were on of key strength However, business the made fundamentals. another more optimistic. These us strong quarter even performance by has results broad-based

our First, seeing Further, pound, driven larger pricing the quarter. the but of or behavior of second our steady consumers volume which This pack efficiency buy. production reducing improves consumer per up from value-seeking and or have was they growth systems. distribution towards to indication impact size was the is that buying quarter entirely sizes lines Freshpet the than a our move trend positive rather amount larger price sizes, slightly no been a we in this mix by growth. consumers There reduces

Second, growth our from penetration household is million hit target XX to to needed a be our where households. rate we of perspective, XXXX

in low the user combination base. and mid-XXs in growth results growing are digits. rate increasing rates, which single our heaviest users total the are low even level. faster buying to encouragingly, our That growing mid-XXs households More is the We than in targeted the

our price comparable healthy the household way line is gains media prior It driving is had we years. that and the to past penetration acquisition model had we to over customer took strong plan the costs is delivering our cost we at Third, long-term increases X with in the also hoped. a

a that able The desire expressed as capacity we our consumers Additionally, a leader. to why the stretch of value among a users that their by now within dollars. continue balancing differentiated Further, to is truly being strong much limits. Fourth, for Freshpet good just environment value. the price. price, quality coming even believe our our of fastest in deliver ways consumers that Freshpet consumers where in heaviest that for another Freshpet value growth the from media growth are strong looking across growth year, segment product, is represents value Frozen believe is investment is to been more We differentiated Fresh indicator a it where find represents, not category for an the evenly appears the living while have our is

continues now first our trends volume growth be created population a Growth Finally, household comes that penetration, we our is from have step strategy trend worked we decade. the in our adoption of for Feed has the supported more And seen by the since pandemic which growth bubble a for towards launched back, XXXX. us expanding pet model than to long-term growth are a The same long-term taking the the but humanization we pet back on pets.

I'd you had provide and our our the made see strong Now great second plan, and some like results. of financial to against in that long-term can highlights quarter. progress We momentum

quarter sales I Second as driven, said up were $XXX.X XX% net all million, earlier. volume being year-over-year it of

target margin above our long-term quarter the to period. was gross the adjusted consecutive quarter XX.X%, compared Second in for XX.X% year second prior

$XX.X Second of line quarter retail solid adjusted a our having million, was year-over-year. From $XX rates. perspective, long-term in availability count a with are an million increase growth year we approximately growth. retail is EBITDA Store of

see bulk high-velocity are to add stores. of engaging some plans to the our with and in on of we potential expect importantly, fridges growth. second That third customers our is where us More larger

see go that exceeding TDP ACV You will growth growth in as forward. we

fridges fridges, second including us retail bringing more than retail XX,XXX cubic the million in new feet of fridges second/third XXX upgrades total and placed space. quarter stores, of to a or at X.X we Specifically,

quarter, to rates could of in continue fridge As supporting be stores, the Freshpet XX,XXX high XXXX, Fill store the fridges June have multiple of and U.S. we're in the and growth. XX% be XX, found in which throughout placement now XXs strong

Now refer as on KPIs profitable I'll and provide More. track an main for more our update meal, what plans, Made we we to mainstream,

as Freshpet includes has of of food XXXX, a mainstream idea mainstream, majority billion dog category. runway is the data, We $XX long increasingly our growth. is and still today. market share business omnichannel According of June on the XX, e-commerce is total only which to becoming pet a Focusing for Nielsen X% $XX billion within have segment, which but U.S. the food a direct-to-consumer,

in is fresh future share. pet continues and food. frozen Freshpet category measured XX% channels, the a outperform to has the pet subcategory food of many it Within believe the broader Fresh market retailers

a Freshpet in distribution Nielsen third to with ACV in second breadth is xAOC, XX% add and and and now we continue depth As fridges. result,

Freshpet Our making XX Household household of the way million penetration gains by households, at and also households million end the target our more demonstrate of that to mainstream. we up year-over-year well meet XXXX. on are was our quarter on XX.X track to XX% penetration second

standard way is Our high-profit pet period. pets and households now feature XX% up of for make pets. versus short, our even humanization the growing to faster, short, the idea is it or the mainstream year food HIPPOs job fresh prior a In are to owning

in the the educate and currently of is meal and fresh buy Nielsen, need this pets U.S. multipacks they $XXX SKUs of reinforce a do our in of versus the HIPPOs product that. helps idea year end, can by the are and of over Based X.X% XX% to quarter total of Freshpet will prior on users from can also opportunity for strategy. our Currently, period. Adding XX% increase marketing per fridges, which from this Freshpet pet plus about convert the their the than brand. XX.X consumers more our part finite point data driver and consumers key we quarter. percentage are increase represent widening use to as XXX,XXX your appeal we assortment our XX% encouraging, and our can help of sales turn concentrated Since the was advertising. our at of increase approximately heaviest fridge, a of on our retail Turning total Freshpet up per HIPPOs. than users, SKUs grew SKUs, part pack as SKUs value-added food of distribution, business. ago. help of our product Even amount that There XX% our or an the main have visibility in rate, main to increase larger year meal X sizes users grow unique be up benefits their meal sales group about X% Freshpet increasingly business. The space our year. total second more we XX.X less the of pets, third users second impact, the significant amplifying is and of have pet's past We to of broadening our represented and year. the in number more of of we They number average to main now $X,XXX

margin EBITDA part strong XX.X% XX items more posted in we basis improvement XX.X%. The to an second and the More, points this improvement. of margin we results QX another Main were: We margin the of of gross the quarter first, Adjusted quality. ended with more quarter adjusted to had Now drove strong key improved that profitable. versus and

