Freshpet (FRPT) Q3 2024 Earnings Name Transcript

Freshpet (FRPT 14.62%)
Q3 2024 Earnings Name
Nov 04, 2024, 8:00 a.m. ET

Contents:

• Ready Remarks
• Questions and Solutions
• Name Individuals

Ready Remarks:

Operator

Greetings. Welcome to Freshpet’s third quarter 2024 earnings name. Presently, all individuals are on a listen-only mode. An issue-and-answer session will comply with the formal presentation.

[Operator instructions] As a reminder, this convention is being recorded. It’s now my pleasure to introduce Jeff Sonnek with ICR. Thanks. It’s possible you’ll start.

Jeff Sonnek — Investor Relations

Thanks. Good morning, and welcome to Freshpet’s third quarter 2024 earnings name and webcast. On in the present day’s name are Billy Cyr, chief government officer; and Todd Cunfer, chief monetary officer. Scott Morris, president and co-founder, may also be obtainable for Q&A.

Earlier than we start, please do not forget that through the course of this name, administration might make forward-looking statements inside the which means of the Personal Securities Litigation Reform Act of 1995. These embody statements associated to our long-term technique, 2027 targets and tempo in attaining these targets, prospects for development, timing of capability growth, new merchandise and new expertise, and 2024 steerage. Phrases comparable to anticipate, imagine, might, estimate, anticipate, steerage, intend, might, mission, will, or comparable conditional expressions are meant to determine forward-looking statements. These statements are primarily based on administration’s present expectations and beliefs and contain dangers and uncertainties that would trigger precise outcomes to vary materially from these described in these forward-looking statements, together with these related to such statements.

Please seek advice from the corporate’s annual report on Type 10-Ok filed with the SEC and the corporate’s press launch issued in the present day for an in depth dialogue of dangers that would trigger precise outcomes to vary materially from these expressed or implied in any forward-looking statements made in the present day. Please be aware that on in the present day’s name, administration will seek advice from sure non-GAAP monetary measures, comparable to EBITDA and adjusted EBITDA, amongst others, whereas the corporate believes these non-GAAP monetary measures present helpful data for buyers, presentation of this data will not be meant to be thought-about in isolation or as an alternative choice to the monetary data offered in accordance with GAAP. Please seek advice from in the present day’s press launch for the way administration defines such non-GAAP measures, why administration believes such non-GAAP measures are helpful, a reconciliation of the non-GAAP monetary measures to essentially the most comparable measures ready in accordance with GAAP and limitations related to such non-GAAP measures. Lastly, the corporate has produced a presentation that incorporates lots of the key metrics that shall be mentioned on this name.

That presentation could be discovered on the corporate’s investor web site. Administration’s commentary won’t particularly stroll by the presentation on the decision however quite as a abstract of the outcomes and steerage they are going to focus on in the present day. So with that, I would like to show the decision over to Billy Cyr, chief government officer. Billy?

Billy Cyr — Chief Government Officer

Thanks, Jeff, and good morning, everybody. For these of you who’re questioning, Jeff was gracious sufficient to fill in for our VP of investor relations, Rachel, whereas she is on maternity go away. Now to the enterprise. The message I would really like you to remove is that we’re starting to ascertain the type of consistency and reliability in our manufacturing operations that we have now been delivering on the highest line for a while.

That has enabled us to quickly enhance our margins whereas concurrently producing the type of development you have got come to anticipate from us. As , our goal this yr was to proceed our sturdy top-line development however do it at a charge that may allow us to stay inside our capability limits, whereas strengthening our working efficiency and money technology. The outcome could be category-leading development, outsized enchancment in profitability, and more practical money administration. We describe that as disciplined development.

If we do this effectively, shoppers will win, prospects will win, and our shareholders will win. And that’s what we’re delivering. In Q3, we delivered our twenty fifth consecutive quarter of 25% year-on-year development, a big growth in our adjusted gross margin and adjusted EBITDA margin and sizable working money movement. The truth is, that is the third quarter in a row the place our adjusted gross margin exceeded our 2027 goal and our sixth consecutive quarter the place our logistics price was higher than our long-term goal.

And we have generated greater than $100 million in working money movement thus far this yr. I believe that a lot of you are actually questioning if or when we’re going to alter our long-term targets to mirror the early achievement of so a lot of our long-term monetary targets. Whereas we’re very inspired by our progress, we do not wish to get forward of ourselves. We wish to see sustained enchancment throughout the complete yr earlier than we conclude that we will ship greater than what we have now already dedicated.

We’re additionally very conscious that we’re working in a dynamic surroundings and would really like a bit extra time to see the place the present developments, notably on inflation, settle out. So that is one thing we’re supplying you with quite a lot of thought to in session with our board, however we aren’t but able to replace our long-term targets. I might now wish to name out a number of key highlights from the quarter, after which Todd will present a bit extra element on the monetary outcomes, and we’ll replace you on our considering on steerage. First, I’m very inspired by the web gross sales development we noticed within the quarter.

We grew 26%, and just about all of it was resulting from quantity development. This quantity development was pushed by sturdy family penetration development, notably amongst our HIPPOH’s. General family penetration development was up 17% regardless of lapping a large achieve in households within the year-ago interval, and the HIPPOH development charge was 24%. Recall, our media funding is extra backloaded this yr than it was final yr.

So you need to anticipate that family penetration, which is a 52-week measure, will lag our long-term development charge within the again half of this yr as a result of change within the media timing. Nonetheless, it ought to reaccelerate within the first half of subsequent yr, we’re getting the good thing about this yr’s second half media funding within the 52-week measure. We proceed to imagine that we’re effectively on monitor to ship our 2027 goal of 20 million households and are more and more focusing our consideration on the 5 million HIPPOHs, who now characterize roughly 90% of our revenues. Second, our crew did an impressive job managing the steadiness between capability and demand, permitting us to concurrently drive sturdy development charges and robust working efficiency.

Recall that we selected to restrict our first-half media funding to a charge that was under our charge of gross sales development in order that we might reliably meet demand till our new function line in Ennis was up and working on the finish of Q3. That plan labored. We had been capable of develop 26% within the quarter, however did it with a buyer order fill charge of 99% for the quarter. As I’ve mentioned earlier than, a robust fill charge is an excellent indicator of general working efficiency for us, and that was positively true in Q3.

