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Form 8-K Freshpet, Inc. For: Aug 08

August 8, 2022 4:11 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): August 8, 2022
 
 
FRESHPET, INC.
(Exact name of Registrant as Specified in Its Charter)
 
 
Delaware
001-36729
20-1884894
(State or Other Jurisdiction
of Incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
     
400 Plaza Drive, 1st Floor
Secaucus, NJ
 
07094
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrants Telephone Number, Including Area Code: (201) 520-4000
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
FRPT
NASDAQ Global Market
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
 
Emerging growth company 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
 

 
 
Item 2.02. Results of Operations and Financial Condition.
 
On August 8, 2022, Freshpet, Inc. (“Freshpet”) issued a press release disclosing its financial results for the quarter ended June 30, 2022. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
 
As previously announced, Freshpet will hold a conference call at 4:30 p.m., Eastern Time, on Monday, August 8, 2022 to discuss its financial results for the quarter ended June 30, 2022.
 
Freshpet references non-GAAP financial information in the press release and makes similar references in the transcript to the conference call. A reconciliation of these non-GAAP financial measures to the nearest comparable GAAP financial measures is contained in the attached Exhibit 99.1 press release.
 
Item 7.01. Regulation FD Disclosure.
 
On August 8, 2022, Freshpet published to the investor relations section of its website a presentation which will be used by Freshpet’s management team in meetings with analysts and stockholders. A copy of the presentation is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
 
The information furnished with Item 2.02 and this Item 7.01, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“the Exchange Act”) or incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
 
Freshpet uses the “Investors” section of its website (investors.freshpet.com) as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.
 
Item 9.01. Financial Statements and Exhibits.
 
(d) Exhibits
 
Exhibit
Number
 
Description
     
99.1
 
99.2
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document).
 
 

 
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
             
       
FRESHPET, INC.
       
Date: August 8, 2022
     
By:
 
/s/ Heather Pomerantz
       
Name: Heather Pomerantz
       
Title: Chief Financial Officer
 
 

Exhibit 99.1

 

ex_195392img001.jpg

Freshpet, Inc. Reports Second Quarter 2022 Financial Results

 

Strong Topline and Household Penetration Growth Despite Higher Pricing

Revises Adjusted EBITDA Guidance to Reflect Inflation and Quality Issue

Refines CAPEX forecast to reflect new efficiencies

 

SECAUCUS, N.J. – August 8, 2022 – Freshpet, Inc. (“Freshpet” or the “Company”) (Nasdaq: FRPT) today reported financial results for its second quarter ended June 30, 2022.

 

Second Quarter 2022 Financial Highlights Compared to Prior Year Period

 

 

Net sales of $146.0 million, an increase of 34.4%

 

Net loss of $20.6 million, compared with prior year net loss of $7.5 million

 

Adjusted EBITDA of $3.9 million, compared to prior year of $10.9 million 1

 

"We made solid progress on our most important long-term value drivers in the second quarter, despite external challenges such as inflation and some short-term internal challenges with our operations," commented Billy Cyr, Freshpet's Chief Executive Officer. "We are encouraged by our strong consumption growth in the face of higher pricing, the acceleration in our household penetration growth, and our strong production performance that supported it. However, the combination of inflation and short-term operating challenges negatively impacted our bottom line in the quarter, and we are reflecting those factors in our 2022 outlook. We continue to take the necessary corrective actions, such as another price increase to offset inflation, and are steadfastly committed to fixing the operational issues so that the rewards of our strong growth become more apparent."

 

Mr. Cyr continued, "We look forward to opening our new, state-of-the art Freshpet Kitchen in Ennis, TX, next month, which — when it is fully operational — will take our total capacity over $1 billion. In connection with that, we have further refined — and reduced by $80 million — our capital spending forecast for this year with an eye on maximizing near term efficiencies while enabling us to continue driving towards our long-term growth objectives."