Our well. has team continues size we our issues of to opportunity been improvement, of number also the to execute have both lots able team for of We the issues. to reduce and manage any have but further still

cost and input yield. Second,

percent historic diversification, a an combination opportunity Further, and cost yields. We we meaningful through price as believe formulation of have to continue our operating area and of in costs returned to this to in net management work, sales improve is production level commodity our input supplier increases, technologies. a new improvements through improvements efficiency of there

logistics. Third,

our new from rates improve and our in the for DC lower lanes performance. are our in we Ennis of behind of primary increased expansion the some fill to production place quarter, including drivers the lane service fuel benefiting rate on bid service costs. macro have improved XX% in customer and our effectively tools Dallas more the the put clearly are freight, area factors But We and

our to Turning on capacity. update an

technology new still to a to improving capacity Ennis, have XXXX. In In approach seventh team end and increasing to utilization line and/or July ways execute South, while start XXXX. that second OEE, by is our fourth is focused throughput and will start disciplined on and in track on we to commissioning Bethlehem, line the plans is the shifts. test existing the the of up and on evaluate half the so managing about run our and campus or the We also of line to up continue add QX more yields continue good in capacity to in expansion lines. In Kitchen began expected We on test far. lines feel

capacity expansion to efficiency. greater drive our continue evolve capital plans We to

throughput developing the we lines; focused discussed As technologies we of of X maximizing previously, intensely have new one, are that two, our line. the capacity existing and sites; more implementing per our on: generate and existing throughput maximizing three,

to systems our both to like continue and We've PA, to invested more since I opportunities progress, the good and in way make talent heavily not long tremendous the in are food Freshpet are beginning a technology manufacturing at to reliable we'd our still still make will first where come improvement Quakertown, think made this we've While invest at facility them be. We've stable, the of for growth we making disciplined and delivering the production but believe efficient. progress we sizable. In summary, year. promised are

we the this we we've led on approximately generation, made capacity growth, right and especially delivered, has of and economics well business of Ennis business. be progress under profitability. could the investment of will the are flow some we model are we to believe the and technologies our capital new the have within still that and We very confident increasingly is development focused our progress our cash that believe results managing balance incredibly bags on highly generating XXXX. I'm subscale, have by meaningfully and have at to our proud We made works the exciting XX% free growth, since we enhance live cash positive

need we and level raising at to to Now continue the keep a high bar. execute

offices into purpose-built want out New the in I Jersey, our point space right that moved home of to to New road Bedminster, under a Jersey our in Todd, a We've earnings the in office outgrown previous dateline of instead it announcing and had down Bedminster. temporary Bedminster, release today our Secaucus. Before while have new leased in is our turn over office corporate I construction corporate Secaucus press

new the first in the of into office half move to year. expect next We

retain go much forth and need to location new to talent in enabling in to top we will collaboration technical marketing much the Bethlehem, and back closer Bedminster it our allow and Our easier for attract making finance Pennsylvania, team us base planning. while and members our

with our when Pets look opens will Planet it Our you year. new and [indiscernible] sharing mantra forward next we office People to

through results Now turn the guidance. details let Todd? the to it of me over updated QX to our Todd walk and

Thank and morning, you, everyone. good Billy,

to As mentioned, ability with second very improvement. our Billy deliver quarter we are on the profit pleased results, particularly

Now I'll for and give financials you some our guidance year. color updated on the

pet across net that the a previously possible, expanded and channel. It Nielsen beyond what $XXX.X sales our XX% period growth xAOC, XX% sales year specialty the adds U.S. dollar pet of saw has broad-based important XX% in business versus more We of estimate category. to quarter channels. X% Chewy, Nielsen Nielsen called the their our in in online IQ U.S. the Mega view We over Channel new Wherever Food, or U.S. covers in to use channel that were million feed neighborhood provide is was and prior measured year-over-year. expanded to growth new Second unmeasured growth pet XX% and with farm XXX% most this consumption coverage retail that the plus Amazon stores. channel note growth we growth definition retailers via comprehensive the business XX% will than today. and we

driven throughput margin up an points cost, XX.X%, input cost. and XXX adjusted was improvement gross yield, year-over-year. Second in This by basis quarter quality was

costs as costs, XX a points sales improved XXX basis and while input with throughput lower basis net better costs Specifically, by of improved yields, commodity quality percent points.

sales media of that compared the our and past live rates. states in was with up in of with second more the to stated, land due served period. adjusted XXX Billy quarter XX% We macro-driven remainder we second increase the was fill to was Recall of Other reduced on our favorable the negotiate SG&A, by granted higher capacity growth front-loaded by in strategic being spent multiyear taken net the year SG&A was year true-up in and continued plan points, XX.X% Second Total XX.X% This the sales likelihood to to sales down net awards. center to has basis of greater net period. net rates, of of improve year's XXXX. profit vendors XX% year quarter, those media that share-based quarter basis compensation. Please driven by less which number includes majority of from increasing points of on prior the year-over-year. $XX.X noncash XX media period. year with in increased within driven based increased GAAP investment performance strong fiscal to miles X.X% compensation is manage distribution our sales than unexpectedly year P&L improvement million incentive its on Like limits. Logistics have prior of XX.X% compared X% we prior an decrease vesting awards can note our actions the the a the so of this sales years were costs in our share-based