We had been capable of ship this sturdy efficiency as a result of the reliability of our media mannequin supplied a really correct forecast demand, and our operations crew generated sturdy throughput on our present manufacturing traces and began up the brand new function line one week early. In essence, we had been capable of thread the needle, i.e., generate sturdy development with out exceeding our capability limits and whereas sustaining distinctive customer support. We anticipate to use that very same sort of strong planning as we convey on new traces over the subsequent few years, fastidiously managing our media funding and capability to make sure good customer support, sturdy web gross sales development, and wholesome margins. Third, the manufacturing, high quality, and logistics groups within the Freshpet Kitchens proceed to drive improved efficiency, together with yield, throughput, and high quality prices, whereas additionally delivering distinctive customer support at our lowest logistics price as a p.c of web gross sales ever.

On a year-over-year foundation, the sum complete of our enter prices, logistics, and high quality improved by 790 foundation factors, and that contributed to a 630 foundation level enchancment in our adjusted gross margin. We imagine that is the results of the funding we have made in our hourly manufacturing workforce and their coaching, i.e., the Freshpet Academy, the Freshpet efficiency excellence program we started about two years in the past and a extra secure exterior surroundings. Lastly, our prospects proceed to imagine that Freshpet is the way forward for pet meals and proceed committing a digital retail area to Freshpet. On the finish of the quarter, we had 22% extra complete distribution factors, TDPs, as a result of addition of greater than 1,000 new shops yr to this point, greater than 750 further shops with second and third fridges yr to this point and a large enhance in shelf area and retailer-owned fridges.

We proceed to additionally see a robust connection between the elevated retail visibility and the effectivity of our media funding, as our retail presence amplifies the media funding. That is seen in our buyer acquisition price, CAC, which continues to be according to our long-term targets and helps us drive a robust return on our promoting funding. Now I am going to present an replace on KPIs we monitor for our major and extra plans, mainstream, major meal, extra worthwhile plans. Specializing in the thought of mainstream, Freshpet is changing into more and more mainstream, however nonetheless has a protracted runway for development.

In keeping with Nielsen omnichannel information, which incorporates e-commerce and direct-to-consumer, as of September 28, 2024, complete U.S. pet meals is a $54 billion class. We solely have a 3.2% market share inside the $37 billion pet food section, which is almost all of our enterprise in the present day. Inside the contemporary frozen subcategory in measured channels, Freshpet has a 96% market share.

Recent continues to outperform the broader pet meals class, and plenty of retailers imagine it’s the way forward for pet meals. Because of this, Freshpet now instructions 66% ACV in Nielsen xAOC, and we proceed so as to add distribution breadth and depth with second and third fridges. Our family penetration good points additionally display that we’re effectively on our option to making Freshpet extra mainstream. As I discussed earlier, family penetration is on monitor to fulfill our goal of 20 million households by 2027.

However extra importantly, the complexion of the households underpinning our development continues to enhance. Our HIPPOHs are rising 24% versus the prior yr interval, surpassing our broader family development of 17%. We expect the mix of retail help and our means to drive family penetration is a transparent indication that Freshpet is main the way in which towards making contemporary pet meals in mainstream thought. Our HIPPOH penetration additionally extends to the primary meal a part of the technique.

Presently, 39% of Freshpet customers are HIPPOHs, and so they represented 90% of our gross sales within the third quarter. Of these customers, about 325,000 or lower than 3% of our complete customers by greater than $1,000 of Freshpet per yr, and this group grew 23% over the previous yr. They now characterize roughly 27% of our enterprise. We’re more and more focusing our consideration on this viewers and making an attempt to create a a lot bigger cohort of customers who seem like they do.

A part of our technique for making Freshpet right into a extra of a major meal merchandise is to supply a variety of things that meet the broadest vary of client wants. This yr, we have now launched a number of new objects to try this, and they’re doing very effectively. Specifically, our giant canine product, whereas nonetheless limitless distribution, has grown fairly properly and is changing into a really profitable merchandise for us because it broadens the enchantment of Freshpet into bigger canines. Equally, our multipacks have executed very effectively.

Early subsequent yr, we shall be launching a product for seniors, additional broadening Freshpet’s enchantment, including second and third fridges allows higher distribution of our wider assortment. Primarily based on complete U.S. pet retail plus information from Nielsen, we at present have a median of 20.5 SKUs per level of distribution, up from 18.0 SKUs one yr in the past. Now to the extra a part of major and extra, extra worthwhile.

We had one other sturdy quarter of margin enchancment. Adjusted gross margin improved 60 foundation factors versus the sturdy outcomes we posted in Q2 to 46.5%, and we ended the third quarter with an adjusted EBITDA margin of 17.2%. As I discussed earlier, the margin enchancment got here in our key focus areas of high quality, enter prices, and logistics. It’s changing into more and more obvious that the improved organizational functionality, improved analytics methods, and intense concentrate on these drivers of revenue enchancment usually are not solely working, however producing higher outcomes than we had anticipated and before we had anticipated.

We’re more than happy with this progress, but in addition imagine there may be vital upside that we will ship over time. I might additionally like to offer you an replace on our efforts to increase our capability. As a reminder, we proceed to focus our capability growth plans on three key drivers of improved capital effectivity. They’re, one, maximizing the throughput of our present traces; two, maximizing the capability of our three present websites; and three, growing and implementing new applied sciences that generate extra throughput per line.

We’re making good progress in opposition to all three elements of that technique. In Q3, we achieved one other milestone with the start-up of the fourth line in Ennis, a roll line, giving us two bag traces and two roll traces at that website. That fourth line began up one week early, below finances, and ramped up quicker than we had projected. We’ve additionally largely accomplished the set up of the fifth line, which shall be our third roll line in Ennis as a result of it was extra environment friendly to put in two roll traces on the identical time within the new area.

That fifth line shall be commissioned in This autumn. And between these two new roll traces, we may have sufficient rolls capability to final effectively into 2026 as soon as we have now absolutely staffed these traces. We’re within the remaining levels of putting in our subsequent bag line in Kitchen South and anticipate that to start out up in late Q1 of subsequent yr. We’ve additionally added staffing at Kitchen South on the present traces in order that we’ll have enough bag capability for the steadiness of ’24 and into 2025.

In Bethlehem, the crew is concentrated on growing capability utilization or OEE, on our present traces. Our Freshpet Efficiency Excellence program has pushed sizable good points in throughput, yield, and high quality because it was launched virtually two years in the past, and we imagine that funding has unlocked a large quantity of free capability. We imagine there may be vital upside remaining and are growing the assets we commit to that effort and reapplying this system to Ennis. The Bethlehem crew can also be within the course of of reworking some dry cupboard space in Kitchens 2 to accommodate a manufacturing line that makes use of the brand new expertise for our bag merchandise.

