Freshpet, Inc. (FRPT) Earnings Call Transcript & Summary

Okay. We're going to go ahead and get started. Good morning, everybody. My name is Jon Andersen, and I'm the analyst at William Blair that covers Freshpet. I want to welcome you to the Growth Stock Conference. Final day here. Thanks for joining us this week and also the presentation specifically for Freshpet. We're pleased to have Freshpet's Co-Founder and Chief Operating Officer, Scott Morris, with us; and Chief Financial Officer, Heather Pomerantz. Freshpet is a rapidly growing manufacturer and marketer of premium and differentiated fresh refrigerated foods and treats for dogs. The products are sold in highly visible branded refrigerators found in stores across multiple channels of trade, including grocery stores, mass merchants, pet specialty and natural food retailers. The premium pet food segment is growing rapidly as more consumers humanize their pets. Freshpet is a pioneer in commercializing their brand of fresh refrigerated pet food, and they're currently investing in manufacturing capacity and organizational capabilities to extend their leadership position. I suspect we'll hear more about the company's efforts in this area this morning. Before handing it over to management, just a couple of quick housekeeping items. First, recall immediately following this presentation, Scott and Heather are going to be available for a breakout session in the Richardson room. That's on the second floor, the Richardson room. And second, I must inform you, a complete list of research disclosures and potential conflicts of interest can be found on the William Blair website. So thank you for your patience. And with that, I will turn it over to Scott.

Thank you, Jon. Good morning, everyone. Good to see everyone. I know it's a little bit early. Thank you for joining us. Thank you for everyone at William Blair for having us this morning. So we're going to spend about 25 minutes or so going through a presentation, and we're going to start -- we're actually going to start -- I'll take you through a little bit of an agenda here, our disclosures too. And then we're actually going to start where literally what we started building a decade ago and why what we did 10 years ago is really important today. So I'm going to touch on that a little bit. Then we're going to talk about how some of that work really creates incredible advantage today and how we see the marketplace developing. Then Heather is going to talk a little bit about what we're building out. And then also, we're going to talk a lot about know-how, first-mover advantage and also the scale benefits that we see. All right. So let's talk a little bit about fresh and like why we got started in the fresh category. So I'm going to -- I'll show you a slide here. Now not to pick on Del Monte, but if you were going to choose a peach or canned peaches, which one do you think is fresher and healthier and less processed, right? Or this is one where I'm sure the Costco guys are going to give me a call over this. But who's up for my dinner -- if you come over at my house, we're going to have canned roast beef for dinner. So just to give you just some analogies, we just think that fresh is better. People know fresh is better, right? And I think that if I was in a room 10 or 15 years ago, I'm going ask the room full of people who thinks they want to eat a fresher, healthier, less processed diet? I'd probably get about half the room. I think today, the majority of the room would kind of definitely raise their hand. Whether they're doing it or not is another story, where they know it's good or not, I think, is different. The majority of people believe this ideology. So we think what we started 10 years ago, we're kind of in the right place as consumer sentiment has changed over time. So not only that people know fresh is better, but so do dogs, and I'm going to show you some data in a few minutes that kind of helps like represent that and talk about how we know dogs believe it's better or know it's better. So fresh is not only -- it's more nutritious, it's healthier, and it's also better tasting in most cases. And what we've seen is study after study on the human side has definitely proven that. And that's why we're all trying to eat that type of diet. That knowledge, that literally probably $1 trillion worth of knowledge out in the universe there of people knowing on the human side transfers into pet. All trends that are in the human side eventually transfer into the pet side. So again, we believe we're really in like a really unique place. So that's why we built our entire company on fresh. But not only do we think about our food being fresh, we really try to take a fresh approach to everything. So if you were all able to -- the companies you work for literally start from scratch. What would you build? How would you build it? And what would you do differently? And I'm sure there's a long list that you could come up with, if you're going to like redo your company. So we were able to like think about the insights from a consumer standpoint. We were also able to think about the food, right? How we make the food that's fresh or refrigerated is everything that we do from a food development standpoint. We use fresh ingredients. We try and get as fresh, less processed ingredients as possible, which is very different than most pet foods today. Fresh preparation. We gently steam cook. We actually use pasteurization as our process. And we cook it as little as possible, and that helps the bioavailability, and I'll talk about bioavailability in a few minutes. Fresh looking. It looks fresh. It smells fresh. And that's really important because we're not selling to just the dog, we're also selling to the consumer, right? We deliver it fresh. It goes from our kitchens that -- we manufacture almost all of our own foods. Other than our treats, we really manufacture all of our own. We have a very broad portfolio. I'll