Excluding generated income. net of million this $X.X charge, we would have

costs. adjusted Capital primarily logistics flow was $X period. X.X% million EBITDA had was quarter million was sales or $XX.X net second the or improved of of of the higher sales $XX.X million, XX.X% second as hand we net quarter. $XXX.X improvement at was gross quarter as year Second on by cash Operating of million $XX.X driven quarter margin spending compared This in in prior end in to the and cash the million. well

We continue flow be fund we to cash in fully that and through believe will growth cash to XXXX XXXX. free our positive adequate have

in improvement capital. makes we need EBITDA year unlikely will strong adjusted additional also it this Our

guidance XXXX. to for turning Now

as to our in second our are conviction our half. ability to second in as the reflect outlook We updating in outperformance quarter well the execute our

or guidance We million at least million growth at of are at raising to XX%. least sales net our $XXX from least $XXX

service. customer particularly improvements sell will maintain Bethelham more South because to to this bit able in efficiency, still year this strong and do Kitchen and that strong of a us the We allow are our in operating

we to the in need of to However, end up we order supply up and September to ramp meet in production by the have line demand. the still need new Ennis start roll

capacity year's mind do want of not keeping the ahead plans. get in too our to are to We support needed growth also original far next and

expect have percentage while lower As capacity. far continue as we growth sales to expanding manage our intentionally throughout sequentially year cadence, as the rate we growth to net of the remainder

delivering critical balanced capacity half investment half, our second year been have while media to the more constraints. experienced has first within living Our we this also growth

dictates drive the the half of meeting year. have year demand second in next experienced will the half we of second first investment we half the half and in media As the first demand really this the

will be half previous investment For investment in this reason, the than our second significantly larger we year. the media made

EBITDA, at million approximately to million second certain the XXX million capacity quarter modest guidance to in ability to approximately full basis at be to expenditures delivery to million expand $XXX adjusted from to least installation projects. In now execute strategy due least meet year to XXX The our demonstrated compared we We and raising margin laid growth reduction the Capital disciplined For $XXX the adjusted approximately $XXX compared now QX. $XXX is for out. to the by in are are results previously. demand the to basis points reflect points timing over of to gross XXXX. expect of summary, the projected expansion support we

very pleased our our significant see concludes are to scale gaining capabilities We we off, are and are overview. investments and in paying capacity organizational advantages. That

your be We to glad will now questions. answer

you the operations. the Operator? we a As that company's your on please reminder, ask questions guidance quarter, and focus

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

proverbially to remind these please quarters, it guideposts about you doing for think so, allow as on are that I you're the pause I gives at. you without will close on you're that you some if hoping asking you the it outlook results raise possible I us consistently? you is the just the I can't you of or think to, getting -- next as for officially I'm update think people guess, of deliver necessarily -- some us within couple that When what Can pull that's you'll raising stating I'm kind that maybe what comes trigger? guess, of also 'XX, today fair. to looking rather outlook makes

we mindful And a The the particularly would time, that thanks. way -- good we've looking really same Ken, environment. feel side. at Yes, in progress that at the the we operations is it fairly on we're about operate very we're we volatile made,

like like in we'll So to XXXX the us be see we'd targets. on embedded ways we'd and point, at full in get forward. rates is the to what would like it makes us see the take the operations that target. a is deliver to our to way the that say that year see what side. we sense the -- in at going a see look And deliver when that full And we'd consistent year XXXX could But support particularly

net we and live as months. feel about good drive where we're capacity capacity our XX we to in the On XX really to are. capacity said to the we limits we growth side, the sales within comments, We're, trying plan out plan

So very it's which expect the as to expect driven be to going that basis guidepost capacity. by growth long-term here going from should our that our and XXXX to you rate us capacity rate at we and on we is through go the close want to ability add very, be to add a to --

those about terms capacity sales ahead now, going. there -- about of not a kind may haven't you little they as give exactly track one about think a see What perhaps will versus an and there's of update next well then other people us given and a I talked, for expect think, rate there. be sales? specifics where year sales next much about? in I investors of it general? think you X while a really bit you how and terms rough each you ahead utilization is just versus although your XX% capacity the confuses confusing expected think in year expect how that Can to to in in on Billy, where of of And still It's or the kind little increase of right little in we kind just a paths -- I is story be a should think path try everything thing bit you capacity the follow-up,

point in capacity where the context talked bags capacity, rolls. at for total now for is driven we've by Historically, the of we're versus really about but capacity it it Yes.

with So underneath in for had that total this sales quarter, keep line [indiscernible] has limit that, net example, capacity lines. starting up we're we've had business, on the to rolls work that we been our this year, in to And is the as rolls our our capacity implied. total limitation another

soon year As into and the is it as first line in that is up flip next then capacity next that and run over bags. half running, limit we'll of probably we the

have we bag lines quarter of so year. new And coming on in the next first

to net utilization to that's way disciplined sales ability don't and fact very I think on of we I feel capacity, X, and deliver our so for embedded that the stay or go we really the cadence. And tend steady we between that new improving keep We existing keep in capacity operate above on think total a steady of and comfortable back very And very if in people adding that the where about we're growth I missing it we flip-flop capacity provides. we're to That's kind close the limitations who and of terms think our guidepost planned, in but us the that trying forth rate line the of it to to focused. of very well. that the really [indiscernible], we look terms have bags are capacity

in Ennis. to just coming Ken, clear, we line month, be the have But up next -- new

and Ennis -- some existing and -- to our some add facility anticipating going then coming also line across ramp-up line to shifts we're Kitchen we're bag the up lines at in in facility. a South performance better entire a have Kitchen We in South,

will $X.X far capacity, ahead literally clear our the going of pointed we too manage we're our to we trying and not of Billy earnings a But year. for have that's So we as flow, to this get amount every about And and capacity feel very cash But review billion next in month, good top We're path have to the get ski. strategy we 'XX. out, altogether. line trick. to

