SECAUCUS, N.J., Nov. 06, 2023 (GLOBE NEWSWIRE) — Freshpet, Inc. (Nasdaq: FRPT) today reported financial results for its third quarter ended September 30, 2023.
Third Quarter 2023 Financial Highlights Compared to Prior Year Period
- Net sales of $200.6 million, an increase of 32.6%.
- Net loss of $7.2 million, compared with prior year net loss of $18.4 million.
- Adjusted EBITDA of $23.2 million, compared to prior year of $3.5 million.1
First Nine Months of 2023 Financial Highlights Compared to Prior Year Period
- Net sales of $551.5 million, an increase of 28.4%.
- Net loss of $48.9 million, compared with prior year net loss of $56.6 million.
- Adjusted EBITDA of $35.2 million, compared to prior year of $1.3 million.1
“Fiscal year 2023 is shaping up to be the kind of year we had hoped it would – delivering strong top-line and bottom-line growth that puts us ahead of the pace needed to deliver our 2027 goals. As a result of our strong third quarter performance, we are raising our 2023 guidance today,” commented Billy Cyr, Freshpet’s Chief Executive Officer. “Our strengthened organization is delivering improved margins from better operational performance in logistics, input costs and quality while maintaining strong volume-based revenue growth. This performance underpins our confidence in delivering our long-term Fresh Future goals. We have real momentum as we enter the fourth quarter and look forward to finishing the year on a high note as we work toward fulfilling our mission to change the way people nourish their pets forever.”
Third Quarter 2023
Net sales increased 32.6% to $200.6 million for the third quarter of 2023 compared to $151.3 million for the third quarter of 2022. Net sales for the third quarter of 2023 were driven by both volume gains, and higher pricing.
Gross profit was $66.3 million, or 33.0% as a percentage of net sales, for the third quarter of 2023, compared to $44.5 million, or 29.4% as a percentage of net sales, in the prior year period. The increase in reported gross profit as a percentage of net sales was primarily due to decreased unabsorbed plant cost as we grow into the Ennis facility, reduced quality and input cost as a percentage of net sales, partially offset by increased depreciation expense associated with the Company’s capacity expansion, and increased share-based compensation. For the third quarter of 2023, Adjusted Gross Profit was $80.6 million, or 40.2% as a percentage of net sales, compared to $52.2 million, or 34.5% as a percentage of net sales, in the prior year period. 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 $73.4 million for the third quarter of 2023 compared to $60.4 million in the prior year period. As a percentage of net sales, SG&A decreased to 36.6% for the third quarter of 2023 compared to 39.9% in the prior year period. The decrease of 330 basis points in SG&A as a percentage of net sales was mainly a result of reduced logistics costs as a percentage of net sales, decreased cost related to the ERP implementation, and increased leverage on depreciation and share-based compensation as the business scales, partially offset by activism engagement charges and increased variable compensation accrual. Adjusted SG&A for the third quarter of 2023 was $57.4 million, or 28.6% as a percentage of net sales, compared to $48.9 million, or 32.3% as a percentage of net sales, in the prior year period. 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.
1 Adjusted EBITDA, as well as certain other measures in this release, is a non-GAAP financial measure. See “Non-GAAP Measures” for how the Company defines these measures and the financial tables that accompany this release for reconciliations of these measures to the closest comparable GAAP measures.
Net loss was $7.2 million for the third quarter of 2023 compared to net loss of $18.4 million for the prior year period. The decrease in net loss was due to contribution profit from higher sales, partially offset by increased SG&A including increased media spend of $5.1 million.
Adjusted EBITDA was $23.2 million for the third quarter of 2023, compared to $3.5 million in the prior year period. The increase in Adjusted EBITDA was a result of higher Adjusted Gross Profit due to sales growth and leverage on plant cost and decreased quality and input costs, partially offset by higher Adjusted SG&A expenses. 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 Nine Months of 2023
Net sales increased 28.4% to $551.5 million for the first nine months of 2023 compared to $429.5 million for the first nine months of 2022. Net sales for the first nine months of 2023 were driven by both volume gains, and higher pricing.
Gross profit was $176.3 million, or 32.0% as a percentage of net sales, for the first nine months of 2023, compared to $140.3 million, or 32.7% as a percentage of net sales, in the prior year period. The decrease in reported gross profit as a percentage of net sales was primarily due to increased stock compensation expense and depreciation expense associated with the Company’s capacity expansion, partially offset by reduced input and quality cost as a percentage of net sales. For the first nine months of 2023, Adjusted Gross Profit was $218.1 million, or 39.5% as a percentage of net sales, compared to $159.3 million, or 37.1% as a percentage of net sales, in the prior year period. 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 $221.6 million for the first nine months of 2023 compared to $190.2 million in the prior year period. As a percentage of net sales, SG&A decreased to 40.2% for the first nine months of 2023 compared to 44.3% in the prior year period. The decrease of 410 basis points in SG&A as a percentage of net sales was mainly a result of reduced logistics cost as a percentage of net sales, decreased cost related to the ERP implementation, and increased leverage on media, depreciation and share-based compensation as the business scales, partially offset by activism engagement charges and increased variable compensation accrual. Adjusted SG&A for the first nine months of 2023 was $182.9 million, or 33.2% as a percentage of net sales, compared to $158.5 million, or 36.9% as a percentage of net sales, in the prior year period. 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 $48.9 million for the first nine months of 2023 compared to a net loss of $56.6 million for the prior year period. The decrease in net loss was due to contribution profit from higher sales, partially offset by increased SG&A including increased media spend of $12.7 million.
Adjusted EBITDA was $35.2 million for the nine months ended September 30, 2023, compared to $1.3 million in the prior year period. The increase in Adjusted EBITDA was a result of increased Adjusted Gross Profit partially offset by higher Adjusted SGA expense. 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 September 30, 2023, the Company had cash and cash equivalents of $338.1 million with $392.6 million of debt outstanding net of $9.9 million of fees. For the nine months ended September 30, 2023, the cash from operations was $39.0 million an increase of $92.6 million compared to the nine months ended September 30, 2022.
The Company will utilize its balance sheet to support its on-going capital needs in connection with its long-term capacity plan.
Outlook
For full year 2023, the Company updates its full year Adjusted EBITDA and Net Sales guidance and reiterates its capital expenditure guidance as follows:
- Net sales of ~$755 million, an increase of ~27% from 2022, from previous guidance of ~$750 million.
- Adjusted EBITDA of ~$62 million, from previous guidance of at least $55 million.
- Capital expenditures of ~$240 million, unchanged from previous guidance.
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.
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.