touch on the portfolio of products that we have. And then the other thing we were able to do, talk about mission, purpose and our team, we were able to create really an ideology around this idea that we call pets, people and planet. We want to nourish pets, people and planet. I'll talk about that on the next slide. But what that's important around is that not only does it motivate the consumers because we're a progressive company, but it also is incredibly motivating to the people in our organization. It's not just the J-O-B, it's a mission and a purpose that we have. So we'll talk about that more on the next slide, as I mentioned. So when we started, one of the things that we really wanted to build in was this idea -- sustainability is so thrown around today. It's unbelievable. Before it was cool and everyone was talking about it, we literally trademarked pets, people and planet. I think it was in 2014. We've had wind-powered kitchens. All the electricity in our kitchens, for example, has been since 2014, 2015. We're landfill-free. So there's a lot of things we've done. So the idea across pets is we really want to make sure that we're nourishing the human-animal bond. In addition to feeding pets, we've actually donated over 11 million meals to shelters. We support all different programs and shelters across the country that support that human-animal bond because people and pets both live longer, healthier lives together and if we can support that, that's what we want to do. From a people standpoint, the goal is every single person that touches our company, we want to walk away better off. And that's a very, very lofty goal. But we feel like we're doing that today. And we feel like we can continue to do that in the future, and it's because of the model that we've developed from the beginning. And finally, from a planet perspective, if you look at where we are from a planet perspective, we are carbon-neutral as a company, stage 1 and 2, if you're familiar with that term. And we now have our leading brand, which I'll talk about in a minute, breaking into the sustainability territory, that's carbon-neutral stage 1, 2 and 3. And as an organization, we've committed to being 1, 2 and 3, which is fully carbon-neutral by 2025. No one is talking about that. And that's important because that is a progressive, thoughtful company that makes our people and our company proud but also our consumers really, really passionate about what they're buying and the brands that we're bringing to market. So we create an entirely new category. But I will tell you that especially in the beginning, I want to talk about 10 years ago, not everyone thought this was a good idea. So this is in 2010, I had the opportunity to actually go to Whole Foods and present at one of the region meetings. And it was really interesting. It was in a hotel room. It was a much bigger room than this. There were probably about 125 people in the room. And the way they do it, it's almost like a pitch slam where you literally -- you have 15 minutes, you walk in, you present and then you're out. Well, I had all these products. I had our portfolio of products laid out and I was all excited about it. And they said, "Oh, you literally have 15 minutes. You don't have time. There's no set up. There's no nothing. You literally walk in, and in 15 minute and 1 second, you're -- they literally give you the hook. So I went and stole a catering cart like they do for the -- walk in with a catering for your room or something. I stole that, basically put our whole display of all of our products, a cutting board with our product sliced up on there. I wheel it into the room, and I put my first slide up and it says, "The future of pet food is fresh" because that's what we believed in 2010. And literally, the first thing before I get a chance to talk, I hear from the audience, "The future of pet food is raw." And someone else goes, "Yes, raw." I was literally starting to be heckled in the room. It was unbelievable. And it kept going on and on. And literally, it got to the point where they started arguing among themselves during the course of the presentation. And literally, they used up 5 minutes of my time and completely threw me off. It was unbelievable. So this was kind of an example of the room, and there were people all over the place. And then I was literally heckled out of the meeting by the end of it. And the irony is, and I don't tell you the story just to tell you about the past, but we are now a 42% share of Whole Foods dog food. If you look at their dry and wet dog food, we're a 42% share. It's unbelievable. But in 2010, I was literally heckled out of the room. And the only reason I take that is there's been a ton of skeptics along the way. Lots of different reasons, and I'll talk about some of those later, that I've thought what are these guys doing and why are they doing this. And -- but we've been able to persevere, and we see an incredibly bright future for the organization. So we did really create this entirely new category. And we've -- as we were creating it, we had something called our value creation platform. How do we create value in the organization? And all of the things that we've built have created incredible barriers to keep us out front, and we're going to touch on a bunch of those. So one of the first things that we did was we said, you know what, there are different consumers and different channels in the marketplace. We want to be able to literally look at where the consumers are, how they're thinking about their pets and their relationship and what's important to them. And we're going to develop brands for each one of these channels. So the grocery card is grocery, and you can see pet stores, and then there's a natural channel. So we literally created brands across every one of these channels. So early on, we put these brands across. There's different -- not only different brands, but there's also different products and