Chappell with is question Bill Truist from Our next Securities.

what want X on and understand, about comment so follow they're seeing signals to past expansion Are real channel, just or hear Just recent the you many change? more club is up buying naturally to a buying of X, the the kind your that more in reflective doing, much sizes mix consumer your right? the is consumer bigger larger of bulk bold? trying which over we of months Or

on want in it, board that towards but the across of buy towards piece a the you hand, the in about the value or their value it behavior. If keep macro to other that's to taking some everyday as way you're see business, should dog. because to purchase the sizes way We're the staples they we you're moving business, it in inventory, there the of are step you market, But slight do think larger we view exercise back are them an that consumers expect in pantry you in diet a the and product meaning [indiscernible] impulse seeking, who ourselves expect it, need a the the consumers sizes is there's to you part if every see should if The a have Clearly, they as driver. migration on business, migration I staple. consumers smaller to migrate sizes. to your our to larger and day, see

And so is of that a It's enough moving into a larger it shift we shift, but noticeable. not sizes. up see consumers is huge

stagnant then since hear mainly has it. fairly picture players before noise lot in the direct-to-consumer. from a And Frozen been you of category the market, it's bigger started even frozen, Got And exist. because direct-to-consumer to new we

I'm more so Just you opportunity? Is much sure players they're understand, if making it trying seeing on you threat? as look from if the are that not are certainly an just at And front, sales it I'm front. to the advertising anything new? the having Is a impact. other noise

close positive so and on X We long really is kind We're of market the how about look, really it's model. testing new types our of are model keeping progressing. entrants that's the where And Bill, We feel love everything eye different the think and in on X term, really different direct-to-consumer playing. in, and always basically a interesting. we're developing our going ways. coming in way it's we

Our from next Robert Cowen. with TD question is Moskow

a a wanted answered rapid the forward Bill, deployment foresee backward therefore, that? And down to at cash could got flow, cash numerator in of It's might like the momentum already. year your flow quarter, implication for It having a to to had capital I not you And question have but and But growth another I little. a this like looks fast last mean data. in you significant X%. your pace, the rate to fund rate buy continue growth appetite then on this question restated. order the kind secondly, of if then rates what's take I tranche growth? for beyond your first compared XXXX, a by What's step about it's is lot, buying year

last I think quarter, was it X%.

to you're So want it's that if you have changes? and if those I any know watching small numbers, for reason but

we do on capacity at through. -- Rob, question, planning we Yes, the out the first do look

attention and pay very to to fact, go close In beyond, out it. we we and XXXX

demand reasonably we that and now sites. construction of project very and installation can on XXXX X have all we're on going to right we comfortable and have operate line capacity those that beyond projects meet the We through that adequate we on the campuses

a adding which we and existing technology been that to at probably this XXXX we've the enough don't XXXX the would new does we our we window to to improvement can lot inside not fairly out time figure sizable happening of And that a and go and point get existing site because require require thing it is, through lines out see the The of sites. footprint be spending would capacity window, where what point, capital a at add expense. us to trying

the the I about So comes of the and business pretty result, as planning of very But can we and about than capability it. And able we good flow more from needs we feel the that have. meet capacity expansion a to the generation comment on good that. cash cash feel

for Let me just a jump second. to the piece numerator

piece, On data literally month. the the numerator numerator every restates

so And readjust their they panel.

expect pricing the is pricing will because lacked numbers that the bit. year, a you This that move numbers What XX-week a always the that's should had no some previous ago, was also periods all year in XX-week expect you we why to change. And there's the in that we've can pricing. numbers. So little

to that rate expect other consumers you than should migrating higher-value is So buy benefiting anything not the products. from

the or Your from is pricing. products, of their increased benefiting -- purchases not it

growth be. about feel We versus household penetration right good about now the very, running expected combination to it. hot fact, in of very I We would have feel rate. really where it's buy and we slightly our mean,

digits cash run rate. call rate, the more it, XXs that commentary on get You will total should give I flow? and our you to buy low penetration the, if on don't on and expect to will we in growth us Todd single any that always low know wanted

at business growth operating cash why into look, spent at. But it's plants. is, time. come make goes of will spending a future. I operating are this I on fruition facility time that of cover possible. to as Yes. CapEx we're to But we EBITDA much at plenty it new Do technologies That's at think, bullish we're to ROIC we scenario, also XX% on to need we better growing what time. We and year-over-year, so that a know new very some we looking get enormous have flow better better those so go will It's getting XXXX? over efficiencies lot amounts new kind in point in in based dollars nicely and which think even look, in clip I our the the capacity, of on valid the Probably And much on we mean, a be grow will a next under we're generating be really Rob. years. could we Look, of question, going several to not.