That line is on monitor for start-up within the second half of 2025. In abstract, I believe we’re making good progress at proving that we will reliably ship improved working efficiency and robust development concurrently. This disciplined development is the results of our strengthened organizational functionality, improved analytics methods, and enhanced focus that has enabled us to generate outsized good points in productiveness and profitability. We’re more and more assured that we will maintain this sort of efficiency and ship the degrees of shareholder returns that we imagine the proprietary Freshpet enterprise mannequin is able to producing.

Now let me flip it over to Todd to stroll by the main points of the Q3 outcomes and our up to date steerage. Todd?

Todd Cunfer — Chief Monetary Officer

Thanks, Billy, and good morning, everybody. As Billy talked about, we’re more than happy with the third-quarter outcomes, notably our means to ship on revenue enchancment. Now I am going to provide you with some extra coloration on our financials and up to date steerage for the yr. Third-quarter web gross sales had been $253.4 million, up 26% yr over yr.

Nielsen measured greenback development was 23% versus the prior yr interval with broad-based consumption development throughout channels. We noticed a 24% development in xAOC, 22% in U.S. Meals, 11% development in pet specialty, and over 70% development within the unmeasured channel. Third-quarter adjusted gross margin was 46.5%, up 630 foundation factors yr over yr.

This was pushed by enhancements in enter prices, yield, throughput, and high quality prices. Particularly, enter prices as a p.c of web gross sales improved 450 foundation factors versus a yr in the past resulting from higher yields and decrease commodity prices, and high quality prices improved by 220 foundation factors versus a yr in the past. We do have a timing profit in our high quality prices that may reverse in This autumn, nevertheless it was a robust quarter, nonetheless. Third-quarter adjusted SG&A was 29.3% of web gross sales in comparison with 28.6% within the prior-year interval.

We spent 10.8% of web gross sales on media within the quarter, up from 9.5% of web gross sales within the prior yr interval. Whole media funding was up 43% yr over yr. Recall our media plan was much less front-loaded this yr than in years previous in order that we might handle our development to stay inside our capability limits. Because of this, our media funding within the again half of 2024 will develop considerably quicker than our gross sales will develop, and that may place us for a quicker begin in 2025.

Logistics prices continued to enhance and had been 5.6% of web gross sales within the second quarter, a lower of 120 foundation factors in comparison with the prior-year interval. The vast majority of the development was resulting from strategic actions we have now taken to extend fill charges, diminished miles pushed by growing the variety of states served by our second distribution heart, and negotiations with numerous carriers with the rest being extra macro pushed with extra favorable lane charges and decrease diesel prices. Different SG&A, which was 13% of web gross sales, elevated 60 foundation factors, pushed by greater incentive compensation. Third-quarter adjusted EBITDA was $43.5 million or 17.2% of web gross sales, in comparison with $23.2 million or 11.6% of web gross sales within the prior-year interval.

This enchancment was primarily pushed by greater gross margin, in addition to improved logistics prices, partially offset by greater media funding and incentive comp. Capital spending within the third quarter was $34 million. This was decrease than anticipated as a result of timing of initiatives and funds. We anticipate a a lot greater charge of spending within the fourth quarter.

Nonetheless, we’re reducing the estimate of capital spending this yr as a result of timing of initiatives. We now anticipate capex this yr to be roughly $180 million versus the earlier steerage of $200 million. Working money movement within the third quarter was $56.1 million, and we had money available of $274.6 million on the finish of the quarter. We proceed to imagine that we have now enough money to completely fund our development by 2025, and we shall be free money movement optimistic in 2026.

Our sturdy enchancment in adjusted EBITDA this yr additionally makes it unlikely we’ll want any further capital. We generated $11.9 million in web revenue within the third quarter, bringing our year-to-date web revenue to $28.8 million. Now turning to steerage for 2024. We’re updating our outlook to mirror our outperformance within the third quarter, in addition to our conviction in our means to execute within the remaining quarter of the yr.

We’re elevating our web gross sales steerage from not less than $965 million to roughly $975 million or development of round 27%. We’re ready to do that due to the numerous enhancements in our working effectivity and the sturdy start-up of the brand new roll line in Ennis. Collectively, these efforts will permit us to promote a bit extra this yr than we had initially projected and nonetheless maintained sturdy customer support. We’re additionally holding in thoughts the capability wanted to help subsequent yr’s development and don’t wish to get too far forward of our unique plans.

So far as cadence, we proceed to anticipate web gross sales to have sequentially decrease share development within the fourth quarter of 2024 because the decrease first half media spending will end in slower development within the second half, one thing that we intentionally did to handle our development to stay inside our capability limits. In our enterprise, the first-half media funding actually dictates the demand we may have within the second half of the yr, and the second half media funding will drive the demand we skilled within the first half of subsequent yr. For that reason, our second-half media funding shall be considerably bigger than the funding we made within the earlier yr. We expect second-half 2024 media funding to be greater than 50% bigger than within the comparable prior-year interval.

For adjusted EBITDA, we’re elevating steerage from not less than $140 million to not less than $155 million to mirror the over supply in Q3. We now anticipate the gross — adjusted gross margin to increase by roughly 600 foundation factors for the complete yr in comparison with 500 foundation factors beforehand. Capital expenditures are actually projected to be roughly $180 million in comparison with roughly $200 million beforehand to help the set up of capability to fulfill demand in 2025. The discount is as a result of timing of sure growth initiatives.

A few of that discount will push spending into 2025. In abstract, the third-quarter outcomes have continued to construct our confidence in our means to ship our long-term monetary targets. We’re working extra successfully and extra effectively, and you’ll see that up and down the P&L and in the way in which we present as much as our prospects and shoppers. We imagine that’s the results of our funding capability and organizational capabilities as they’re now delivering the size advantages we imagine are attainable within the Freshpet enterprise mannequin.

That concludes our overview. We are going to now be glad to reply your questions. Operator?

Questions & Solutions:

Operator

[Operator Instructions] Our first query is from Mark Astrachan with Stifel. Please proceed.

Mark Astrachan — Analyst

Sure. Thanks, and good morning, all people. Clearly, actually, actually good outcomes right here within the quarter and the steerage. So perhaps taking a little bit of a distinct tack, I wished to ask about growth of the enterprise from a top-line standpoint within the much less targeted areas.