forms and varieties and different features and benefits. And it kind of follows -- if you oversimplify it, it's this good, better, best strategy. Now if you think about our grocery brand, Freshpet Select, that's in grocery and mass. Vital is in pet specialty, and then our natural brand, called Nature's Fresh, and I'm going to talk a little bit more about Nature's Fresh in a few minutes, that was originally in Whole Foods. We actually did get in there, obviously, and it's continued to grow. And now we're starting to expand that brand into some of the other channels over time, and we see it as a big part of our future. But what we did -- this was kind of one of the first mover advantages that we had. We literally staked out this territory across. And the goal was not only to be in different channels, but it's really focused on the different emotional and rational motivations that pet parents have. What's important to them? Like why did they want to buy our products or different types of pet food products? So we want to cover the marketplace and really kind of be a first mover there. So the next thing that we did -- so when we first started, we literally went to the human food packers, and then we went to the pet packers. Like this is in the very beginning. And we realized the pet guys could not make what we want to make. And then we went to the human food guys. And we talked to them -- and first of all, most of them thought we were nuts. But secondly, they literally could not make what we wanted to make and what we thought was best for pets and best for pet parents. So it was a risky move, but we spent a lot of capital early on, literally before anyone knew who we were, what our name was. We spent a lot of capital and literally came up with a very different and proprietary process. And our first manufacturing facility was in Quakertown, Pennsylvania. So this box, that little house is supposed to represent 2,000 square feet. So everyone kind of knows what a 2,000 square foot houses. So the first facility was 18 houses. So it's pretty small, but it got us going, and it got us almost up to $50 million. Now that facility is gone. And where we are today is we're literally in Kitchens 1, Kitchens 2 and then we also use Kitchens South. So these are the 3 facilities. And then you can start to see -- this is the number of 2,000 square foot houses. So you'll see that Kitchens 1 is 50 houses, 70 houses and Kitchens South when finished will be 125 houses. Now you probably heard, if you follow the company and the stock, we're building out our manufacturing platform and our overall infrastructure, and Heather is going to talk more about what we're building. We're also building in Ennis, Texas today. We're building a very, very large facility. This is Ennis, Texas, is the next big box. Ennis, Texas Phase 1 is going to be 480,000 square feet. The innovation center that we're building literally around the corner in Bethlehem is going to be about 100,000 square feet, and then Ennis Phase 2 will be 400,000 square feet. We're moving towards 1.4 million square feet of manufacturing. It's not warehouse. It's manufacturing. It's tremendous, okay? And for the last 18 months and on and off for the last 5 years, we have had periods where we have been very constrained based on our capacity. We really want to get ahead of this. And we will build these in careful stages along the way. So Ennis Phase 1 will start up later this year in Q4. And we're really excited about that, and you can start to see the scale of what that represents from where we are today. So overall, we will literally end up investing about $1 billion in what we think is this incredible proprietary technology. And there is nothing exactly -- like if you took every single thing we do, people could figure out the different components, but there's hundreds and hundreds of components, from how we use the equipment, to our temperatures, to our packaging, to how we pack it, to how we clean our facilities. Every single one of those creates that advantage that people have really challenged to figure out and understand. Even on the human food side, we actually have incredible shelf life. I'll talk about that in one moment. The next thing we see based on our cooking technology and the way we make our products is we see incredible palatability. So dogs literally get to choose. You'll see this on the slide on the left. The green bars represent in an industry standard panel of if you gave a dog 2 bowls, which one would they eat. And these are -- most of the majority of the competitors that we go up against, you can see the dog would choose ours, right? They don't get to talk. They just get to eat. And then importantly, the piece on the right talks about bioavailability. So the way we make our product provides better bioavailability. Why is bioavailability important? Because you want the ingredients that we're eating to basically be able to go to work in our bodies. It's literally why that fresher, less processed is so important on the human side. It's important on the pet food side, too. So now in addition, our approach gives us over 20 weeks of shelf life. So why is shelf life important? Because if we have very, very short shelf life, it makes the entire manufacturing and supply chain incredibly complicated, and it drives your spoils way up. So in the very beginning, we literally only had 8 to 10 weeks of shelf life. And there's a term in the fresh food industry, which is sell it or smell it, which is something I was educated on early on. So we had to figure out really long shelf life, right? So we were able to figure that out. And it's -- that's why one of the kind of, I think, the secrets that we've been able to figure out and why we do our own -- one of the reasons why we do our own manufacturing, in addition to the quality. So from there, it literally goes to our company-owned fridges. So the next thing you start thinking about is we have 27,000 -- over 27,000 fridges at retail today across 24,000 stores. It's 1.3 million cubic feet of space at retail. It's kind of an extraordinary number when you think about it. So over 1.4 million square feet of manufacturing, $1 billion in manufacturing and 1.3 million cubic feet at retail. So it's kind of interesting the way we built what we built. But the most important thing is how we nourish that pet-parent bond. And I want to take you through this circle quickly because it is so important and critical. If we understand this, this is how we will win into the future. So it really starts with this idea of fresh food, right, that ideology that I was talking about earlier. And that really looks -- looks really good. Fresh food looks better than most canned or dry food, but also like even frozen, it looks so much better, right? And the next thing is the people -- so people look at it and they go, "Wow, this looks really good. I think it will be good for my dog." And they bring it home. And the next thing they do, they go, "Wow, it looks great." They open up the bag. The next thing they do is typically -- is they'll smell it, right? It just -- that's how we work, right? So you're smelling it like, "Oh my God, it doesn't smell like -- it smells like food I could eat actually." And that's an important trigger. And the next thing they do is they put it down, and the dog eats it, and the dog loves it, the palatability chart I was showing you a minute ago. And the next thing they see, which I know it's early, I'm sorry, but I got to talk a little bit about poop. So the next thing they see is because of the bioavailability and the digestibility of it, they see smaller, firmer poops, right? And if you have a dog, you're unfortunately somewhere, you're typically picking up, right, whether it's like in your backyard or bags or whatever it is. It is reason to believe for the consumers. When they see that, it's like, "Oh my God, this food is better for my dog." The next thing they see is they feel like it's more nutritious, and they see a visible difference in their dog's health over time. And at the end of the day, the reason they want to do well for their pet is they're responsible for that pet -- that kid's well being. So let me take you back. Who has kids here, okay? If you have kids or you have a dog, right, if you have kids and you were able to bring home healthy, fresh, less processed food for them and you were able to give them this food, and they go, "This is a great, mom or dad. This is awesome. I love this." And you're like, wow, they like the good, healthy, fresh food. And then all of a sudden their hair and their skin look better, and they had more energy, which are the key things that we start -- people say they see, how would you feel as a parent? You feel incredibly proud. You literally become a hero, right, which is really the goal for pet parents. They want to feel great about what they're doing. This is so important because we like to say we're rational, but we are emotional beings. And if we can do a great job for our pets that we're responsible to or our kids, we feel good as a parent. This circle is important, and it informed our entire food ideology. That's why we created what we created. That's why we start with fresh ingredients. That's why we generally cook them and package them and stay fresh. And that's why we deliver them in a refrigerator, okay? It wasn't to build like advantage. It was because this was right for the consumer, and that's what we built. So how are we doing? So here's a couple of stats that I think are really pretty interesting. And they're very different than that typically here's our sales stats. I'm going to talk about sales in a minute. We are 92% brand satisfaction. Extraordinary number, no matter where you are in packaged goods, if you can show a number like this, like kudos, good job. So we feel really proud of that number. Repeat purchase. 70% repeat purchase. We see industry-leading Net Promoter Score. We're at #2 across the industry. This is in a period -- we just measured this. This is in a period where for the last 18 months, we have not had enough product for most people. They've been literally having the hunt and peck and search for our product. We are #3 on price value, which is another challenge that we have. 94% see a positive change in their dog. I mentioned that incredibly important. And then also dogs do prefer it as a palatability I talked about a minute ago. So here's our sales, right? If you think about our CAGR, most companies in these high-growth modes, they typically -- their CAGR is very aggressive early on. Our CAGR is actually pretty equal, if you look across the board. Every 3 years, we more than double the size of our company. In fact, in the last year, we were 33% growth, and that is product supply constrained. In more recent periods, you can see our shares across the different channels. So it's food and mass grouped in and then Mega Channel, which includes pet. So you can see our shares -- you can see our growth rates. We're now putting up 40% numbers, and that is incredibly correlated to basically our fill rates because we finally have product in order to sell to consumers. You don't have to look for it or search for it. So that's what this does. If you look at our fill rate and you look at last year, so the line is the growth and the bars are the fill rate. When your fill rate is in the 40s, 50s and 60s, it is really hard to grow. You guys can imagine that. We had people -- I mean, literally, I had people calling and crying on the phone they cannot find the food for their dog. It's pretty -- it's actually really cool, but it's a big responsibility. As you can see, our fill rate is getting back into the 70s, 80s, and we're starting to touch at times -- I actually saw a 90 a couple of times. We're getting there, but it's -- we're not all the way there yet. You can see our growth just explode. The correlation here is pretty