Sure. No, no, no problem at all. No problem. Perfect. All right, welcome everybody, and thanks for joining us for our fireside chat with Freshpet. So with us today are our CEO, Billy Cyr, and CFO, Todd Cunfer. Welcome to you both. Thanks for being with us here today. Thank you. Maybe a good place to start, Freshpet last presented at this conference in 2021. Yep. Can you walk through some of what's changed in the business? I know it's been a lot, and some of the improvements you have made. Yes. Maybe we'll start off with you, Billy. Yeah, great. First of all, just so everybody knows, I'm fine. I'm wearing this mask. I'm healthy. I'm doing this to protect my wife, who's going through some health challenges, so this is my way of keeping her safe. Good question. It has been a wild ride for the last three years, quite a bit of a wild ride. If you think about where we are today, today we're more than two times the size that we were back in 2021. It's pretty remarkable. We now have a dramatically more manufacturing capability. We opened our Ennis, Texas, facility, which will ultimately be a 1 million sq ft production facility, producing over $1 billion of fresh pet food when it's done. But we opened that in that last couple of years. If you look at the scale of the organization or the impact that we have on the market, back then we had about seven and a half million users. Today, we have over twelve and a half million users. Today, our organization is thirteen hundred people. Back then, we had about six hundred people. It's just a dramatically bigger enterprise, but the more important part is, I think we're a much better company than we were back then, and if I had to reflect back on what's changed, what did we do differently to get to where we are today? The first thing is that we got behind in talent. We were behind where we needed to be from an organizational capability perspective, and so we've had to bring in talent. People like Todd over here have joined us since then, Rachel over there. We've brought in a ton of talent to the organization, and that has really helped us quite a bit improve our execution. The second thing that's really different is we made a very deliberate investment three years ago in stabilizing our hourly workforce. It's not the high-glamour, sexy part of it, but we realized we needed to attract higher-skilled workers. We need to give them a career path, not just a job, and training and development to get there. Since we've done that, our turnover rate. Our way to think about it is the percentage of our employees who've been with us for a year or longer has gone from, at that point, it was 18%, to now it's over 70% of our workers have been with us that long. That is showing up in every leg of the P&L, and it's driving tremendous improvement in our performance. As I think about the outcomes that came from all those things, you know, today, our margin, our EBITDA margin today is gonna be probably about ten points better than it was in that year. We're generating probably about $100 million of incremental EBITDA this year, versus where we would've been, where we were in 2021. We're on the verge of positive net income for the first time. We'll be cash flow positive, free cash flow positive in 2026, if not sooner. The cash flow in that year, I think, was -$320 million. This year it'll be, what? -$50 million or something like that. $2 million. Somewhere in that range. So it's a tremendous improvement, and I have to say that we did great things. We feel really good about the work, but it's also obvious the environment is a lot easier. Back then, it was a very difficult time and very challenging time. Workforce, materials, reliability of the supply chain, much tougher, and I don't want us to sound like we did it all ourselves. The reality is, the world got a little bit easier. That's right. Yeah. Thank you. Thanks for that. You just reported your twenty-fourth consecutive quarter of greater than 25% net sales growth, and it's been primarily volume driven. Yeah. Maybe you could talk a little bit about what the key drivers are for that, for those- Yeah ... that maybe aren't as close to the story. Yeah. I mean, it always starts with, we're in a great category. Pet food is still a great category. It's been a great category for more than two decades at this point. The humanization of pets is a very real phenomenon. People are having fewer kids, and they're replacing them with dogs. It's just a fact of life, and that's good for a business like ours. The second is, this is a category that was ripe for some innovation. You know, if you think about it, human food was canned in the first half of the nineteen hundreds. Dried came along in the middle of the nineteen hundreds, but the store, the retailers, if you look at their stores, where it used to be a big center of the store, now, today, it's all perimeter. It's dairy, produce, deli, the meat department, whatnot. That's where all the action is, and yet the pet food market is still stuck in canned and dried. Dry dog