So I’ve seen some issues about increasing the U.S. B2C enterprise past a take a look at. It appears like there may very well be some incremental new doubtlessly sooner or later there. So perhaps speak a bit about efforts in that area? What do you see as the chance path to success and what you have realized thus far? After which wanting exterior the U.S., specifically Europe additionally, it looks as if there’s some efforts there round accelerating or refocusing on that, enterprise, I believe there’s been some type of begins and stops and focus there.

So perhaps speak a bit about these efforts. Thanks.

Billy Cyr — Chief Government Officer

Sure, Mark, that is Billy. I am going to take the second a part of your query, and Scott will take the primary a part of your query. Recall in the beginning of this yr, we mentioned to of us that we felt actually good in regards to the European enterprise and the enterprise mannequin that was there, however we did not really feel excellent in regards to the reliability of the availability chain. So we endeavored to work on methods to create a extra dependable provide chain in Europe earlier than we make any choice about investing any additional in that market.

These checks are underway. We really feel excellent in regards to the progress we’re making, however there is not any conclusion but, no definitive plan to do something greater than what we’re already doing in the present day. We like the patron dynamics there. We expect the Freshpet enterprise has long-term potential there.

However we wish to make sure that we get it proper after we really do it. So at this level, we’re nonetheless within the testing and validation part, notably on the availability chain aspect of it. Flip it to Scott to inform you a bit of bit in regards to the DTC aspect of issues.

Scott Morris — Co-Founder, President, Chief Working Officer, and Director

Hey, Mark. So look, the way in which we take into consideration e-commerce, I believe it fairly effectively. However principally, nearly all of what we take into account e-commerce is click on and gather for us. It is about — that is like round 60% of our complete.

And the overwhelming majority of what we’re seeing is about 87% is coming from our fridge community. In order that’s actually the place nearly all of it’s. Now we’re at all times doing loads of — we all know there’s loads of alternative for us to open up and ensure that we’re giving individuals different alternatives to buy from us in several methods. So we’re at all times persevering with to check.

We’ve opened up our D2C just a bit bit, however examined a bit of little bit of growth, perceive the way it’s working. However proper now, that is one thing that, I believe, it is in a test-and-learn part, a test-and-learn mode much like what Billy was speaking about as in Europe, particularly, we have now all these locations the place we’re planting seeds and understanding how these fashions work, how we’ll spend money on the returns that we’re getting on them. However proper now, these are very small items of our enterprise at this level. And what we’re doing is as we study sufficient and we really feel assured, these are locations that we doubtlessly spend money on and see if we will drive effectively above our type of normal development charge of round 25%.

Operator

Our subsequent query is from Ken Goldman with J.P. Morgan. Please proceed.

Ken Goldman — Analyst

Hello. Good morning, and thanks. I wished to ask on gross margin. The commentary is now being targeted on constant efficiency after the, clearly, wonderful enchancment in that gross margin charge.

How will we consider the remark about constant efficiency, I believe some individuals would possibly interpret as, say, will probably be flattish from right here. In mild of the prior feedback that you are looking at new expertise to assist with throughput and effectivity, perhaps you have got that new expertise coming in later subsequent yr, it feels like. So I simply wished to steadiness these feedback and get a normal sense of the way you see the gross margin path forward. Thanks.

Todd Cunfer — Chief Monetary Officer

Hey, Ken, it is Todd. So look, we’re clearly thrilled with efficiency this yr, hitting yr to this point virtually 46%, and that is our information for the yr. So we predict we’ll have one other strong quarter in This autumn. Clearly, we don’t anticipate that is the top.

We’re clearly forward of our long-term goal of 45%. In order that’s unbelievable that we’re three years forward of schedule. However we nonetheless suppose we have now tons and tons of alternatives. What that path precisely appears like over the subsequent couple of years, I believe we’ll speak extra at yr finish.

We’ll be at CAGNY, so we will clarify that in a bit of extra depth. However clearly, as we speak about on a regular basis, there’s three areas of focus right here the place we predict every of them nonetheless has upside. One is getting extra effectivity out of the traces that we have now. We made nice progress, notably in Bethlehem, the place we acquired much more work in Ennis to go.

And after we’ve seen some optimistic indicators within the final couple of months in Ennis and be ok with the long run there. It is getting extra capability out of all of the services that we have now. So we’ll get — we’ll use each sq. inch to verify we have now the fitting capital effectivity there. After which as you talked about, new applied sciences.

The road ought to come up on the finish of subsequent yr. So it may be early days, and we can’t know precisely the place we’re till the top of subsequent yr. We’re optimistic. We expect we have now one thing that may very well be very, very fascinating, however that is going to take a few years to play out.

So in abstract, look, we’ll hit round 46% for the yr, which, once more, is terrific. We’re not stopping there. We expect there’s vital extra upside to come back.

Ken Goldman — Analyst

Thanks. After which for a follow-up, serious about subsequent yr, I notice it is too early for particular numbers. You may have talked a bit of bit in regards to the cadence simply by way of the way you anticipate the second half of ’24 media to type of affect the primary half of ’25. Simply making an attempt to get a way, are there some other type of tailwinds, headwinds we ought to be serious about proper now? You probably did speak about inflation a bit of bit or not less than point out the phrase.

I wish to get a bit of little bit of coloration there, in case you might, at the moment. Any type of perception that you simply’re prepared to offer I am certain could be appreciated.

Todd Cunfer — Chief Monetary Officer

Sure. So look, we’re nonetheless early days for ’25 planning. The whole lot we’re seeing proper now within the commodity bucket, and once more, it is nonetheless too early, however I am going to simply say it is wanting type of flattish proper now. Nicely, as , we lock in loads of our commodities within the December time interval, notably our proteins.

So we’re getting nearer to that interval. We’re clearly speaking with individuals each week on that. Once more, it feels flattish, however that would change so much within the subsequent month or two. So no different massive updates, however we’re not seeing any surprises proper now.

Operator

Our subsequent query is from Rupesh Parikh with Oppenheimer & Firm. Please proceed.

Rupesh Parikh — Analyst

Good morning. Thanks for taking my query. So perhaps two macro questions for me. So I simply wish to get your newest ideas on the tech class, the place you are seeing from — on the pet adoption aspect.

After which your enterprise continues to see great momentum, so simply curious in case you’re seeing any shifts in client conduct.

Scott Morris — Co-Founder, President, Chief Working Officer, and Director

Hey, Rupesh, Scott. So on the pet class, principally, what we’re seeing is, look, in conventional brick-and-mortar will not be doing as effectively from a development standpoint as they’ve traditionally. There’s positively a bit of little bit of softness there. Nevertheless it’s within the couple of factors down versus prior durations, and many others.