are We that with working closely. adverse -- out minimize not scenario, the amount very another every we're with greenfield will flow looking that partners it's possible there. But like of manage can we capital very, comfortable cash impact very Ennis. We're at whether

Davidson. D.A. Our question with next Brian from is Holland

XXXX year-on-year that there guess part this start was just half than maybe a levels. looks progress what grow target to Trying year. top XXXX of and was increase is? back once help that that's from media again sequentially there acquisition to just it, second spend, seems as I anticipating to costs, your how media still and media higher we're quarter, with off consumer lower of with if I was with quickly think line prior and metric me which pre-price it in we line projecting of bit the guess that in line. about cadence like we to which I out the forgive the to me can there, square of still that know revision missed to the kind one down continued the a come a I for about sort me. But think start be in

coming about are so way X on X this of the within It what is think thing costing it, know year I that. to right We to exactly watched like the really in, about model many it of you've number this focus Brian, consumers. it ago, ago years. exciting really, is ago, for those growth intact. year, I the well get we years the than really years -- look consumers that's is that many, what's a longer was and band definitely even it think

that this one think demonstrates the communicate it is the the that's the -- I of It the potential category. things of idea. making potential to of important change demonstrates we're in really So

extraordinary. and other what and from frozen. we're And costs the that's come we're [indiscernible]. further and people of incredibly unique -- I that's I to think increased getting trying further from kind deeper our we're we're else mean to like seeing not our into getting on TAM, fresh hearing in And

feel we about think I that. really that terrific So

year overall year see at ago. In look position the spot people another fairly And making in If increase we we're was about think It front if the terrific setting year, you you all was in will media back, back the we it's great now, -- at in the need in of is you're a next to a sure going ability lower to for lower and the bounds fortunate the terrific that media to if that do our months XX% kind constructed But if and to XXXX. work X resources a half within we is and I increase that that growth half our you ask increase about it will this and literally in ago. for way about doing sure all we to up the that for overall way, spend think to plan put year against year. think the -- ourselves talk the much for you we're spend, that stay we're company it incredibly be put And -- ourselves but 'XX. a wanted versus a in have a over that media about significant what a for a significant look increase. that. It year, do make the be

or Appreciate in there half. the margin just margins delivery first that consecutive color, reason sequential the gross then about if to in compress Is of they couldn't be gross half year, that mindful biggest Todd, the had in aside was first what's the guidance we've margin the be Scott. second implied over any kinds Anything the And of half over seen quarters X upside driver maybe, mid-XX% the set mindful line, top gross we've thinking of would the of the better in we of second obviously the half? improvement? the

some great the we and had couple of do the gross the margin I are add the hit, fourth marks. costs of couple best Obviously, antennas first the are line in low half our like will but we'd going we're headwinds. feeling volume on here the -- expenses mean, look, there's second mean, very coming I about that in year. half, Obviously, replicate of legitimate, there of a start-up -- the new are those that a But that Yes. to line. will start of there that the that We're out hit to second to half.

adding not us South costs next QX. in any shifts that no and growth XXX inventory. out. But half see are year. there to some still still points, big basis was of -- for the reliance did about We QX will Kitchen impact add of deload Obviously, well. on bad some watch could the to up about we're feeling capacity. prep That's great absolutely start. benefit the We that We we're at going a in as That of additional happen year's a look, our second

point. at it half, be capacity We the don't second is this in online it on headwind. are about the happening covered there But XX% We commodities. see much slight a new coming will

Stifel. is question next from with Astrachan Our Mark

then larger a try wanted it little and to I to pack this back understand to comment size better. go bit

you're flat, Costco So price higher but at larger in packs price/mix point. was selling a

guess amounts just selling So XX And but ago. the how Costco does bigger suppose factor? that you and per has months unit, what a price you today what would I obviously, than you're did in I dollar sales consumers lower that have more And be average bigger buying volumes.

question. So accretive the That's mix line? top would in of be contribution the first that to terms

across think main of pack as I larger we lead. so Freshpet definitely to pushing developing portfolio, becomes Mark, a is look our the sizes way meal you think this more are if and about

bought product a The remember got little or started because about we size. Nutrition other thing our called -- And bit. did we Complete we like pound X intentionally pricing, where as value. X.X was a we so were a sharp tightened it did, the of on ago, you really storm actually a also discussion, a bit year little just And people up before that really sharp clouds hearing a value got we may much in we of we concerned

is have but expensive -- things developed in the seeing et are look only are that interesting which across cetera. The -- are the the items in the of very margins. packs we it's we're growth -- larger clubs, our not if size items, people our also largest smaller and and have some which where good items but some Nutrition, in in the the point, coming you these And you on mass, the you large fastest one we So that price a growing side solid opening of the side Complete other buying have. bags, have at that the things most

lot brands are as people different going basically make lot intentionally a products the products. want a pieces set it it. to our about the on. use forward into covered market, There think when we to want they how for how and we on many there's going And So they we our and sure strategy of to

there from of there developing job sizes. that So through movement really a is, good done know. price lot as is that. we've appreciate There's a portfolio a what There's and it. nice all consumers low And action. And go think are done lot you points we've I to high, a of

but of see X.X the larger of this in are coming of on are Some coming X, people it's people into sizes. that's lot [indiscernible] it's pound on that on sizes, the where area a fastest new and of some the this some sizes is We business. single

it. Got

just as I it's a I moving parts, that. sort a of just lot beyond to question, what -- sort follow-up because had guess, of So of -- of that but kind another related to

the this? people an incremental consuming way still think Costco of larger size, that is pack Is to So just mean, right about is I consumer? the the product? more