food was invented in 1956. Canned dog food was invented in 1922, and it was time for an upgrade, and so that's changed pretty dramatically. Fresh pet food is that sort of generational change that is long overdue. It's. We're driving it in pet food, but it'll probably do the same thing that happened in human food, where consumers, given the choice, will choose the fresh alternative to the canned or the dried product that they otherwise would have previously had available to them. Then the last part of it is, we have a great business model. Our founders did a phenomenal job creating a business model that delivers an exceptional consumer experience. Our products are noticeably different. They're incredibly, good-tasting, nutritionally beneficial. Pet parents notice the difference. We have manufacturing technology that, you know, we are the only ones who really know how to practice it. We don't do promotion or discounting, so the consumer's getting a product every time at the right price. Every single day, we drive household penetration gains with advertising. The whole model works really, really well, and so we don't have a business that is, you know, fluctuates up and down based on promotional intensity or the latest price change in the market or a competitor's pricing action. It's a consumer franchise that is highly loyal to a highly differentiated and preferred product. ... Great. Thank you. The concept of disciplined growth w as a key takeaway from the past earnings call. Can you talk a bit about how you're managing that, and what, what's different maybe than in years past? You wanna take that? Yeah, so look. This is. This is. We have grown faster than the 25%. We can grow faster than the 25%, but the execution risk of growing above 30% is high for us. We're still a relatively small organization. We've determined the sweet spot for us is to grow around plus or minus 25%. That allows us to execute extremely well. It allows us to increase the margins, which we've got a nice head start on, but we got a long way to go, and it also allows us to manage CapEx a little bit more prudently, and get the free cash flow quicker. Again, it's great growth at 25%, we don't feel bad about that, but again, it's the sweet spot where we feel we can be more disciplined and plan out our business a lot more efficiently. Got it. Got it. You've talked about reaching an inflection point on profitability. Why now? This is truly a scale business. It is. What we do, what the team does every day is very difficult, and we're really the only people who can make fresh pet food. Again, this is. It's fresh, there's no preservatives, it's got a 23-week shelf life. But it's very challenging to do what we do. And to have the network that we have with over 30,000 fridges out there, we've reached. Now we're gonna be $1 billion this year. We've kind of reached that inflection point where the scale aspect of it is really starting to kick in. The Ennis facility, where this, you know, just the next week or two, we're gonna have the fourth line go live, that's gonna start. There'll be 10 or 11 lines there eventually. That is now starting to reach the point where we'll be more efficient in that facility. So lots of good things are happening by the way we're planning it, but just now that the scale of the business is approaching $1 billion, allows us to do a lot of nice things on the margin. I just wanna clarify a point. You said we're gonna be a $1 billion business. We're not gonna have net sales of $1 billion this year. Yes. We've told people that. It's close. Our run rate now- Close to $1 billion. Our run rate now would support, you know- Yeah ... being in $1 billion and next- we're already thinking next year. Yep. So that's what that means. But I also want to just add, it's interesting, is, we've done a lot of our internal strategy reviews, and as you think about the business, if you look at really good category-changing, category-creating companies, people who redefined what the consumer's expectation should be in a market. So, you know, talk about Tesla and electric cars, Netflix, when they were, you know, basically creating streaming video, you look at Starbucks, you look at Amazon, and you look at what their trajectory was, and they didn't make money for a long, long, long time. They're capital intensive, they're continually reinvesting capital to build scale and leverage. And when they inflected, their inflection was incredibly fast, incredibly steep, much more than people had expected. And I think we probably fall more into that pattern than the pattern you'd see of a much more gradual slope of a more traditional business. We are creating a new category. It is a capital-intensive business, but when you reach enough scale, adequate scale, and you begin to inflect, you start seeing that inflection happen very, very quickly. Yeah. Some of your longer-term 2027 targets have already been exceeded or eclipsed, adjusted gross margin, logistics, quality, input costs. Two questions here: Where do you see further