However keep in mind, there was a ton of growth for some time. The place we’re seeing loads of that development is unquestionably some increasingly of it’s coming from on-line. So in case you take a look at type of any sort of omnichannel piece, you are seeing like nonetheless a few factors of development. The lengthy long-term algorithm that I’ve at all times used for the class is you are seeing 2% to 4% general pet class development.

You may not see it inside six months or a yr, however that is sometimes what you see. And that is what we’re seeing proper now. We’re seeing round like a 3% development in case you take a look at every little thing like omnichannel. From an adoption standpoint, look, these items go up and down and in waves.

We expect, from every little thing we’re seeing, it is come again, and it is at a extra constant tempo. There may be positively some developments which can be beginning to develop round canine dimension once more. Once more, they arrive and go. We’re beginning to see a bit of bit extra towards smaller and medium-sized canines once more, simply barely.

We’re seeing increasingly of these canines adopted and in shoppers’ houses a bit extra. That is really a superb factor for us. In the event you take a look at the place we sometimes over index, it is sometimes with individuals with smaller and medium-sized canines. We do not do fairly as effectively with giant canines, though we’re making loads of progress with our giant — new giant canine product to proceed to come back out of the gate and do actually, very well.

Operator

Our subsequent query is from Robert Moskow with TD Cowen. Please proceed.

Robert Moskow — Analyst

Hello. Congrats once more. And a few questions. I believe the goal for gross sales is like near $2 billion — is lower than that, however — for 2027.

And as you are evaluating revising your long-term information, are you evaluating introducing one other time collection like past 2027? Is that a part of the decision-making that you simply’re doing? And would that additionally entail spending to increase your footprint past Ennis and past what you have got in Pennsylvania? After which a follow-up, please.

Billy Cyr — Chief Government Officer

Sure, Rob. We have not decided on what we’ll take a look at for updating steerage if we do this someday subsequent yr. There’s — every little thing has acquired to be taken a take a look at. One of many issues that we do spend loads of time serious about is capability planning, which is embedded in how we take into consideration the long-term steerage and in addition part of your query.

However I might remind you that inside our present footprint of the three websites that we have now in the present day, we have now capability to get us to the $2 billion in web gross sales. Our information is for $1.8 billion, however that you must have a run charge that is forward of that once you get there. We will get effectively north of $2 billion by — with the present footprint. So any choice on increasing the footprint past the place we’re would affect durations that may go effectively past 2027.

We can’t want any capability past that footprint till most likely ’29 or ’30, relying on how our new expertise performs out, what our efficiencies do and whatnot. So at this level, there’s actually no conclusion or choice the place we have got all of the variables. We’ll take a look at all of them. We’ll make the fitting choice primarily based on the most effective inputs and the most effective visibility that we have now.

Operator

Our subsequent query is from Brian Holland with D.A. Davidson. Please proceed.

Brian Holland — Analyst

Thanks. Good morning. I imagine steerage implies a 24% web gross sales development in opposition to relative media spend of 9% within the again half of ’24. I clearly notice that is little bit of a condensed window versus it extra annualized.

However simply curious whether or not that dynamic is indicative in any respect of the way you see ’25 shaping up at this level, notably on the media aspect.

Billy Cyr — Chief Government Officer

Sure. Brian, I might characterize it because the media within the again half of the yr would point out the momentum and the family penetration good points we get as we head into the primary half of subsequent yr. So wanting on the spending within the again half and the expansion charge within the again half, you are form of two issues that aren’t time aligned. The expansion charge within the again half of this yr is expounded to the spending we had within the first half of this yr.

The spending within the second half of this yr is what’s going to drive the expansion charge within the first half subsequent yr. So we do know that as we get the numerous media spending that we’re making within the again half of this yr relative to what we have executed in earlier years, we anticipate that to be the factor that begins driving the family penetration development again up once more, and you may begin seeing them within the first half of subsequent yr. After which that clearly will flip into quantity development that begins within the first half of subsequent yr and continues by the again half of the yr.

Operator

Our subsequent query is from Bryan Spillane with Financial institution of America. Please proceed.

Bryan Spillane — Analyst

Thanks, operator. Good morning, everybody. Given the — among the feedback and stuff you’ve teased out by way of updating long-term targets and goals, I assume a much bigger query I used to be serious about is it’s extremely uncommon in client packaged items for a class to develop and achieve substantial shelf area with actually only one participant within the class. Retailers have a tendency to love a number of choices, a number of worth factors.

And if we take into consideration contemporary as a subsegment of complete pet meals class, simply how does that issue into your serious about growth, gaining share of — contemporary gaining share of the pet meals class? Actually, can that occur with what’s successfully — not less than in brick-and-mortar retail — successfully, like one horse within the race?

Billy Cyr — Chief Government Officer

Sure. Brian, that is the factor that we have been spending loads of time serious about since we launched Feed the Progress in 2017, which is the truth is that it is a very scale-driven enterprise, and there are huge benefits to anyone who construct scale in it, whether or not that is in manufacturing, whether or not that is the fridge placements of retail, whether or not that is distribution and logistics that go together with it. And our objective was to get ourselves able the place we had an infinite head begin and a big scale benefit in opposition to anyone who got here behind us. Clearly, anyone else can enter this class.

We have seen that from Mars and from Normal Mills, and we might anticipate to see others come alongside as effectively. Whether or not they’d be capable of compete successfully in opposition to what we have constructed is — stays to be seen. However by way of in case you look again over time, your remark is a reasonably good one. However the actuality is the class creator, the man who creates the class, in the event that they do a very good job, which is what we’re capturing to do, finally ends up with the lion’s share of the market share, whether or not you concentrate on gate charge a 75 share the place you concentrate on Keurig Inexperienced Mountain, any of those guys have actually created a giant class.

They personal the lion share of the class and the majority of the earnings, if no more than 100% of the class revenue. And in order that’s actually the place we anticipate ourselves to go. We do anticipate to have competitors sooner or later. The query is how good they will be.

Operator

Our subsequent query is from Jon Andersen with William Blair. Please proceed.

Jon Andersen — Analyst

Hey. Good morning, all people, and congrats on the quarter. Fast two parter on distribution. Within the presentation, it reveals a 9% enhance in cubic ft however a 22% enhance in TDPs.

Simply questioning the way you sq. the 2. And I believe there was a remark within the ready remarks round absorbing some shelf area from retailer-owned fridges. Might you speak a bit of bit about that dynamic? After which the second half is, I believe 22% now of your places have second fridges. How would you anticipate that to develop over time primarily based in your conversations with retailers? And the place is the white area for second, third fridges by way of channels?

