SECAUCUS, N.J. — Despite facing some production challenges and maintaining a lofty advertising budget, Freshpet, Inc. reported on August 5 it grew net sales to $60.1 million over the second quarter ended June 30, up 26.1% from the second quarter of last year.

Dick Kassar, CFO of Freshpet, said the company is raising its full year net sales guidance from at least $240 million to more than $244 million as a result of its continued profit growth.

“This represents net sales growth of 26% for the year and puts us within striking distance of our $300 million goal in 2020,” Kassar added.

Freshpet’s core dog business, which consists of its dog roll, roasted meals and Fresh From the Kitchen items and makes up 90% of the company’s sales, was up 28% in the second quarter of this year, said CEO Billy Cyr.

The company’s EBITDA was $1.2 million, down $1.3 million from the second quarter of 2018, which Cyr attributed to a $4.8 million increase in the company’s advertising investment, in part behind a second advertising campaign that positions Freshpet as the “next generation of pet food.”

Freshpet’s stock price per common share raised to $0.16 from $0.10 compared to its year-ago price.

Household penetration increased 18%, a record growth for Freshpet in this category, and the buying rate was up 9% compared to the second quarter of 2018.

“As a result of our significant marketing investments and distribution gains, we drove the largest year-over-year increase on record in the size of our Freshpet consumer franchise, and those consumers bought more than they did a year ago,” Cyr said.

Cyr reported retail sales grew 27% in the mega-channel (as measured by Nielsen), 35% in the grocery channel, 27% in mass and 13% in big box.

More than 80% of e-commerce sales, which were up 101% in the second quarter across home delivery, curbside pickup and direct-to-consumer services, utilized the company’s in-store fridges, according to Cyr.

Freshpet continued to upgrade existing stores and install fridges in new retail locations throughout the quarter, with 160 stores upgraded from small or medium fridges to large ones, adding a second fridge to 376 stores and adding fridges to 361 new stores, bringing the total store count to 20,414, Cyr said.

“We expect to see the strong distribution gains continue throughout the year and deliver our annual targets of 1,500 to 1,600 more stores, an incremental 500 fridge upgrades on top of the 1,000 we delivered as part of the plan we announced last year and 800 stores with two or more fridges,” Cyr said.

Freshpet reported some production challenges in the second quarter, including adjustments after converting its fourth production line to 24-hour operation for three and a half days per week in mid-May, incurring “incremental processing costs” which constrained supply, and facing quality issues with SKU-specific raw materials that “did not meet our quality standards,” Cyr said.

“Those issues are now largely resolved and we're now shipping to our customers demand,” Cyr added.

The company is also pressing on in its search for its next processing facility, with plans to acquire property and hire a site leader soon.

“If we continue to grow at our current rates, that facility would need to be up and running sometime in 2022,” he said.

Overall, the company mitigated operational challenges in the pursuit of its mission to add more stores, increase production capacity and stay top-of-mind with consumers with consistent and well-funded marketing messages in this second quarter.

“In summary, 2019 is shaping up to be another strong year for Freshpet,” Cyr concluded. “Our strong growth is continuing and we are on track to exceed our net sales and adjusted EBITDA guidance for 2019 and meet our longer term 2020 goals.”

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