Yes.

lot and through in for new not a up X-pound come some in actually, also it do retail. interesting a with you'll our all sizes even is the consumers people We we -- only are are I roll. of larger interesting. mean, thing start is we it go but club, So see seeing

going to We us a was meal to see that people then dynamic multipacks, multi bit as going main plan product. but long-term put it's slower, retail, of knew into to little started what definitely starting packs So starting to club, out we're that it to of go a see using make not sure they're early get in only are be we and these are we to starting regular a And on. also part but these traction.

fastest thing, one number so with a at amongst seeing an mentioned it other comments, larger the oftentimes, the rate. as faster comes are growing it's ultra moving where Mark, been we people heavier of then users, has users even you amounts consumers HIPPOs, we purchase also if growth in are into up buying that buying $X,XXX increasing we the over an the higher year. who They're think our so and sizes. said pack that about and

Benedict question next Our Peter with from is Baird.

just might talk mean is needed capacity, -- I one a be First forward. going about what of lot around

proving You seem did mention be the here. new out production to technologies

a the said you to of like you you lines remind to, Just kind that going continue what guess, half That's question. to your new existing retrofit without be facility, 'XX I my to with second have improve technologies? or I and those first of fully improve up where Can plan us of ways what's your of on kind of output that running. would think And thinking there? thing. type

about our lines. to us is this I the think the way think improving pieces there's capacity X Peter, on major to

to an the will off The work it like I job that first opportunity, that will first profitability and one that guys lines, change go cadence hats doing there. improve like the and open long existing we they're is network, the to okay? will new -- And is and significant, from they've and That's the basically one. a the just significant be that lot need that done. OE of and mean way team a to improvement, and have we extraordinary the

to we're making small this is. And minor that We've where potential at that -- it's would is able progress seeing of it's The future call we're And and developed it evolution. I will a production and I'll like in some anything lines not and the we significant is, our I kind would of some investments say of been revolution the really updating by of call amount a second one the about not of bag an and we're improvements with share of going that bag more somewhat kind -- third new the we're start just the is -- technology there basically, proving be. to seeing technology. and state one upside it, it almost some believe enthusiastic new pretty to We're point, lines modifications significant excited area. that in but equipment. existing out,

in we kind question future. I work. very take the can't -- start expansion in like just it we'll the out, on of confident not And will that expand be get like Now our that exact that exactly the but this that, that's we the are start we network. when future. can predict out. that, far at we we and is is But the that's taking will impact say our as will to technology that our lines into. year, see capacity across it It's exactly then our far prove And that intent will will next too small. really something place as point, technology The

And couple the you follow-up Scott. over Well, fair years. the question, of team then to That's made look, a perspective. my last guys enough, good management have enhancements

in You're Bedminster, Jersey, finance looking obviously maybe talked think executing about to I marketing areas some corporate very mentioned and you'd headquarters as be attract additional you well. New where the you Billy, talent. new

you expand around to on Just continuing what could the that, the in might wondering support if maybe on, the as thoughts you would your business? organization, build or growth who be you -- focused areas you

on growing learned in virtually rate talent. lesson when as growing, the in adding you get you're what the every company. we're Peter, happens last and we we're Yes. And growing. the obviously, we've couple growth That's important is have at of the that opportunities behind most area years needs can't in

company, opportunities the area where a level high sophistication probably can $X gives and been scale may can and that's sales. we've before, for generalist add $X talent wide And seen of that previously you'll or specific we months, of leaning see other a been it billion has specialist, difference. fairly that's talent we we the capability say that that where than haven't we don't biggest into it where us needed in become a in as range you operating, had billion necessary should capability an in get $X just have areas. as make in last about the a see been we've the So to into but get add the to XX in the areas us places acquiring hired any the you billion amount want to can in business or will significant. I And you've to think areas capabilities

going So be it's to you're strength just going and ongoing to help to the see add of add people continue our company part an us bench to grow to process. us

with Parikh Our next Oppenheimer. Rupesh is from question

the more start And one guys any QX? EBITDA out think you have color just just maybe So versus QX with on cadence, I about how follow-up. then

more spending. guidance, of media second Obviously, just picture. see year. half We'll specific this a media amount but don't of the QX just than in similar We'll we EBITDA give first from as have QX big to half because -- the the pushed

additional amount similar then QX, very you for QX, QX. a in there versus that still media year, drop allow a us. sizable QX but in will and a of spend be be But off, will unusual increase EBITDA drop-off You'll that's prior did a see there'll in in as

Great. And then on the category. one follow-up question just

in category your side. one So pet customers green the retail of adoption the seeing highlighted pet they're on shoots

perspective? adoption pet from curious a Just guys seeing what are right you now

category, we -- to going we're normalized some think in haven't there either kind -- bit to is are the single trends think really little I kind to mean, And on category post-COVID more think we about and digits, a back single or you're I you're way the headwinds that of tons definitely when think much to headwinds fortunate is, had focus tailwinds. We've goes you this look, of of I very that through ebbs going to come rate. on And a think really been like that there there's Rupesh, focus I look on. those of the going of light dealing trough, those winning within. But and at always if a it's flows.