upside? And what's not included in these long-term targets? Yeah. When should we expect you to formally update those long-term targets? Yeah. So 18 months ago at CAGNY, we set out targets, by 2027, we'd be at $1.8 billion in net sales, basically tripling the business at a 25% growth rate. We'd have adjusted gross margin of 45% and adjusted EBITDA margin of 18%. Great news is, we're well ahead of that target. We gave guidance this year that we would already hit the 45% on adjusted gross margin, and we gave guidance and implied we'd be close to 15% on EBITDA margin. So that's fantastic news. We are thrilled by that. We are working internally really hard right now to see kind of what... You know, we're not gonna stop at 45%, obviously. So what are the levers that we still have, and we have several that allow us to get over 45%? You know, at what, what does the 18% look like as well? So we're working on that right now. We're probably gonna come back to people next year, and, you know, re-look at those targets. More to come, but the good news is, we are way ahead of schedule, and we feel like there's more upside. Would you expect the need to raise any additional capital at this point? Yeah, so that's the other good news. If I was sitting here a year ago, I would've thought, "Hey, we're gonna be free cash flow positive in 2026, but we're probably gonna need a little bit of debt to get us, incremental debt to get us over the finish line." Operating cash flow has been much stronger than I anticipated, and that's obviously largely EBITDA-driven. We're sitting with over $250 million of cash on the balance sheet right now. We'll end well over $200 million this year. We'll use a little bit of cash next year, and then we think we're gonna be self-sufficient going forward. Right now, I do not anticipate any more capital raises, whether it's debt or equity. Got it. And again, timing, remind us on timing to be Free Cash Flow positive? In '26. '26, got it. Got it. Turning to media spend, you frequently talk about customer acquisition costs. Why do you think you've been able to keep that so low as you get, you know, further into the- Yeah ... the TAM? ... Yeah, it's first of all, you know, we're relatively small as a share of the market and as part of the TAM. The TAM today is roughly 42 million households who we think would be prime prospects. For Freshpet, we're in about 12.5 million of them. And so at this point, there's still a lot of headroom available to us, and so we think we're just scratching the surface. We're not to that point where the curve begins to, you know, bend and create that diminishing returns on the investment. Having said all that, we also think that, you know, with the scale of our media investment, roughly $100 million in media, you would normally expect to see some of that, and we don't want to be, you know, oblivious to the fact that that will happen at some point. But we have a counterbalancing benefit that we get, which is we pay to and invest in fridges to put in retail outlets. These are four-foot wide, seven-foot tall, branded, refrigerated, lighted fridges that not only service our customer and provide the consumer with the products they need, but they act as a billboard for our point of difference with the consumer. They see this fridge, and they understand it, and as we understand why Freshpet is better and different than the drier canned dog food sitting next to it. If you see one of our ads on television, and then you walk in the store, and the only fridge in the store is this tiny little fridge in the middle of an aisle, probably not likely to get a conversion of that advertising investment into a sale, but if you walk into a store after seeing the ad, and now there's two Freshpet fridges sitting there on end caps, shining at you, you're going to say, "There's something going on here. Maybe I ought to be looking at this, or maybe I ought to be trying this category." And so our conversion on the advertising is influenced by the retail visibility that we've created, and that's permanent visibility. It's a big capital investment that we've made. We put this capital investment in. It's to the retailer's benefit. The retailer gets the benefit of having, you know, given up this space to create this awareness, but it then drives, for us, a loyal consumer who will shop that store and buy that product as a result of the advertising and the retail visibility. Yeah. And this leads into what, what's Freshpet's competitive moat? And, and why do you think others have tried to come into the space, and failed largely? You know, fresh is very hard, so there's a technical challenge to do fresh. It's very, very difficult, and when I say that it's a technical challenge, you have to be able to produce a product that will go through a refrigerated supply chain to a retail outlet or a warehouse distribution center and then a retail outlet. It has to have a long enough shelf life to go through that supply chain and still arrive with plenty of shelf life left on it for the consumer