 

Second Quarter 2022

 

Net sales increased 34.4% to $146.0 million for the second quarter of 2022 compared to $108.6 million for the second quarter of 2021. Net sales for the second quarter of 2022 were driven by velocity, pricing, distribution gains and innovation. 

 

Gross profit was $52.2 million, or 35.8% as a percentage of net sales, for the second quarter of 2022, compared to $43.1 million, or 39.7% as a percentage of net sales, in the prior year period. For the second quarter of 2022, Adjusted Gross Profit was $61.8 million, or 42.4% as a percentage of net sales, compared to $50.1 million, or 46.1% as a percentage of net sales, in the prior year period. The decrease in gross profit as a percentage of net sales and Adjusted Gross Profit as a percentage of net sales was primarily due to inflation of ingredient cost and labor, and quality issues, partially offset by increased pricing. Adjusted Gross Profit is a non-GAAP financial measure defined under “Non-GAAP Measures” and is reconciled to gross profit in the financial tables that accompany this release.

 

Selling, general and administrative expenses (“SG&A”) were $70.4 million for the second quarter of 2022 compared to $49.6 million in the prior year period. As a percentage of net sales, SG&A increased to 48.2% for the second quarter of 2022 compared to 45.6% in the prior year period. The increase in SG&A as a percentage of net sales was a result of increased media spend as a percentage of net sales of 350 basis points, offset by increased selling, general and administrative expense leverage of 90 basis points due to higher net sales. Adjusted SG&A for the second quarter of 2022 was $58.0 million, or 39.7% as a percentage of net sales, compared to $39.3 million, or 36.1% as a percentage of net sales, in the prior year period. The increase in Adjusted SG&A as a percentage of net sales was mainly a result of increased media spend as a percentage of net sales of 350 basis points. Adjusted SG&A is a non-GAAP financial measure defined under “Non-GAAP Measures” and is reconciled to SG&A in the financial tables that accompany this release.

 

Net loss was $20.6 million for the second quarter of 2022 compared to net loss of $7.5 million for the prior year period. The increase in net loss was due to increased SG&A, which includes increased media spend of $9.9 million, partially offset by higher net sales and increased gross profit. 

 

1     Adjusted EBITDA, as well as certain other measures in this release, is a non-GAAP financial measure. See "Non-GAAP Measures" for how we define these measures and the financial tables that accompany this release for reconciliations of these measures to the closest comparable GAAP measures.

 

1

 

Adjusted EBITDA was $3.9 million, or 2.6% as a percentage of net sales, for the second quarter of 2022, compared to $10.9 million, or 10.0% as a percentage of net sales, in the prior year period. The decrease in Adjusted EBITDA was a result of increased Adjusted SG&A expense partially offset by higher net sales and Adjusted Gross Profit. Adjusted EBITDA is a non-GAAP financial measure defined under “Non-GAAP Measures” and is reconciled to net loss in the financial tables that accompany this release.

 

First Six Months of 2022

 

Net sales increased 37.7% to $278.2 million for the first six months of 2022 compared to $202.0 million for the first six months of 2021. Net sales for the first six months of 2022 were driven by velocity, pricing, distribution gains and innovation. 

 

Gross profit was $97.0 million, or 34.9% as a percentage of net sales, for the first six months of 2022, compared to $79.4 million, or 39.3% as a percentage of net sales, in the prior year period. For the first six months of 2022, Adjusted Gross Profit was $117.2 million, or 42.1% as a percentage of net sales, compared to $93.7 million, or 46.4% as a percentage of net sales, in the prior year period. The decrease in gross profit as a percentage of net sales and Adjusted Gross Profit as a percentage of net sales was primarily due to inflation of ingredient cost and labor, and quality issues, partially offset by increased pricing. Adjusted Gross Profit is a non-GAAP financial measure defined under “Non-GAAP Measures” and is reconciled to gross profit in the financial tables that accompany this release.

