frpt20230930

frpt20230930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36729

FRESHPET, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

20-1884894

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)


400 Plaza Drive, 1^st Floor, Secaucus, New Jersey	07094

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (201) 520-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	FRPT	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 2, 2023 the registrant had 48,241,898 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

		Page No.
Part I. Financial Information		5
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4.	Controls and Procedures	36
Part II. Other Information		37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	37
Item 5.	Other Information	37
Item 6.	Exhibits	39

Forward-Looking Statements

This report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” "target," “intend,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

	•	our ability to meet our sustainability targets, goals, and commitments, including due to the impact of climate change;
	•	changes in global economic and financial market conditions generally, such as inflation and interest rate increases;
	•	the impact of various worldwide or macroeconomic events, such as the ongoing conflict between Russia and Ukraine and the current conflict in Israel and the Gaza Strip, on the U.S. and global economics, our employees, suppliers, customers and end consumers, which could adversely and materially impact our business, financial condition and results of operations;
	•	our ability to successfully implement our growth strategy, including related to implementing our marketing strategy and building capacity to meet demand, such as through the timely expansion of certain of our Freshpet Kitchens (as defined below);
	•	our ability to successfully implement new processes and systems as we continue to stabilize and improve our new ERP;
	•	our ability to timely complete the construction at our Freshpet Kitchens South and Freshpet Kitchens Ennis (our Freshpet Kitchens Bethlehem, Freshpet Kitchens South and Freshpet Kitchens Ennis collectively, “Freshpet Kitchens") and achieve the anticipated benefits therefrom;

•

the loss of key members of our senior management team;

	•	allegations that our products cause injury or illness or fail to comply with government regulations;
	•	the loss of a significant customer;

	•	the entrance of new competitors into our industry;
	•	the effectiveness of our marketing and trade spending programs;

	•	our ability to introduce new products and improve existing products;
	•	our ability to match our manufacturing capacity with demand;

	•	the impact of government regulation, scrutiny, warnings and public perception;
	•	the effect of false marketing claims;
	•	adverse weather conditions, natural disasters, pestilences and other natural conditions affecting our operations;

•

our ability to develop and maintain our brand;

	•	the effect of potential price increases and shortages on the inputs, commodities and ingredients that we require, including those effects caused by inflation;
	•	our ability to manage our supply chain effectively;

	•	global or local pandemic, such as COVID-19;
	•	the failure of our information technology systems to perform adequately, including as a result of any interruptions, intrusions, cyber attacks or physical or electronic security breaches of such systems;
	•	actions of activist stockholders;

	•	volatility in the price of our common stock; and
	•	other factors discussed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and the headings "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022 and our subsequent Quarterly Reports on Form 10-Q.

While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FRESHPET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, In thousands, except per share data)

	*September 30,*			*December 31,*
	*2023*			*2022*
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	338,107		$	132,735
Accounts receivable, net of allowance for doubtful accounts		54,415			57,572
Inventories, net		59,063			58,290
Prepaid expenses		8,813			9,778
Other current assets		1,992			3,590
Total Current Assets		462,390			261,965
Property, plant and equipment, net		924,720			800,586
Deposits on equipment		2,256			3,823
Operating lease right of use assets		3,990			5,165
Equity method investment		—			25,418
Long term investment in equity securities		23,528			—
Other assets		27,449			28,426
Total Assets	$	1,444,333		$	1,125,383
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	40,908		$	55,088
Accrued expenses		39,377			33,016
Current operating lease liabilities		1,445			1,510
Current finance lease liabilities		2,043			—
Total Current Liabilities	$	83,773		$	89,614
Convertible senior notes		392,562			—
Long term operating lease liabilities		2,846			4,200
Long term finance lease liabilities		26,596			—
Total Liabilities	$	505,777		$	93,814
Commitments and contingencies		—			—
STOCKHOLDERS' EQUITY:
Common stock — voting, $0.001 par value, 200,000 shares authorized, 48,240 issued and 48,226 outstanding on September 30, 2023, and 48,051 issued and 48,037 outstanding on December 31, 2022		48			48
Additional paid-in capital		1,283,744			1,325,524
Accumulated deficit		(344,021	)		(295,117	)
Accumulated other comprehensive (loss) income		(959	)		1,370
Treasury stock, at cost — 14 shares on September 30, 2023 and on December 31, 2022		(256	)		(256	)
Total Stockholders' Equity		938,556			1,031,569
Total Liabilities and Stockholders' Equity	$	1,444,333		$	1,125,383

See accompanying notes to the unaudited condensed consolidated financial statements.