to be able to consume it at a reasonable rate, to not have a lot of product go spoiled, and so doing that without any preservatives in your product is technically very, very difficult, and other people haven't figured out how to do that, and so I'd start with it's tough. The second thing that about this is fresh is always a scale-driven business. The reality is, if you don't have scale in fresh, you can no longer do long production runs, meaning if you don't have enough velocity to justify long production runs, large manufacturing assets, lots of automation, you're going to be doing a ton of really small runs to sort of support a very small business. It's incredibly inefficient. You're not going to be shipping full truckloads to your customer with the frequency that you want, so your freight costs are going to be higher. You're going to have a large amount of your product become unsalable, meaning it goes past its expiration date at retail, and you're going to have to pay the cost for that because the retailer will not want to cover that cost. There's huge advantages for having a high-velocity, large-scale business in the world of fresh, and we've finally gotten to that point. And so that's a huge advantage, and if somebody comes along behind us, it's going to struggle to keep up with that. Others have tried, others have not done very well, but we continually seek to expand our moats. People originally thought it was just the fridges. The fridges are nice, but Walmart put fridges in 2,000 stores, and, you know, they can do that. But it's the manufacturing technology. We keep advancing the manufacturing technology to greater and greater levels to give us better products at better costs and an advantage versus people who come along behind us. We're now working up into the supply chain. We put a chicken processing operation on site in our facility in Texas because we believe there's competitive advantage if we can get better, higher-quality chicken and find a way to do it at a lower cost. We think that delivers a better consumer experience, and it also can deliver a cost advantage to us. So we look across the entire business ecosystem, and we're looking for as many ways as we can create an advantage. And frankly, now we have a first mover, we have scale, we have brand identity, brand, you know, association with the category, outstanding products, a very loyal consumer franchise. We feel very good about the position we're in, but we're not going to rest where we are. Are there items that you think investors are either getting wrong or maybe not fully appreciating based on what you can see inside, you know, with the business or in your discussions top to top with key customers or what have you? Yeah, look, it's interesting, as we've done, you know, very, very well this year. I think the conversations are getting a lot more clarified over the last quarter. People are starting to get it. You know, I think early on it was like this business is never going to be that big. Now people started a year or two ago, "Okay, this is legitimate business." And then, "It's going to be big, but it probably can't ever be profitable." So now that we've made some really nice headway in the profitability, again, we're not all the way to breakeven, we have a long way to go, but we now have people believing that that is achievable to make this a very profitable business. The capital intensity is the last piece of it, where people are like: Great top line. Yeah, I see potential for margins, but boy, this is still a capital-intensive business, and where's the free cash flow? So we're going to prove, I think, pretty quickly, that this is going to be a free cash flow positive business, and the scale of this thing will start to really move up very, very quickly. I think. Yeah, the other thing I would say is from a brick-and-mortar perspective, we are so important to retailers. You know, this is a category where 30% of the business is online, so Chewy and Amazon, there's a ton of business that goes through those channels. Instead of why am I gonna go buy a 40-pound bag of kibble at the store and lug it home? I'm just gonna have it sent to me, you know, every four weeks on auto ship. This is a product you have to go in the store for. You have to go in and visit one of our fridges. You have to go down the aisle, and not only are you gonna buy it, Freshpet in the store, you're also gonna buy a bunch of other things in there, and the type of customer that we bring in i t is extremely valuable to that, to that retailer. And so as they plan their business every year, they, and they've lost a lot of market share over the last five or 10 years, they realize if they're not winning with us, it's gonna be a very difficult way, difficult means for them to grow. Look, we're in a great position. We think there's a lot of upside. Again, we have 3% of the dog food share at this point. There's no reason this can't be at least 10% share, if not even more over time. This is early innings. There's a ton of runway. Yeah. You