 

Selling, general and administrative expenses (“SG&A”) were $131.0 million for the first six months of 2022 compared to $95.6 million in the prior year period. As a percentage of net sales, SG&A decreased to 47.1% for the first six months of 2022 compared to 47.3% in the prior year period. The decrease in SG&A as a percentage of net sales was a result of increased selling, general and administrative expense leverage of 400 basis points due to higher net sales, partially offset by increased media as a percentage of net sales of 380 basis points. Adjusted SG&A for the first six months of 2022 was $108.6 million, or 39.0% as a percentage of net sales, compared to $75.1 million, or 37.2% as a percentage of net sales, in the prior year period. The increase in Adjusted SG&A as a percentage of net sales was a result of increased media as a percentage of net sales of 380 basis points offset by increased selling, general and administrative expense leverage of 200 basis points due to higher net sales. Adjusted SG&A is a non-GAAP financial measure defined under “Non-GAAP Measures” and is reconciled to SG&A in the financial tables that accompany this release.

 

Net loss was $38.1 million for the first six months of 2022 compared to net loss of $18.4 million for the prior year period. The increase in net loss was due to increased SG&A, partially offset by higher net sales and increased gross profit. 

 

Adjusted EBITDA was $9.0 million, or 3.2% as a percentage of net sales, for the first six months of 2022, compared to $18.6 million, or 9.2% as a percentage of net sales, in the prior year period. The decrease in Adjusted EBITDA was a result of increased Adjusted SG&A expense partially offset by higher net sales and Adjusted Gross Profit. Adjusted EBITDA is a non-GAAP financial measure defined under “Non-GAAP Measures” and is reconciled to net loss in the financial tables that accompany this release.

 

Balance Sheet

 

As of June 30, 2022, the Company had cash and cash equivalents of $307.3 million with $78.0 million of debt outstanding.

 

Outlook

 

For full year 2022, the Company updated its Adj. EBITDA guidance. The Company now expects the following results: 

 

 

Net sales of >$575 million, an increase of ~35% from 2021

 

 

Adjusted EBITDA of >$48 million, an increase of ~12% from 2021

 

 

Capital expenditures of approximately $320 million, reflecting a reduction of approximately $80 million versus prior forecast

 

The Company does not provide guidance for the most directly comparable GAAP measure, net income, and similarly cannot provide a reconciliation between its forecasted adjusted EBITDA and net income metrics without unreasonable effort due to the unavailability of reliable estimates for certain components of net income and the respective reconciliations, including the timing of and amount of costs of goods sold and selling, general and administrative expenses. These items are not within the Company's control and may vary greatly between periods and could significantly impact future results.

 

 

2

 

Conference Call & Earnings Presentation Webcast Information

As previously announced, today, August 8, 2022, the Company will host a conference call beginning at 4:30 p.m. Eastern Time with members of its leadership team. The conference call webcast will be available live over the Internet through the "Investors" section of the Company's website at www.freshpet.com. To participate on the live call, listeners in North America may dial (877) 407-0792 and international listeners may dial (201) 689-8263. 

 

A replay of the conference call will be archived on the Company's website and telephonic playback will be available from 7:30 p.m. Eastern Time today through August 22, 2022. North American listeners may dial (844) 512-2921 and international listeners may dial (412) 317-6671; the passcode is 13730982.

 


About Freshpet

Freshpet’s mission is to improve the lives of dogs and cats through the power of fresh, real food. Freshpet foods are blends of fresh meats, vegetables and fruits farmed locally and made at our Freshpet Kitchens. We thoughtfully prepare our foods using natural ingredients, cooking them in small batches at lower temperatures to preserve the natural goodness of the ingredients. Freshpet foods and treats are kept refrigerated from the moment they are made until they arrive at Freshpet Fridges in your local market.

 

Our foods are available in select mass, grocery (including online), natural food, club, and pet specialty retailers across the United States, Canada and Europe. From the care, we take to source our ingredients and make our food, to the moment it reaches your home, our integrity, transparency and social responsibility are the way we like to run our business. To learn more, visit www.freshpet.com.