FRESHPET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in thousands, except per share data)

	*For the Three Months Ended*						*For the Nine Months Ended*
	*September 30,*						*September 30,*
	*2023*			*2022*			*2023*			*2022*
NET SALES	$	200,621		$	151,333		$	551,474		$	429,511
COST OF GOODS SOLD		134,328			106,788			375,177			289,187
GROSS PROFIT		66,293			44,545			176,297			140,324
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES		73,371			60,449			221,638			190,241
LOSS FROM OPERATIONS		(7,078	)		(15,904	)		(45,341	)		(49,917	)
OTHER EXPENSES:
Interest and Other Income, net		4,130			256			9,185			492
Interest Expense		(4,148	)		(1,817	)		(10,648	)		(4,060	)
		(18	)		(1,561	)		(1,463	)		(3,568	)
LOSS BEFORE INCOME TAXES		(7,096	)		(17,465	)		(46,804	)		(53,485	)
INCOME TAX EXPENSE		70			41			210			123
LOSS ON EQUITY METHOD INVESTMENT		-			943			1,890			2,969
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(7,166	)	$	(18,449	)	$	(48,904	)	$	(56,577	)
OTHER COMPREHENSIVE LOSS:
Change in foreign currency translation	$	(296	)	$	(592	)	$	(2,329	)	$	895
Unrealized gain on available for sale investments	$	-		$	271		$	-		$	271
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME		(296	)		(321	)		(2,329	)		1,166
TOTAL COMPREHENSIVE LOSS	$	(7,462	)	$	(18,770	)	$	(51,233	)	$	(55,411	)
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
-BASIC	$	(0.15	)	$	(0.39	)	$	(1.02	)	$	(1.24	)
-DILUTED	$	(0.15	)	$	(0.39	)	$	(1.02	)	$	(1.24	)
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING
-BASIC		48,194			47,856			48,123			45,545
-DILUTED		48,194			47,856			48,123			45,545

See accompanying notes to the unaudited condensed consolidated financial statements.

FRESHPET, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

	Common Shares		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Treasury Shares		Treasury Stock			Total Stockholders' Equity
BALANCES, June 30, 2023		48,185	$	48	$	1,275,510		$	(336,855	)	$	(663	)		14	$	(256	)	$	937,784
Exercise of options to purchase common stock		40		—		1,111			—			—			—		—			1,111
Vesting of restricted stock units		15		—		(9	)		—			—			—		—			(9	)
Share-based compensation expense		—		—		7,132			—			—			—		—			7,132
Foreign currency translation		—		—		—			—			(296	)		—		—			(296	)
Net loss		—		—		—			(7,166	)		—			—		—			(7,166	)
BALANCES, September 30, 2023		48,240	$	48	$	1,283,744		$	(344,021	)	$	(959	)		14	$	(256	)	$	938,556

	Common Shares		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income		Treasury Shares		Treasury Stock			Total Stockholders' Equity
BALANCES, June 30, 2022		47,834	$	48	$	1,305,260		$	(273,751	)	$	1,367		14	$	(256	)	$	1,032,668
Exercise of options to purchase common stock		2		—		—			—			—		—		—			—
Vesting of restricted stock units		2		—		(66	)		—			—		—		—			(66	)
Share-based compensation expense		—		—		6,671			—			—		—		—			6,671
Issuance of partner warrants		—		—		9,775			—

SEC Form 10-Q filed by Freshpet Inc.