know, one other thing I would add is that, you know, when we talked to the investors in our meetings last day and a half, it's kind of interesting is because, you know, I've been in the food business for basically forty years at this point, and virtually everybody in this industry expects that your products can be co-packed by somebody. That there's somebody else out there who can make it, because the reality is, the technology has not evolved that much across the vast majority of the categories, so you can find somebody who can bottle, bag, box, whatever it is, in the vast majority of the businesses, and so we get these people asking us, like, "Can't you guys go get this co-packed?" It means that they're not really understanding how difficult it is and how limited the manufacturing capability is to produce this, and then when I say to people, "The technology to make fresh pet food is in its infancy, infancy," I don't think people know what that means, and it's not that they're not incapable of understanding. It's just we haven't been able to really define what that looks like. Because, you know, if you think about the history of food and how food develops, the technology's evolved, but they evolve at a glacial pace, and so what's being done to make foods today or beverages today is dramatically different than what it was done thirty years ago, but most people don't remember thirty years ago. They don't know what thirty years ago looked like. We think of this as very early innings in manufacturing technology. That's why we've invested in the talent and the technology to advance it, to produce superior products, but people look at it and say, like, "Well, so when, how fast is that gonna happen, and what is that gonna mean?", and we can't really tell them because we're walking into unexplored area, and that's not really well understood in this space because it doesn't happen very often in this space. Right. Right. Yeah. On Tuesday, you announced the appointment of a new COO. Yep. Nicki Baty, I think I pronounced that right. Yep. Can you share a little bit about her background and sort of the strategic rationale behind the move? Yeah. Well, first of all, we're thrilled to have Nicki join us. She's a absolutely fabulous person. She's a great talent. We are excited to get her going on our business. She does have some restrictions on what she can do. She came to us from Hill's, and so she can only work on the grocery, mass, and club channels until next May, at which point then the restrictions will be gone. But between now and then, there's a lot for her to learn about this business. She's a tremendous leader. She's a very, very bright mind. She's got tremendous capability. We love the fact that she's got experience internationally. That's an opportunity for us. We love that she's got experience across basically every class of trade. She's passionate about animals, understands this space, and she's frankly gonna be a good complement. Within this, what this does is it allows us to get Scott Morris, who was previously our COO, President, and co-founder, to spend time in doing things that only he can do. He is the consummate entrepreneur. He is the kind of guy who will see a problem and find fifteen different ways and will knock down walls to get the problem solved. We're thinking about the world as we're expanding the ecosphere. I kind of described a little bit earlier, but we're expanding the ecosphere that we're operating in, and we want to move further up into the supply chain to find ways to get strategic and competitive advantage on the ingredients that we buy, the cost, the quality, and whatnot. We want to work on the technologies that we use to cook our product and get strategic advantage there. We want to move downstream into retail to make those fridges even more valuable to us, to our consumers, and to our customers through the use of technology, and there's nobody better to take on that ecosystem and find a way to build an even more robust business. When I think about the CPG industry, most good CPG companies make good products, and they sell great brands, but the truly winning companies build an ecosystem that delivers an exceptional consumer experience. Coca-Cola's bottling system delivers within an arm's reach of desire. We want to be in that case where we build an ecosystem that delivers the exceptional consumer experience, and Scott's gonna be leading that work for us. Yeah, I mean, Nicki's gonna be unbelievable. I probably spent time with her three or four times before she's come on board. I still can't believe we convinced her to come. She's incredibly talented. She's a true general manager. She understands the P&L. She is going to be amazing, so we're so happy to have her. Great. Are you able to comment on the recent 8-K filing? Yeah ... related to severance, change of control, and non-competes? And does Nicki's appointment have anything to do with that? Yeah. No, Nicki's appointment had nothing to do with that. It did look like in the dark of night on a