 

Connect with Freshpet:

 

https://www.facebook.com/Freshpet

 

https://twitter.com/Freshpet

 

http://instagram.com/Freshpet

 

http://pinterest.com/Freshpet

 

https://www.tiktok.com/@Freshpet

 

https://en.wikipedia.org/wiki/Freshpet

 

https://www.youtube.com/user/freshpet400

 

Forward Looking Statements

 

Certain statements in this release constitute “forward-looking” statements, including statements relating to our long-term capacity planning, net sales guidance and Adjusted EBITDA guidance. These statements are based on management's current opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. These forward-looking statements, including our updated guidance, are only predictions, not historical fact, and involve certain risks and uncertainties, as well as assumptions. Actual results, levels of activity, performance, achievements and events could differ materially from those stated, anticipated or implied by such forward-looking statements. While Freshpet believes that its assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect actual results. There are several risks and uncertainties that could cause actual results to differ materially from forward-looking statements made herein including, most prominently, the risks discussed under the heading “Risk Factors” in the Company's latest annual report on Form 10-K and its quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Such forward-looking statements are made only as of the date of this release. Freshpet undertakes no obligation to publicly update or revise any forward-looking statement because of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

 

3


Non-GAAP Financial Measures

 

Freshpet uses the following non-GAAP financial measures in its financial communications. These non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies.

 

 

Adjusted Gross Profit

 

 

Adjusted Gross Profit as a % of net sales (Adjusted Gross Margin)

 

 

Adjusted SG&A

 

 

Adjusted SG&A as a % of net sales

 

 

EBITDA

 

 

Adjusted EBITDA

 

 

Adjusted EBITDA as a % of net sales

 

Adjusted Gross Profit: Freshpet defines Adjusted Gross Profit as gross profit before depreciation expense, plant start-up expense, non-cash share-based compensation and COVID-19 expenses.

 

Adjusted SG&A Expenses: Freshpet defines Adjusted SG&A as SG&A expenses before depreciation and amortization, non-cash share-based compensation, launch expense, fees related to equity offerings of our common stock, implementation and other costs associated with the implementation of an enterprise resource planning ("ERP") system, loss on disposal of equipment and COVID-19 expenses.

 

EBITDA and Adjusted EBITDA: EBITDA represents net income (loss) plus interest expense, income tax expense and depreciation and amortization expense, and Adjusted EBITDA represents EBITDA plus loss on equity method investment, non-cash share-based compensation expense, launch expenses, fees related to equity offerings, plant start-up expense, implementation and other costs associated with the implementation of an ERP system, loss on disposal of equipment and COVID-19 expenses. Beginning with the period ending September 30, 2022, we anticipate no longer adding back launch expenses and plant start-up expense in our calculation of Adjusted EBITDA. This change is part of a renewed focus on capital efficiency, that will provide greater clarity on our path toward generating positive net income as the business scales further following our planned capacity additions.

 

Management believes that the non-GAAP financial measures are meaningful to investors because they provide a view of the Company with respect to ongoing operating results. The non-GAAP financial measures are shown as supplemental disclosures in this release because they are widely used by the investment community for analysis and comparative evaluation. They also provide additional metrics to evaluate the Company’s operations and, when considered with both the Company’s GAAP results and the reconciliation to the most comparable GAAP measures, provide a more complete understanding of the Company’s business than could be obtained absent this disclosure. The non-GAAP measures are not and should not be considered an alternative to the most comparable GAAP measures or any other figure calculated in accordance with GAAP, or as an indicator of operating performance. The Company’s calculation of the non-GAAP financial measures may differ from methods used by other companies. Management believes that the non-GAAP measures are important to an understanding of the Company's overall operating results in the periods presented. The non-GAAP financial measures are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance.

