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SECAUCUS, N.J., Aug. 11, 2015 (GLOBE NEWSWIRE) -- Freshpet, Inc. ("Freshpet" or the "Company") (Nasdaq:FRPT) today reported financial results for its second quarter ended June 30, 2015.
Second Quarter 2015 Financial Highlights Compared to Prior Year Period
First Six Months of Fiscal 2015 Financial Highlights Compared to Prior Year Period
"Our mission to provide simple, natural foods continues to resonate with pet parents and has propelled our strong performance in the first six months of 2015," said Richard Thompson, Freshpet's Chief Executive Officer. "In the second quarter, net sales increased approximately 39% reflecting improved sales velocity across each of our retail channels and enabled us to achieve increased adjusted EBITDA. We continue to make strategic investments in increasing manufacturing capacity and in future sales growth to support the tremendous opportunities ahead of us."
Second Quarter 2015
Net sales increased 39.1% to $28.4 million compared to $20.4 million in the second quarter of 2014. Net sales for the second quarter of 2015 include sales associated with the Company's Freshpet Baked test product. Excluding the impact of the Freshpet Baked test product, net sales for the second quarter of 2015 increased 34.3% to $27.4 million. Second quarter net sales growth was driven by increased velocity across all retail channels. The Company also experienced an increase in Freshpet Fridges to 14,354 from 12,593 in the second quarter of 2014.
Gross profit was $13.7 million, or 48.2% of net sales, compared to $10.1 million for the same quarter last year. The increase in gross profit for the second quarter of 2015 is primarily due to higher net sales and lower manufacturing costs per pound on rolls and roast meals, slightly offset by increased cost of goods sold related to product sales mix as a result of increased net sales from the Company's new innovative refrigerated product, Freshpet® Select Fresh From the Kitchen™. Excluding the margin impact from the Company's Fresh Baked test product, gross margin was 48.9%, compared to 49.4% during the same period last year.
Selling, general and administrative expenses ("SG&A") were $15.7 million compared to $13.4 million for the same quarter last year. As a percentage of net sales, SG&A decreased to 55.3% from 65.7% in the second quarter of 2014. After adjusting $1.7 million and $0.2 million for non-cash items related to stock-based compensation and the fair valuation of warrants in 2015 and 2014, respectively, as well as $0.6 million in the second quarter of 2015 for fees and expenses associated with the Company's secondary offering completed on May 5, 2015, SG&A decreased as a percentage of net sales to 47.3% from 64.6% of net sales in the second quarter of 2014.
Net loss was $2.2 million compared to a net loss of $6.3 million in the second quarter of 2014. Net loss in the second quarter of 2014 included $1.8 million of fees on debt guarantee with no corresponding fees recorded in the second quarter of 2015. Net loss in the second quarter of 2015 includes $0.6 million of fees and expenses associated with the Company's secondary offering completed on May 5, 2015.
Adjusted EBITDA increased $3.1 million to $2.8 million from a loss of $0.4 million in the second quarter of 2014. Freshpet Baked test product had adjusted EBITDA of less than $0.1 million during the three months ended June 30, 2015. Adjusted EBITDA is a non-GAAP financial measure. Please refer to the financial tables in this press release for a reconciliation of all non-GAAP financial measures.
First Six Months of Fiscal 2015
Net sales for the first six months of 2015 increased 39.5% to $55.4 million compared to $39.7 million during the first six months of 2014. Net sales for the first six months of 2015 include sales associated with the Company's Fresh Baked test product. Excluding the impact of the Fresh Baked test product, net sales for the first six months of 2015 increased 35.6% to $53.9 million. Net sales growth was driven by increased velocity across all retail channels.
Gross profit was $26.9 million, or 48.6% of net sales, compared to $19.4 million, or 48.7% of net sales, in the same period last year. Excluding the margin impact from the Company's Fresh Baked test product, gross margin was 49.1% of net sales, compared to 48.7% in the same period last year.
SG&A was $31.5 million compared to $25.0 million in the prior year. After adjusting $3.6 million and $0.4 million for non-cash items related to stock compensation and fair valuation of warrants in 2015 and 2014, respectively, as well as $0.6 million for fees and expenses associated with the companies secondary offering in the second quarter of 2015, SG&A decreased as a percentage of net sales to 49.3% compared to 61.8% of net sales in the first six months of 2014.
Net loss for the six months ended June 30, 2015 was $4.8 million compared to $11.4 million in the same period of 2014. Net loss in the six months ended June 30, 2014 included $3.6 million of fees on debt guarantee with no corresponding fees recorded in the second quarter of 2015. Net loss in 2015 includes $0.6 million of fees and expenses associated with the Company's secondary offering completed on May 5, 2015.