across I'd the then the and category you're of kind really to you're, And and segments for of like business. been the any you're If creates future the it winner looking across kind you're looking across work opportunity absolute us and with looking even clear more them develop almost into say, have brands. retailer, and we

when that has your quarterly we're it's mean, say, basis specific kids term. a we where a months things adoption significant been X this they've are people and to bit. part are less this know yes, question and people over on around trend think and are more a was I pets. trend, like become people more and and a look, ebbing stuff large having continue an look, looking long treating our rates. of and flowing, going at little I off would -- societal I pets important the So that's And lives,

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

Just one me. question for

of to started this terms overheat this year you manufacturing I more plan or be think measured, growth not year your with right, wanting network. to into I went and guess, a in

And so guess, I you you had you been question, curious, right, from has the there have was could year, we're guess this higher, given what your results? demand been, is the right, in retailers if sales not just how than if -- if maybe interest seeing consumers good as and would a make much could, as I more capacity

on expansion it's the good really, that. supply growth also we at And year, fashion. orderly feel half really and last seen we say keep us, would within capacity couldn't if of in had we rate other knew words, for in to would the And our first comparable spend more measured demand, of plan it. growth, media in media and grow we the the I have execute to growth what the sales rate important you same very about a we would but limit at sort to capacity

Our service team want because provide customer know do We starting of designing, provide We high has gotten to and want really up high level good lines. we that service. reliably. to level of we constructing very at customer

costs are Our lower.

are happy, better. Our sales are Customers are fridges are consumers full. The happy.

rate. I to works that And measure everybody growth or the at you we we that So We that live for manage it's to should if very the from And going expect capacity. all see us, think important forward. within really think us disciplined a add wins. capacity the together,

is Michael Piper Sandler. question from Lavery next Our with

at overhead leverage there's Kitchen about of benefit the or X-part on absorption is Kitchen I that South, least like in with operating way? talked kind the better You question. guess, efficiencies or you cost? And How guess relationship at part shifts maybe adding if ad it of from changeovers the should shifts that you opportunity South, other on I of at from Do and an lines an your runs. opportunities or the well for least then think do own to maybe any extended that about is, we of as do reduce have as How part you?

pleased that shifts of dramatic. been We out be not It's performing we more the is some Kitchen terrific well. little add terrific. could is exceptionally South The with Sure. performance bit this leverage there. There not relationship They've operation. a as coming They're year. of

leverage. set the Just we up, a way little arrangement the get bit is do of

to earlier, -- have then just we'll continue in, lean as I if both But for So more we to route QX, in if as mentioned we that a shifts. room few that and in there we coming have partners in on line facility another not choose lines go well.

facility. of capacity So great we years more that of performance and out look forward to coming many additional

Bethlehem? lines extend any or at add runs to add And is on shifts or Ennis there room

Ennis, add next point. not ramped will is in at the there get and -- We'll this efficiencies yes, over year Bethlehem we room, or X. the tight up shifts. we'll the pretty more facility is

there is there. capacity So some

operating it grows, that operation. then capacity half on on install when XX/X happens production before time. think on our that the as Michael, period shift is putting grows bring next line model we in the about we a line. to And and the it you the ultimately typically take utilization efficiency for one demand And a as we it line, by essence, ramp up or, a of

more all it throughput number those So to higher of increase in that And extend the the make of we on lines we system us of at of specific some allows specialized, hour and our changeovers or and higher we and products lines of being our some the have working to operation. are they're produced. depending per do to reduces what the some or are as output number same we're deliver where that, doing time also runs of

as in significant are each scale. of gain we benefits there that operations So gain our we

helpful. a And just follow-up. That's Okay.

the the remarks Dallas in D.C. prepared mentioned You

optimized? its the maybe it was now get it expanded a all I further more it it way what is that room to I to. for area. service there Is phrased expand Or wasn't optimal think coverage could was, realized you I -- or of meant that to guess hadn't expiring more could area? even

now, in Right take state DC the produced that the Ennis can the to Dallas to exists it product that's and serve. ship it

we production supply Dallas able states. DC add as in the So NS, more is to

Dallas process right Ennis Dallas Southeast. of should the in is and more the States. running the Ultimately, out as production, we're to the of Think Utah the full than So be or its for XX half the states example, and to now the of of being Colorado of when and over probably of like Ennis the shipped DC converting lines up Mississippi of west it everything United supplying parts DC. of

So we will from from get facility. Ennis of but to the the Dallas efficiencies output freight continue DC, the to or increasing they're amount linked connected XXX%

Anderson next Jon is from William Blair. Our with question

one. wanted distribution. come an comment on back to have just to I earlier I

brand same the ACV growth and the of more I growth guess just particularly think, to to -- that be I should bit now you are stores your forward. my more expect we Bill, fridges. mentioned question in -- And you around PDP represented add need is second from you exceeding is, in a that in moving kind FBM, that are moving the understand see third seeing proactively trying of seeing perspective? at the coverage to context to comment? time, your accounts, I'm a that little you large

exciting. of and you we've which it. is scale far at that to I by so are it, Jon, but a we which think now only the growth, they recognizing weeks I category, really behind measure growth looking actually delivering year, their the this it by million next growth and in mention nice think have last are of but think starting any brief I the on mean but clearly leader our brand in is the not category, of made to if before, like any Freshpet far, I -- not I they're year, XX $XXX about as the is look retailers think added only

start they looking second productive mix not about existing just not I stores know now we in third also it's some the distribution have We conversations next fridges what you we fridges, going and -- year, the but in in, only fridges So that bridges. products also say, about to really and expanding and but forward do? do of tighten having, need would where we're cases second even we're in

that's think of and going some own their has So very what of where into -- bought or retailer some may we'll time, I space some fridges, going that too. few there that couple are so also we a see forward. There's be over scenarios