 

 

Contact

 

ICR

Jeff Sonnek

646-277-1263

[email protected] 

 

4

 

FRESHPET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

   

June 30,

   

December 31,

 
   

2022

   

2021

 

ASSETS

               

CURRENT ASSETS:

               

Cash and cash equivalents

  $ 307,345     $ 72,788  

Short-term investments

    19,840        

Accounts receivable, net of allowance for doubtful accounts

    62,090       34,780  

Inventories, net

    60,679       35,574  

Prepaid expenses

    2,547       5,834  

Other current assets

    2,220       1,349  

Total Current Assets

    454,721       150,325  

Property, plant and equipment, net

    662,527       583,922  

Deposits on equipment

    1,084       4,100  

Operating lease right of use assets

    5,862       6,537  

Equity method investment

    27,123       25,856  

Other assets

    22,197       13,670  

Total Assets

  $ 1,173,514     $ 784,410  

LIABILITIES AND STOCKHOLDERS' EQUITY

               

CURRENT LIABILITIES:

               

Accounts payable

  $ 39,507     $ 42,612  

Accrued expenses

    19,437       14,950  

Current operating lease liabilities

    1,446       1,384  

Current portion of long-term debt

    10,449       -  

Total Current Liabilities

  $ 70,839     $ 58,946  

Long term debt

    65,036        

Long term operating lease liabilities

    4,971       5,710  

Total Liabilities

  $ 140,846     $ 64,656  

STOCKHOLDERS' EQUITY:

               

Common stock — voting, $0.001 par value, 200,000 shares authorized, 47,834 issued and 47,820 outstanding on June 30, 2022, and 43,449 issued and 43,435 outstanding on December 31, 2021

    48       43  

Additional paid-in capital

    1,305,260       955,710  

Accumulated deficit

    (273,751 )     (235,623 )

Accumulated other comprehensive income (loss)

    1,367       (120 )

Treasury stock, at cost — 14 shares on June 30, 2022 and on December 31, 2021

    (256 )     (256 )

Total Stockholders' Equity

    1,032,668       719,754  

Total Liabilities and Stockholders' Equity

  $ 1,173,514     $ 784,410  

 

5

 

FRESHPET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data)

 

   

For the Three Months Ended

   

For the Six Months Ended

 
   

June 30,

   

June 30,

 
   

2022

   

2021

   

2022

   

2021

 

NET SALES

  $ 146,007     $ 108,616     $ 278,179     $ 202,029  

COST OF GOODS SOLD

    93,773       65,525       181,192       122,624  

GROSS PROFIT

    52,234       43,091       96,987       79,405  

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

    70,369       49,557       131,000       95,589  

LOSS FROM OPERATIONS

    (18,135 )     (6,466 )     (34,013 )     (16,184 )

OTHER (EXPENSES)/INCOME:

                               

Other (Expenses)/Income, net

    (21 )     (2 )     237       (7 )

Interest Expense

    (1,672 )     (654 )     (2,243 )     (1,556 )
      (1,693 )     (656 )     (2,006 )     (1,563 )

LOSS BEFORE INCOME TAXES

    (19,828 )     (7,122 )     (36,019 )     (17,747 )

INCOME TAX EXPENSE

    41       16       82       32  

LOSS ON EQUITY METHOD INVESTMENT

    717       337       2,027       585  

LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

  $ (20,586 )   $ (7,475 )   $ (38,128 )   $ (18,364 )

OTHER COMPREHENSIVE (LOSS) INCOME:

                               

Change in foreign currency translation

  $ 1,849       (91 )   $ 1,487     $ 169  

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)

    1,849       (91 )     1,487       169  

TOTAL COMPREHENSIVE LOSS

  $ (18,737 )   $ (7,566 )   $ (36,641 )   $ (18,194 )

NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

                               

-BASIC

  $ (0.45 )   $ (0.17 )   $ (0.85 )   $ (0.43 )

-DILUTED

  $ (0.45 )   $ (0.17 )   $ (0.85 )   $ (0.43 )