Scott Morris — Co-Founder, President, Chief Working Officer, and Director

Hey, Jon. Scott. So sure, so we — look, we have tried to maneuver over time, actually begin serious about the area that we’re choosing up from a cubic foot standpoint. The fact is that one fridge is fascinating, however we — the truth is for us that second and third fridges is admittedly the place the best alternatives lie for us.

So we’re persevering with to see loads of second and third fridges being added, not solely we added this yr, we predict there’s going to be so much added over the course of the subsequent couple of years as retailers are wanting across the class. And in case you look — most retailers, they appear up and down the class, and so they’re going, what is going on on throughout these manufacturers and what is going on on throughout these segments? After which recognizing that contemporary is admittedly the place the expansion is coming from. And as they do this, they go, wow, I’ve one fridge. Do I would like a second and doubtlessly a 3rd, and we even have dialog with a number of individuals, perhaps even a fourth.

And that is a bit of bit untimely. However we see constant development coming from fridge growth. What we’re beginning to see is there are a few retailers, and I might say, actually only a handful which can be type of tinkering and making an attempt a few completely different fridge layouts and codecs with a few of their very own fashions and a few of their very own fridges. The one one who has actually substantial variety of their very own fridges is Walmart.

They’d made an funding in it. That funding was initially meant to assist Blue and truthfully, I imagine Caesar rollout, and along with a few of their non-public label merchandise. And what’s occurred over time is that they made that funding. I believe it was a very fascinating choice for them.

It’s a heavy carry, not solely from a capital standpoint, however from a upkeep standpoint. And people merchandise actually did not play out to what I believe anybody had imagined on any aspect of the fence. I believe Walmart was considerably disenchanted with it. And now what’s beginning to occur is we’re really going into a lot of these fridges.

You may begin to see our merchandise into a few of these fridges. And now we’ll have a considerable share of that fridge, and our merchandise are performing extremely effectively. We’re pleasantly, pleasantly stunned that having the ability to put a set of recent merchandise into these fridges and see the efficiency that they are delivering. They usually proceed to develop on a constant foundation.

So we love that. We’re actually behind in area at Walmart, and we love that we’re capable of now seize that further area in these fridges and see that occur. Apart from Walmart, as I used to be referring to a minute in the past, there actually is not anybody that has any type of scale round proudly owning their very own fridges. And I believe most retailers have gotten actually comfy with — we’re bringing one thing that is extremely value-added, very distinctive, extremely effectively managed, and I can get into like why it is effectively managed, however they do not have to the touch a factor.

We will restore a fridge, a damaged fridge inside hours, not days and weeks, that you will have many instances. And it is as a result of we have constructed this into one other one in all these type of property and capabilities of the group. And hats off to the fridge crew. We’ve lower than 1% of fridges down on a regular basis, and we have now 33,000 fridges on the market.

It is a small group that does nice work for us. So we predict that is an asset that we’re growing for the long run and a profit that we’re bringing to retailers. And most of them aren’t anticipating shopping for their very own fridges.

Operator

Our subsequent query is from Peter Benedict with Baird. Please proceed.

Peter Benedict — Analyst

Hey. Good morning, guys. Thanks for taking my query. Questioning in case you might speak a bit of bit in regards to the hiring of Nicki as Chief Working Officer a few months in the past.

Simply type of curious what she’s bringing, what are perhaps preliminary observations are, and she or he’s considerably restricted in what you are able to do initially. However simply assist us perceive what you suppose her influence could be on the group as you guys look to proceed to develop over the subsequent few years.

Billy Cyr — Chief Government Officer

Sure. Thanks, Peter. We’re thrilled to have Nicki be a part of us. She’s bringing a contemporary set of eyes to our enterprise and a distinct set of capabilities than a few of our administration has or our crew has collectively.

And in order that’s been an actual breath of contemporary air. As you alluded to, she does have some limitations in what she will be able to do till Might of subsequent yr. And people limitations limit her means to work solely within the grocery, drug, mass, membership channels. till then.

So we’ll be a bit of bit restricted within the complete influence that she will be able to have till that point. However between at times, she’s digging into our present enterprise, bringing contemporary eyes to it, and we predict that is going to be purely additive and provides to our bench energy. We’ve actually massive ambitions as an organization. We wish to be a a lot greater participant within the pet class, and getting a expertise that’s of Nicki’s caliber is a big win for us.

And we predict, frankly, it provides us the flexibility to mission additional — a a lot greater enterprise, most likely a way more expansive enterprise than we have now in the present day.

Operator

Our subsequent query is from Tom Palmer with Citi. Please proceed.

Tom Palmer — Analyst

Hello. Good morning, and thanks for the query. I simply wished to ask on some timing objects you have type of famous this yr. You famous this quarter that there was a timing profit for high quality price within the third quarter that’s anticipated to reverse.

Simply any quantification intimately on what drove that? After which secondarily, within the first quarter of this yr, you have famous round 100 foundation factors of working leverage on the gross margin line. Has that type of absolutely reversed at this level? Thanks.

Todd Cunfer — Chief Monetary Officer

Sure, it is Todd. So on the standard situation, we had a unbelievable quarter. Disposals had been tremendous low, which actually helped. We did see — expertise some greater high quality prices in September, the secondary processing piece of the standard element.

That didn’t movement by the P&L in September. Nicely, it did movement by the P&L in October. That was a few 50 foundation level profit in Q3 that we’ll see in This autumn. In order that quantity nonetheless shall be greater the standard price quantity in This autumn, however we nonetheless really feel very, excellent about the place we’re for the yr.

Concerning the 100 foundation factors profit we noticed in Q1 as we constructed stock, we have seen solely a really small portion of that reverse. It is nonetheless a bit of little bit of a wildcard. We would see a bit of little bit of it reverse in This autumn, however I am not anticipating a lot of it. So most of that stock profit will maintain.

It is actually only a spinoff of how briskly we’re rising and our have to construct stock to provide the enterprise.

Operator

Our subsequent query is from Michael Lavery with Piper Sandler. Please proceed.

Michael Lavery — Analyst

Thanks. Good morning. Are you able to simply contact on Ennis a bit of bit extra now that you have the fourth line? How way more vital is your flexibility there? And have you ever been capable of push a bit of bit on extra prolonged runs with like perhaps one bag and one roll line that every might do type of the facility SKUs after which the opposite that would do the remainder of the portfolio? Is that one thing you have been capable of take a look at but or get engaged on how does that look?