Adjusted EBITDA increased $4.4 million to $4.8 million from adjusted EBITDA of $0.4 million for the same period last year. Excluding the impact of the Freshpet Baked test product, adjusted EBITDA would have increased $4.9 million to $5.3 million.
Cash and Net Debt
As of June 30, 2015, the Company had cash and equivalents and short term investments (certificates of deposit) of $23.5 million, compared to $36.3 million as of December 31, 2014. The decrease in cash and equivalents and short term investments is primarily due to the capital expenditures related to the expansion of the Company's Freshpet Kitchens in Bethlehem, Pennsylvania, the purchase of a building and 6.5 acres of land that is adjacent to Freshpet Kitchens for approximately $5.0 million, and capital investments to increase distribution through the purchase of additional Freshpet Fridges.
In conjunction with its initial public offering, the Company entered into a $40 million credit facility, of which zero was outstanding at June 30, 2015. The Company expects to use its current liquidity, which includes its available Credit Facility to continue its expansion of its manufacturing facility to further add capacity and further grow distribution.
The Company reiterated its guidance for 2015. For full year 2015, excluding any potential incremental impact associated with the expanded test of the Company's Freshpet Baked product, the Company expects the following full year results compared to prior year:
Conference Call and Webcast
The Company will host a conference call with members of the executive management team to discuss these results with additional comments and details. The conference call is scheduled to begin at 5:00 p.m. ET on Tuesday, August 11, 2015. To participate on the live call listeners in North America may dial (844) 452-6821 and international listeners may dial (724) 924-4985; the passcode is 92123770.
In addition, the call will be broadcast live over the Internet hosted at the "Investor" section of the Company's website at www.freshpet.com and will be archived online through August 25, 2015. A telephonic playback will be available from 7:30 p.m. ET, August 11, 2015, through August 25, 2015. North American listeners may dial (855) 859-2056 and international listeners may dial (404) 537-3406; the passcode is 92123770.
Freshpet has a single-minded mission – to bring the power of fresh, natural food to dogs and cats. We are committed to doing so in ways that are good for pets, for the people who love them, and for the planet we live on. That's why all Freshpet recipes are thoughtfully prepared using fresh, locally sourced ingredients.
Forward Looking Statements
Certain statements in this release may constitute "forward-looking" statements. 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 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 a number of 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 annual report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2015. 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 as a result 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.
Management believes that EBITDA and Adjusted EBITDA, which are non-GAAP measurements, are meaningful to investors because they provide a view of the Company with respect to ongoing operating results. EBITDA, which represents net loss plus depreciation and amortization, interest expense (including fees on debt guarantee), and income tax expense, and Adjusted EBITDA, which represents EBITDA plus loss on disposal of equipment, new plant startup expenses and processing, share based compensation, launch expenses, warrant expenses, and fees associated with the secondary offering, are shown as supplemental disclosures because these figures are widely used by the investment community for analysis and comparative evaluation and each of these measures provides an additional metric to evaluate the Company's operations and, when considered with both the Company's U.S. GAAP results and the reconciliation to net loss, provides a more complete understanding of the Company's business than could be obtained absent this disclosure. EBITDA and Adjusted EBITDA are not and should not be considered alternatives to net loss or any other figure calculated in accordance with U.S. GAAP, or as an indicator of operating performance. The Company's calculation of EBITDA and Adjusted EBITDA may differ from methods used by other companies. Management believes that these non-GAAP measurements are important to an understanding of the Company's overall operating results in the periods presented. Such non-GAAP measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance. We have not reconciled our expected Adjusted EBITDA to net income under "Outlook" because we have not finalized our calculations of several factors necessary to provide the reconciliation, including net income, interest expense and income tax expense. In addition, certain items that impact net income and other reconciling metrics are out of our control and/or cannot be reasonably predicted at this time.