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING USED IN COMPUTING NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

                               

-BASIC

    45,636       43,303       44,691       42,470  

-DILUTED

    45,636       43,303       44,691       42,470  

 

6

 

FRESHPET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 

(In thousands)

 

   

For the Six Months Ended

 
   

June 30,

 
   

2022

   

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (38,128 )   $ (18,364 )

Adjustments to reconcile net loss to net cash flows provided by operating activities:

               

Provision for loss (gains) on accounts receivable

    (14 )     5  

Loss on disposal of equipment

    89       106  

Share-based compensation

    12,589       12,770  

Inventory obsolescence

    3,455       253  

Depreciation and amortization

    15,888       14,743  

Amortization of deferred financing costs and loan discount

    398       815  

Change in operating lease right of use asset

    675       661  

Loss on equity method investment

    2,027       585  

Changes in operating assets and liabilities:

               

Accounts receivable

    (36,268 )     (15,529 )

Inventories

    (28,560 )     (5,731 )

Prepaid expenses and other current assets

    2,416       (1,443 )

Other assets

    (358 )     (2,156 )

Accounts payable

    (421 )     15,494  

Accrued expenses

    4,487       1,369  

Other lease liabilities

    (677 )     (643 )

Net cash flows used in operating activities

    (62,402 )     2,935  

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Purchase of short-term investments

    (19,840 )      

Investments in equity method investment

    (3,294 )      

Acquisitions of property, plant and equipment, software and deposits on equipment

    (94,872 )     (117,592 )

Net cash flows used in investing activities

    (118,006 )     (117,592 )

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Proceeds from common shares issued in primary offering, net of issuance cost

    337,849       332,172  

Proceeds from exercise of options to purchase common stock

    329       1,740  

Tax withholdings related to net shares settlements of restricted stock units

    (1,213 )     (2,917 )

Proceeds from borrowings under Credit Facility

    78,000        

Fees paid in connection with financing agreements

          (3,262 )

Net cash flows provided by financing activities

    414,965       327,733  

NET CHANGE IN CASH AND CASH EQUIVALENTS

    234,557       213,076  

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

    72,788       67,247  

CASH AND CASH EQUIVALENTS, END OF PERIOD

  $ 307,345     $ 280,323  

 

7

 

FRESHPET, INC. AND SUBSIDIARIES

RECONCILIATION BETWEEN GROSS PROFIT AND ADJUSTED GROSS PROFIT

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2022

   

2021

   

2022

   

2021

 
   

(Dollars in thousands)

 

Gross profit

  $ 52,234     $ 43,091     $ 96,987     $ 79,405  

Depreciation expense

    3,141       4,021       7,842       7,821  

Plant start-up expense (a)

    5,293       1,130       10,040       2,973  

Non-cash share-based compensation

    1,170       1,203       2,339       1,913  

COVID-19 expense (b)

          681             1,634  

Adjusted Gross Profit

  $ 61,838     $ 50,126     $ 117,208     $ 93,746  

Adjusted Gross Profit as a % of Net Sales

    42.4 %     46.1 %     42.1 %     46.4 %

 

  (a) Represents additional operating costs, inclusive of inventory disposal, incurred in connection with the start-up of our new manufacturing lines as part of the Freshpet Kitchens expansion projects. 
  (b) Represents COVID-19 expenses including (i) costs incurred to protect the health and safety of our employees during the COVID-19 pandemic, (ii) temporary increased compensation expense to ensure continued operations during the pandemic, and (iii) costs related to mitigating potential supply chain disruptions during the pandemic, included in cost of goods sold. As of the fourth quarter of 2021, all remaining COVID-19 related expenses are part of our operating performance. 