incredible. Now that's not to minimize the marketing and our fridge placements and everything we have. So our fridges keep growing -- the number of fridges that we have keep growing every year, and we've accomplished a lot. This is our sales that are projected for this year at $575 million. We're growing at a terrific clip this year also. So we're incredibly excited about the progress that we're able to make. And it is true. We are not alone anymore. There are other people that are going, "Hey, this is a pretty good idea. Let's do this." But I want to talk a little about where those guys have been. So the first competitors came in about 4 -- about 5 or 6 years ago. They were around for 4 years, and they eventually exited. We outsold them 7:1. So remember, good, better, best? They tried to come in at good. They didn't do well. Then they tried to come in, in another channel with PetSmart, we outsold them 10:1. They tried to come in, in that kind of good level, almost to the better level. And then CESAR now has come out recently. We're outselling them. Now it's still early, but we're outselling them 13:1, okay? So everyone has kind of tried this. So the first 2, they've literally gone away. CESAR is now in 800, 900 Walmarts or whatever. They're doing okay, but we're literally outselling -- they had a -- they're a whole fridge to themself in those 800 or 900 stores. And they were the best stores, by the way, okay? And they're not doing well. So now Nom Nom has come into -- Nom Nom was purchased by Mars. They've come into PetSmart. We're outselling them 12:1. Now it's still early. But you kind of start to like no, red, yellow, green early on, and I don't see a green from what I've seen across the board. There is JustFoodForDogs. They are exclusively in Petco through 2024. It was a public announcement. So they're out there. These are all the guys that are cooked and frozen. The other 2 -- on the previous page, they were fresh. These 2 guys are frozen. We don't think frozen is the best way to potentially sell food. It's fine, but this is one way to do it, right? So to stack it up, since 2014, all these competitors have come and gone, but you can kind of see -- this is the chart. We own 96.4% of the category today, and competition has gotten up to 3.6%. So it's really, really small. This is all across brick-and-mortar. This is where the majority share is. This is where we believe the biggest piece of the future of the category is. So where people buy their fresh and frozen food. So what are we doing to stay ahead? Well, we -- it was great tailwinds across the category. But we also see the category developing from $1 billion all the way up to $4 billion to $6 billion. Now this is not just our number anymore. We actually put out a $5 billion number. There were 2 other people that came out with industry reports that were claiming somewhere between $4 billion to $6 billion. So it's been really interesting to see that. We've done a tremendous amount of work behind this, and that's given us the confidence in order to build our network. Another thing that I'll touch on briefly is from a millennial and Gen Z standpoint, they are the future of this category. The chart -- to skip over most of this, if you look all the way on the right, today, we are at a 318 index with those guys and a 147 with millennials. We are doing really, really well, having those guys come into our products and our brand and our company. So we believe that's an important piece of the future that we're building. Across every single aspect that you can look at, whether it's distribution or penetration or aided awareness, we have tremendous opportunity also across every one of these, and our advertising and our marketing and our innovation are going to be core to that. We also see our addressable market expanding. We've done a lot of work around this, and that's helped to feed to understand how many consumers are interested in this proposition. That's helped to feed the market sizing studies that we've done. And as I mentioned, the marketing, our refrigerators, our availability and visibility and also our innovation are incredibly key. So we have a wide range of innovation. We feel like we've pushed really hard to make sure our innovation is really, really strong out there. Anything that's a better idea, we're going to come to market with. We're not going to be the ones that sit tight and go, it may cannibalize a little bit of our sales. We want to come with the best products that can meet consumers' needs. And every time we've done this, over the past 10 years, we have grown share, expanded our penetration and brought new consumers into our brand. Spring & Sprout, all the way on the right, is a plant-based line. We're also launching a restaging of Nature's Fresh. It will be best in industry from a sustainability standpoint. We're using regenerative proteins. We work incredibly hard across our company to come up with regenerative proteins. It will be, as I mentioned earlier, carbon-neutral across 1, 2 and 3, perfectly carbon-neutral across even our inputs. It's powered by wind. We'll use wind or renewable energy in order to produce it. Even the refrigerators that are plugged into outlets that are not ours at retail, we cover and buy wind power for those, okay? So we are doing this stuff right. There is no nonsense greenwashing. So we see a lot of opportunity in this category. If you look at where we are today, I mentioned that we're 96.4% of the measured category. If we did that into the future and the category goes to $4 billion, right, you can kind of see what the numbers are. And if it's a 90% or 80% -- let's say, we only hold on to -- so go from 96%. Let's say we only hold on to 80%. You can kind of start to see what the potential is, not in the distant future. And if we end up with 70%, we -- Heather and I think we will be fired. So we feel really good about where the future is and where we're going. So thank you, Heather.