Billy Cyr — Chief Government Officer

Sure, Michael, as we have mentioned all alongside, getting two bag traces and two roll traces up and going was going to be a giant unlock for us and that we’ll be capable of have one line specialised in very excessive velocity, high-volume SKUs, and have all of the complexity being taken by the opposite line. So after we began up that roll line in September, we noticed that profit that clearly did not present up on this quarter as a result of these — that manufacturing will influence This autumn, however we began seeing some sizable enhancements, notably on our roll aspect of the enterprise. On the bag aspect of the enterprise, we have been getting among the advantage of that, however we’re nonetheless scaling that enterprise, making an attempt to work out the kings as you get the positioning up and going. However surely, having two of every, two bag traces, two roll traces has enabled us to get the longer runs on one of many traces extra effectivity on these traces and have all of the complexity borne on the opposite line.

The positioning in Ennis, simply to be very clear, we’ll at all times be, I would say, working a bit of bit behind the place we’re in Bethlehem, purely as a result of we’re consistently beginning up new traces versus the extra mature website in Bethlehem, the place we have been working for a very long time. It is a very secure surroundings. In Ennis, we began up a line in September. We’ve one other line beginning up in December.

The third roll line begins up in December, and we have now development occurring there. So there is a nonstop means of growth that makes it a bit of bit more durable to get to the extent of efficiency you get in a extra secure operation like Bethlehem. However over the lengthy haul, Ennis appears like it may ship the effectivity benefits that we had hoped for after we designed and constructed the power, it simply will take a bit of little bit of time till we get there.

Operator

Our subsequent query is from Jim Salera with Stephens Inc. Please proceed.

Jim Salera — Analyst

Hello, guys. Good morning. Thanks for taking our query. Two-part query for me.

Simply speaking within the deck in regards to the conversion from toppers to major meals serving to drive the purchase charge, I simply wished to drill down on that and see in case you might supply some coloration on what drives that conversion right into a major meal purchaser. And in case you’re capable of dimension up the proportion of your present consumers which can be utilizing the product as toppers simply so we will body up how a lot conversion alternative there may be as we transfer ahead.

Scott Morris — Co-Founder, President, Chief Working Officer, and Director

Hey, Jim. So look, I believe that loads of instances, adoption takes completely different paths. So we all know that individuals — some individuals are available and so they begin — they develop into a heavy person virtually instantly. They usually go down that path.

We do know that there are loads of customers. The truth is, it is a very massive chunk of folks that we take into account toppers as a result of they’re doing a little sort of blending conduct. It is a fairly normal conduct in pet meals, the place persons are taking dry meals and mixing in all moist meals. What our objective is and what we’re doing over time is we’re making an attempt to ensure that we’re speaking and messaging to folks that that is your major meal.

And I believe that is why you are beginning to see increasingly development in that HIPPO space. So in case you see — we talked about principally our penetration development is that this quantity, our HIPPOH development is 24%. So if we will get these HIPPOHs and get everybody in that mindset to make use of us as a major meal and never a topper and get them to grasp, that is the middle of your plate. Identical to your meals, your meal, the middle of your plate ought to be contemporary actual meals.

And that is what we’re delivering to shoppers and bringing to them. And what you are seeing is that is in the way in which in our promoting and the way in which we talk. That is in every little thing we’re exhibiting, we’re at all times exhibiting full bowls of Freshpet. We’re not exhibiting bowls of individuals mixing meals.

So we’re demonstrating that in all of the imagery that we’re doing, every little thing that we’re — the way in which we’re speaking shoppers from an emotional standpoint, and who they’re and what they’re all about and the way they consider their pet food. After which the subsequent factor that we’re doing, you may see increasingly lately and Billy touched on it within the script, is increasingly packs which can be multipack of selection packs, the place there’s simply a number of SKUs in a pack. You are additionally seeing increasingly giant sizes from us. The most important individuals that blend is a big canine.

Nicely, what will we simply come out with a big bag of a big pet food that tends to be doing actually, very well, like we’re thrilled with the outcomes from that. So that is what we’re seeing, and that is going to take a while as a result of what we’re doing is making an attempt to encourage a conduct change. The core of our enterprise once more is the $5 million excessive revenue or the HIPPOHs, the tremendous heavy, heavy group. We love these guys.

They’re 90% of our enterprise. That is who we’re specializing in. That is what we wish to domesticate, and that is the conduct we wish to encourage.

Operator

Our subsequent query is from Kaumil Gajrawala with Jefferies. Please proceed.

Kaumil Gajrawala — Analyst

Hey, guys. Good morning. One simply beginning — only a very fast one, confirming that the capex change was simply fully timing and pushed into ’25 and perhaps one thing that you simply’re doing in a different way or a choice you have made on capability. After which perhaps a much bigger query, which is on the advertising and, I assume, effectiveness of promoting.

You alluded to it a bit of bit in the beginning, however there’s many various items of calculus in how a lot to spend, whether or not it is capability, capability particular types. But additionally now you are pushing $1 billion in income, so how do you concentrate on promoting within the context of — promoting and advertising within the context of the scale that you simply now are past simply the capability stuff which you introduced up?

Billy Cyr — Chief Government Officer

Sure. I am going to take the primary half. The capex is nearly all timing. So that may push into 2025.

Scott Morris — Co-Founder, President, Chief Working Officer, and Director

That was fast.

Billy Cyr — Chief Government Officer

Look, to the effectiveness of the advertising, like that is the — I believe that is the important thing query that we try to keep on prime of — generally on a weekly foundation, we’re this. And the factor that’s — look, it’s extremely uncommon. It is one introduced up very uncommon for a packaged items enterprise with a view to preserve like a management function for a very lengthy time frame. I believe it is extremely uncommon for a packaged items firm to have the identical degree of productiveness on their promoting advertising effectiveness as that they had for nearly the previous 10 years.

I do not suppose I am exaggerating an excessive amount of the place I say for — actually for a decade, we have now had very comparable CAC. And the factor — I am going to go to CAC for a second, acquisition prices as a result of I believe it is a good indicator of, we’re persevering with to maintain the message contemporary. We’re persevering with to search out new channels to speak. The CAC stayed inside a really, very tight band.

And I believe what that demonstrates is the mannequin is general intact. And it additionally, I believe, most significantly, demonstrates the TAM potential, which I believe is the opposite factor that individuals get actually involved about. Normally, once you get deeper into your TAM, your CAC begins to go up considerably. We have not seen that.