 

8

 

FRESHPET, INC. AND SUBSIDIARIES

RECONCILIATION BETWEEN SG&A EXPENSES AND ADJUSTED SG&A EXPENSES

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2022

   

2021

   

2022

   

2021

 
   

(Dollars in thousands)

 

SG&A expenses

  $ 70,369     $ 49,557     $ 131,000     $ 95,589  

Depreciation and amortization expense

    4,739       3,633       8,025       6,922  

Non-cash share-based compensation

    5,124       5,487       10,250       10,857  

Launch expense (a)

    504       1,018       1,136       1,749  

Loss on disposal of equipment

    48       46       91       106  

Equity offering expenses (b)

          (125 )            

Enterprise Resource Planning (c)

    1,991       247       3,008       850  

COVID-19 expense (d)

                      5  

Adjusted SG&A Expenses

  $ 57,963     $ 39,251     $ 108,489     $ 75,100  

Adjusted SG&A Expenses as a % of Net Sales

    39.7 %     36.1 %     39.0 %     37.2 %

 

 

  (a) Represents new store marketing allowance of $1,000 for each store added to our distribution network, as well as the non-capitalized freight costs associated with Freshpet Fridge replacements. The expense enhances the overall marketing spend to support our growing distribution network. 
  (b) Represents fees associated with public offerings of our common stock.
  (c) Represents implementation and other costs associated with the implementation of an ERP system.
  (d) Represents COVID-19 expenses including (i) costs incurred to protect the health and safety of our employees during the COVID-19 pandemic, (ii) temporary increased compensation expense to ensure continued operations during the pandemic, and (iii) costs related to mitigating potential supply chain disruptions during the pandemic, included in SG&A. As of the fourth quarter of 2021, all remaining COVID-19 related expenses are part of our operating performance.

 

9

 

FRESHPET, INC. AND SUBSIDIARIES

RECONCILIATION BETWEEN NET INCOME (LOSS) AND ADJUSTED EBITDA

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2022

   

2021

   

2022

   

2021

 
   

(Dollars in thousands)

 

Net loss

  $ (20,586 )   $ (7,475 )   $ (38,128 )   $ (18,364 )

Depreciation and amortization

    7,880       7,654       15,867       14,743  

Interest expense

    1,671       654       2,243       1,556  

Income tax expense

    41       16       82       32  

EBITDA

  $ (10,994 )   $ 849     $ (19,936 )   $ (2,033 )

Loss on equity method investment

  $ 717       337     $ 2,027       585  

Loss on disposal of equipment

    48       46       91       106  

Non-cash share-based compensation

    6,294       6,690       12,589       12,770  

Launch expense (a)

    504       1,018       1,136       1,749  

Plant start-up expense (b)

    5,293       1,130       10,040       2,973  

Equity offering expenses (c)

          (125 )            

Enterprise Resource Planning (d)

    1,991       247       3,008       850  

COVID-19 expense (e)

          681             1,639  

Adjusted EBITDA

  $ 3,853     $ 10,873     $ 8,955     $ 18,639  

Adjusted EBITDA as a % of Net Sales

    2.6 %     10.0 %     3.2 %     9.2 %

 

 

  (a) Represents new store marketing allowance of $1,000 for each store added to our distribution network, as well as the non-capitalized freight costs associated with Freshpet Fridge replacements. The expense enhances the overall marketing spend to support our growing distribution network.
  (b) Represents additional operating costs, inclusive of inventory disposal, incurred in connection with the start-up of our new manufacturing lines as part of the Freshpet Kitchens expansion projects. 
  (c) Represents fees associated with public offerings of our common stock.
  (d) Represents implementation and other costs associated with the implementation of an ERP system.
  (e) Represents COVID-19 expenses including (i) costs incurred to protect the health and safety of our employees during the COVID-19 pandemic, (ii) temporary increased compensation expense to ensure continued operations during the pandemic, and (iii) costs related to mitigating potential supply chain disruptions during the pandemic. As of the fourth quarter of 2021, all remaining COVID-19 related expenses are part of our operating performance. 

 

10

Exhibit 99.2

 

 

 

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