|FRESHPET INC. AND SUBSIDIARIES|
|CONSOLIDATED BALANCE SHEETS|
|Cash and cash equivalents||$ 16,046,925||$ 36,259,252|
|Accounts receivable, net||6,297,531||5,360,400|
|Prepaid expenses and other current assets||689,654||1,291,379|
|Total Current Assets||38,344,571||50,225,182|
|Property, plant and equipment, net||69,183,959||57,825,961|
|Deposits on equipment||3,856,464||2,883,234|
|Total Assets||$ 112,877,819||$ 112,461,860|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Total Current Liabilities||$ 10,338,427||$ 9,069,161|
|Total Liabilities||$ 10,338,427||$ 9,069,161|
|Additional paid-in capital||292,179,262||288,216,882|
|Total Stockholders' Equity||102,539,392||103,392,699|
|Total Liabilities and Stockholders' Equity||$ 112,877,819||$ 112,461,860|
|FRESHPET INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS|
|For the Three Months Ended||For the Six Months Ended|
|June 30,||June 30,|
|NET SALES||$ 28,359,404||$ 20,386,038||$ 55,414,078||$ 39,736,235|
|COST OF GOODS SOLD||14,699,240||10,313,193||28,500,895||20,370,265|
|SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES||15,694,304||13,401,264||31,486,007||24,995,794|
|LOSS FROM OPERATIONS||(2,034,140)||(3,328,419)||(4,572,824)||(5,629,824)|
|Other Expenses, net||(68,831)||(43,477)||(64,682)||(85,076)|
|Fees on Debt Guarantee||—||(1,807,969)||—||(3,645,216)|
|LOSS BEFORE INCOME TAXES||(2,213,650)||(6,258,800)||(4,785,724)||(11,393,026)|
|INCOME TAX EXPENSE||15,000||8,000||30,000||16,000|
|NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS||$ (2,228,650)||$ (10,771,075)||$ (4,815,724)||$ (18,256,717)|
|NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS|
|-BASIC||$ (0.07)||$ (0.77)||$ (0.14)||$ (1.30)|
|-DILUTED||$ (0.07)||$ (0.77)||$ (0.14)||$ (1.30)|
|WEIGHTED AVERAGE SHARES OF COMMON STOCK|
|OUTSTANDING USED IN COMPUTING NET LOSS PER SHARE|
|ATTRIBUTABLE TO COMMON STOCKHOLDERS|
|FRESHPET INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENT OF CASH FLOWS|
|For the Six Months Ended|
|CASH FLOWS FROM OPERATING ACTIVITIES:|
|Net loss||$ (4,815,724)||$ (11,409,026)|
|Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:|
|Provision for losses on accounts receivable||24,001||211,565|
|Loss on disposal of equipment and deposits on equipment||80,679||70,710|
|Fees on debt guarantee||—||3,645,216|
|Share based compensation||3,664,450||485,852|
|Fair value adjustment for outstanding warrants||70,163||—|
|Change in reserve for inventory obsolescence||(5,031)||(79,292)|
|Depreciation and amortization||3,624,282||3,124,096|
|Amortization of deferred financing costs and loan discount||70,974||126,047|
|Changes in operating assets and liabilities|
|Prepaid expenses and other current assets||601,725||(1,115,719)|
|Accrued expenses and accrued interest on long-term debt||(497,140)||1,100,936|
|Net cash flows provided by (used in) operating activities||2,059,464||(4,444,941)|
|CASH FLOWS FROM INVESTING ACTIVITIES:|
|Purchases of short-term investments||(7,499,205)||—|
|Acquisitions of property, plant and equipment, software and deposits on equipment||(10,035,332)||(10,361,113)|
|Acquisitions of land and building||(4,979,710)||—|
|Proceeds from sale of equipment||—||234,127|
|Net cash flows used in investing activities||(22,514,247)||(10,126,986)|
|CASH FLOWS FROM FINANCING ACTIVITIES:|
|Borrowings on long-term debt||—||7,500,000|
|Exercise of options to purchase common stock||242,456||—|
|Proceeds from preferred stock - Series C issued||—||6,550,996|
|Net cash flows provided by financing activities||242,456||14,050,996|
|NET CHANGE IN CASH AND EQUIVALENTS||(20,212,327)||(520,931)|
|CASH AND EQUIVALENTS, BEGINNING OF YEAR||36,259,252||2,444,754|
|CASH AND EQUIVALENTS, END OF PERIOD||$ 16,046,925||$ 1,923,823|
|FRESHPET INC. AND SUBSIDIARIES|
|RECONCILIATION BETWEEN NET LOSS AND ADJUSTED EBITDA|
|(Amounts in thousands)|
|Certain totals may not sum due to rounding|
|Three months ended||Six months ended|
|June 30,||June 30,|
|Net Loss||$ (2,229)||$ (6,267)||$ (4,816)||$ (11,409)|
|Fees on debt guarantee||—||1,808||—||3,645|
|Depreciation and amortization||1,869||1,536||3,624||3,124|
|Income tax expense||15||8||30||16|
|EBITDA||$ (234)||$ (1,836)||$ (1,014)||$ (2,591)|
|Loss on disposal of equipment||72||36||81||71|
|New plant startup expenses and processing||—||—||—||113|
|Noncash stock based compensation||1,804||243||3,664||486|
|Warrant fair valuation||(44)||—||70||—|
|Adjusted EBITDA||$ 2,787||$ (355)||$ 4,794||$ 413|
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