Friday before a holiday weekend, we snuck some stuff out there and hoping nobody would pay attention. That really wasn't the goal. In fact, the timing was driven by the fact that the original FTC new directive on non-competes had an effective date of yesterday, and any agreements that were completed prior to yesterday would be grandfathered in. Even though the courts have now put that on hold for a while, our work was well underway, and we wanted to get them done to make sure there's no chance. The real motivation for doing what we did was that we realized that over the last decade, we've built an enormous amount of intellectual property that is essential for our success in fresh pet food. You know, and it all exists in the minds of our key leaders, technical leaders, as well as commercial leaders. If we look back, you know, ten years ago, we were an $86 million company, and we had non-competes that, you know, had varying scopes, varying lengths, you know, all kinds of things that frankly didn't give us the protection that we needed to guarantee that we were gonna able to own the intellectual property we created. So we set out to create much better, stronger non-competes for the company, but in order to do that, you can't go to an existing employee and say, "Oh, by the way, we're putting a tighter noose on you on your non-compete." You actually have to offer them something, as an accommodation. And the accommodation that we could offer was, if there was a change in control, you would get a richer severance than your previous agreement allowed you to do. So you basically are bartering one for the other, and we were able to do that. So we think the shareholders win, 'cause they get much better protection on the intellectual property, and the leaders of the organization get the confidence and security that if for some reason somebody showed up, they'd be well taken care of. So it was a really good move. It was done on Friday, 'cause we had to get it done before September 4th, and we were gonna be out of town, so we wanted to get it done. But that's what drove the timing. It was not a, you know, in the dark of the night exercise. So- Great, thank you for that. We've got a couple minutes left. Maybe we take a step back and just talk about the overall pet food category. Just a couple of trends. What are you seeing in terms of either trading up- Yeah ... trading down, you know, channel, right, specific moves that you're seeing? Yeah. And just kind of, what are your expectations for the overall category as we move through the back half of this year? So, I think the way to think about it is that we went through four years of hell. Those four years are done. We're back to a more normalized environment. You know, every environment has, you know, employment might be good or bad, economy might be good or bad, but the reality is we're back to a more normal period. I think the trends that we saw in 2019 are now continuing on. So we had a big, you know, adoption boom, a bust just kind of normalization. And what we see now is we see the pet adoptions continuing at roughly the same rate that they were going for the last decade before, before the pandemic, and we see that as a good, healthy thing. We also see the move towards the premiumization of pet food just continuing. The two fastest growing pet foods right now are Farmer's Dog, which is a very expensive DTC brand, and Freshpet, a very expensive fresh brand. And so the reality is, for people to say that the consumer is, you know, tightening up, when the fastest growing items are the most expensive, is kind of... It's, it's an odd piece. Within our business, we see two signs that there's some economic strain out there. One of them is our consumers are moving from from smaller sizes to larger sizes, 'cause that's where they get the most efficient, you know, cost per pound. So every time I look at the Nielsens, the pounds are up more than the units are, which is a healthy thing for us, and it's good for the consumer. The other thing is more of our business has moved into value-oriented channels. So channels like Walmart, which are known for value, are getting better foot traffic, so we see a higher rate of growth in those kinds of channels than we do in the channels that are less known for value. Beyond that, you know, we, in our business, we're not seeing a whole lot of other changes. I will say what we're hearing from our, you know, from the competitors in the pet food broadly, is that they are seeing a little bit more shifting and shuffling between the brands. There's a little bit more of a value orientation. I would just argue that what that's masking is the fact that there's a lack of differentiation between some of those products. Yeah ... and so they are more substitutable for each other. Yep. Good, good. All right, I think that's a great place to leave it here. Hopefully you can join us in the breakout session next door. Okay. And please, join me in thanking Billy and Todd for being here. Great, thank you. Thank you both. Thank you.