So it provides us unbelievable confidence in what we’re doing. Now again to what we’re doing for a second. So that is one in all these areas the place there may be loads of magic that is created from the crew and the individuals related and that we work with with a view to hold the advertising going. And it is first the artistic.

The artistic checks extremely effectively, after which in-market efficiency is, truthfully, it is extraordinary. Todd loves after I use that phrase. Subsequent, the way in which we have now — the place we place it, we have began off like very, very giant, broad market promoting, after which we have taken it into increasingly several types of automobiles and mediums and completely different targets. And whilst we have moved into completely different targets, males and sports activities, you are seeing us increasingly in sports activities, we have been capable of keep as productive.

And we additionally know what we’re doing not now, however we all know what we’re doing six months and even a yr from now because the plans fold out. So what I imply by that’s we’ll take a look at issues which can be six months plus out and have them able to go for us to proceed to execute on the — throughout the advertising mannequin that we use. In order that hopefully is useful. We might spend loads of time on that one.

Operator

Our subsequent query is from Marc Torrente with Wells Fargo. Please proceed.

Marc Torrente — Wells Fargo Securities — Analyst

Hey. Good morning. Thanks for the query. Simply on the patron, you proceed to see sturdy purchase charge good points.

You had additionally referred to as out a shift to bigger pad sizes of final quarter. I assume any up to date coloration on what you are seeing on the market, how do you anticipate combine to evolve in close to time period each by way of client conduct, and the way that flows by the mannequin? Thanks.

Todd Cunfer — Chief Monetary Officer

Hey, Mark. So it is fascinating. It has been one in all these durations the place there are — it is a bit of little bit of a story of two cities, fairly truthfully. We talked about general development charge of the class has actually moderated a bit, flattened out round that 3% degree.

Positively, there are two ends of the spectrum that appear to be doing effectively. One in all them is what’s thought-about virtually extremely premium within the class, and we’ll put ourselves in that bucket for a second. I do not suppose we might like to consider ourselves that means. However we’re within the greater finish of the class.

After which there is a handful of merchandise and extra within the worth space which can be nonetheless doing fairly effectively and really rising. The center is getting squeezed a bit of bit. and it tends to need to do some bit with individuals’s revenue ranges, however it’s a acutely aware selection that persons are deciding on what meals they wish to purchase. On the ultra-premium finish, there’s individuals like us.

There’s different direct-to-consumer manufacturers which can be very pretty costly, however persons are seeing the worth and what we’re bringing to the market and prepared to spend the additional cash on it due to the product that we convey and the worth that they see from it. On the opposite finish, perhaps individuals that are not fairly as concerned with their pet. They could be in a bit of little bit of a crunch from inflation. They have not seen salaries go up as a lot, and so they’re making some completely different shopping for selections.

That is not likely our client group. That is not likely who we’re targeted on, and that is not likely the group we’re after. However we’re watching this play out for the class. It has been an fascinating interval.

I believe it is beginning to flatten out and average a bit. I believe persons are getting a bit of bit extra — I believe salaries have general grown a bit. I believe persons are getting extra comfy with the pricing is generally throughout the market. And I believe that we’re in a very lucky place as we have tapped into a necessity and curiosity available in the market from a client group that appears to be actually, actually giant and rising as they perceive the differentiation of the merchandise that we’re placing on the market.

Operator

Our remaining query is from John Lawrence with the Benchmark Firm. Please proceed.

John Lawrence — The Benchmark Firm — Analyst

Nice. Thanks. Congrats, guys. Are you able to speak a bit of bit in regards to the retailers? You talked about the second and third fridges.

We have talked about it over time, the cycle instances and the evaluation durations at these retailers, once they do their efficiency critiques, how lengthy — does it generally take 12 to 18 months to get these planograms and fridges added to the combo?

Scott Morris — Co-Founder, President, Chief Working Officer, and Director

Hey, John. Sure, it actually, in some circumstances, generally is a very, very lengthy cadence with sure retailers which can be in sure mindsets and sure funding ideologies. And an amazing instance, and also you and I’ve most likely chatted about this at one level. If somebody’s doing a large transform in ’26, they don’t seem to be going to most likely do a giant contact in a class in ’25.

However look, there are 70 retailers that we work with. So it spans the gamut. There are occasions the place we may very well be having discussions now or in Q1 that may have actual influence in 2025, and we have now seen that fairly often. I believe the excellent news for us is that we’re having nice conversations now about issues that may occur in ’25, and if they do not occur in ’25, a few of them will occur in ’26.

And we really feel like effectively positioned to start out going into subsequent yr with further fridge growth, area growth, and many others, because the retailers assess the class. The one factor I’ll put just like the paid commercial in right here, the distribution is terrific. The media is what’s the overwhelming majority of the motive force. It is over 70% of the motive force for our development, and that is the expansion algorithm.

After which what that media does is it drives new shoppers, hopefully they’re HIPPOHs. They arrive into the enterprise, after which we do see actually, actually sturdy same-store gross sales development over time. We’re at all times seeing double-digit same-store gross sales development. In order that places us in a very good place.

After which on prime of that, then we’ll add innovation and we’ll add some further area, and that is actually what will get us to the remainder of the expansion charge that we’re at all times in search of.

Operator

We’ve reached the top of our question-and-answer session. I wish to flip the convention again over to Mr. Cyr for closing feedback.

Billy Cyr — Chief Government Officer

Thanks, everybody. On today earlier than election day, I am reminded of a quote from Will Rogers. I really like a canine. He does nothing for political causes.

So reward that canine with some Freshpet. Your canine’s affection will make you neglect all these marketing campaign adverts and fundraising tech you have been drowning in. Thanks very a lot.

Operator

[Operator signoff]

Period: 0 minutes

Name individuals:

Jeff Sonnek — Investor Relations

Billy Cyr — Chief Government Officer

Todd Cunfer — Chief Monetary Officer

Mark Astrachan — Analyst

Scott Morris — Co-Founder, President, Chief Working Officer, and Director

Ken Goldman — Analyst

Rupesh Parikh — Analyst

Robert Moskow — Analyst

Brian Holland — Analyst

Bryan Spillane — Analyst

Jon Andersen — Analyst

Peter Benedict — Analyst

Tom Palmer — Analyst

Michael Lavery — Analyst

Jim Salera — Analyst

Kaumil Gajrawala — Analyst

Marc Torrente — Wells Fargo Securities — Analyst

John Lawrence — The Benchmark Firm — Analyst

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