Okay. more If one I squeeze could in.

front, talk And on messaging? working? is bit update little taken maybe months type about the have maybe it think the how using how buying the than you're On spend, that the Because XX you you the in past months, an evolving past, different -- you've and helpful. of XX approaches level over changing media I media the a some can be and that of or but you're or but would not

Yes.

really a buying so are how has So in the on also been and overall we're not also consistent from that on entire actually, great I expensive, We're but about earlier. me producing like been and we tremendous with team. It's marketing talking work strong. to the the seeing the the face, that been has well. great place by more range media, can our the food, on expand seeing we're CAC we it -- marketing performance a different It's think what packaging. done, productivity And creative across start from performance great dog campaign work for incredibly That's to us. the creative. planning it's the let deliver spots but and only not that team continue We're opportunities

work it back across really done So seeing things the we up. conversions creative really, site to performing well. both goes the track the visits And the that really media every up seeing is and also We're the buying. that we're metric to

we've that So We've sports. continue of expand yes, to we different kind also into pushed targets. recognized out

of then in about really then us worked we of pushing and that is to the we see has well. And now those seeing it we want to of to You're think Every more. and little really typically want the sports want productivity test a bit kind future. the one we buy that

is bigger the next we're into year or buy quarter that. when a getting on So next

So mode. that in we're constantly

with Tom Our is question Citi. next from Palmer

I on discussion. follow-up just count wanted the to first fridge

of the sounds driver we visibility units, look becomes maybe like new adding As and you the some next next of here one kind which years, second at of years? for both have it the couple the bigger over stores couple

be second term clear longer is fridges. to driver The going

-- double-digit about point. margins, first of that annuity capital growth the quote for you X productivity XX% year now us. fridge. most sales running is typically you we can one But are a of next in increase investment off, It's in once cocktail of when we you if the out that's years the a pet levels the category-leading interesting feet [indiscernible]. within get The And that have ongoing for we productive forward. fridge, the an the look and going feet fridge. And it's into great. an at great. that will expansion then the X sales demonstrate the months. have first actually we And second on you number really second If is now, and X great that The It's really get productive typically is into

the seeing -- on on growth the that growth seeing that Freshpet. with moved So compounding retailers earlier effect are they're the a us

also opening if year's guess added the then guidance quarter, guidance, but ramp of -- just the the line quarter of that this note new also how on is about lines in and then line but was new this it? at sales reliant, -- hitting this And I the thinking did you prior just this that Ennis growth, continued Ennis all, your to updated year's shifts. or

rate some didn't the come that, up and would growth The the quarter issue with meet we now year. very rolls we comfortable of our of reason happen, We're the -- Ennis to in lines at why online. qualification new the growth starts very, year, year shifts demand we're we've in have, on the short South the right then year. online. going well. bags mean, support at bringing rolls line that that the We're to of confident that in come this we is ability is of already balance later we on the going if next capacity the But which balance first and be Bags our to for as continue new very line year. for head quarter very new for to that becomes bag first current it's into Kitchen production to I and order actually an need our very next

We that capacity. the position keeps the we constantly we've in So to time. reliable need very nicely. the we're and we When business on can had into where we support bring fashion do growing a existing growing fill in on a very, are rates the that, with line our customers high

developing, really it's that got cadence to well. we're execute we've a but So nice

with is question Fargo. Marc from Torrente Our next Wells

over Non-tracked much me. for most to distribution for does new grow incremental? areas of traction gain How What represent guys? And total to one XXX%. starting here any space now? continue Just this other you channels white

are is to going untracked now coming multiple fruition. lot in of we that's yes, years nice for the a growth been on work it's seeing So some really And channels. -- that's it of

may pick, very there and is us, through click et we would think includes to see that our performance we see we're continued a sales X% tremendous of cetera. think someone some of longer there Approximately the you talk albeit of could thing past. there, to We digital and in very, are buy other and X, growth to area You're and opportunity really XX then continue lot are are in, and not type that down have are from term to underdeveloped. that have as like we see -- digital Canada hoping tremendous the great or and just as the standpoint, there. months. year, XX like any developed -- in also. And a many that over in there going expand -- of brands the to We and a both growth leading our focuse heard e-commerce But to There's We're sit kind in next the this really is opportunities digital the U.K. a from in next small. kind computer way. opportunity of we where us about tremendous, to

And about first Marc, X QX, points tremendous just growth been at one QX. the points Obviously, call in the half in has out. in X year nonmeasured that of

e-com which that in world, 'XX really in really, But wrong, growth in get still growth that And will of the to growth well. some As second really is flow we half. of year second but nice start still here anticipate we me the got will at growth. into as gains to it in the year, about probably nonmeasured lap half the the strong, the we're Scott be that half, as we think last store only some we going really that slow the second will in pointed points X is tremendous out, seeing

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

Ford, your mailman much life, you Thank the one treats, in you. he from Sean and would fat Thank thought. if very to us is That's to teach visitor with be but very which mailman be bacon for Dogs most a loved interest. carries anticipated Thanks, for I you your the fresh trusted. leave add, interest. important lesson not I'll have. you turkey will could everyone,

concludes conference. This today's

participation. you may your this your for at You time, lines and disconnect thank