Yes. Thanks, Scott. So with that in mind, which we don't want to have happen, I'm going to talk about what we're doing around building out capacity to make sure that we could keep up with that accelerated demand. And so we are building a long-term capacity plan now that gives us $2.9 billion in capacity. So if you think about where we are now, revenue, you go, wow, like that's really aggressive in terms of why do you need that much capacity. So I want you to reflect on what Scott shared in terms of -- I don't know, he didn't mention, but we're thinking the $4 billion to $6 billion is as early as 2026. And there's a lead time to building out these factories, and I'll touch on those lead times. One of the things that we're doing in terms of this plan is building it out in phases. So we've built out our foundation as we call it, which is really our kitchens in Pennsylvania and some of the lines that we've put in Kitchens South. We are starting up Ennis Phase 1 later in this year. And then we have Ennis Phase 2 and 3, which is coming in subsequent phases, as well as our innovation manufacturing facility. In terms of the why behind it, so I mean, Scott touched on it, but we are having accelerated growth, right? Our CAGR, we've been doubling this business every 3 years, but our CAGR continues to accelerate. So if you take the most recent Mega Channel performance, 42%, and you run that as a CAGR, we will run out of capacity actually as we get into the 2026-'27 time frame way beyond what we had planned prior. And so the $2.9 billion plan is a function of this accelerated growth rate and being there and not losing to any potential competitors or share. So how do we actually have optionality? How do we make sure we can risk-manage against this? What if it doesn't come to fruition? You're spending all this money, right? So what I wanted to talk about is very quickly, our capacity projects come in phases, and that actually gives us optionality. We -- the first phase is actually building out the box. And there's about 2 years lead time to do that. You have to prepare the soil, you have to bring in all the materials, build out the frame of the building, et cetera. After that, there's about a year's worth of time to actually finish the box, refrigeration, utilities, all of those components. Then we have to procure and install the equipment, which is about 9 to 12 months and then lastly, bringing in the labor. And you could see on the right, the costs actually about 60% come in the final 12 months of these projects. So as we've looked at our plans, we've built in optionality to allow us to either slow down projects or even defer projects as we're planning them out. Our targets as of now in 2025 are to be in 11 million households, net sales of $1.25 billion and an adjusted EBITDA margin of 25%. We have an expectation of significant scale coming from the growth that we have. Our business model is simple. We reach consumers mainly through media, and then we convert them to Freshpet, we retain and grow them, and we drive scale. We -- I'm going to touch on now what do we expect to get very briefly before we run out of time. So we built a foundation. We have a manufacturing footprint across 2 campuses that allow us to generate about $800 million in revenue. We've got 28,000 company-owned fridges. And we have actually the only refrigerated pet food network in North America for distribution. If you look at the campus in Bethlehem, actually from a productivity perspective, we generate already adjusted gross margin of 50%. So while we've guided across the totality of our business to 42%, we have a proof point in terms of the scale and benefits that could be generated by this business. What are we building? We're building a manufacturing footprint of $2.9 billion across 3 campuses. We expect to have a fridge network of about 40,000 and be in about 75% to 80% ACV distribution. And we're expanding our distribution network across multiple DCs. So what does this give us? We expect to actually have an adjusted EBITDA margin of 25% in 2025. We have a bit of recovery that's happening. We've faced inflation ahead of pricing. And we've also had some operating inefficiencies as we've scaled up in Bethlehem. But we expect significant scale to be coming from the growth that we see. So if you look at SG&A leverage, we expect about 400 basis points through mainly overhead absorption and improved retail presence. We do expect significant scale in our logistics network from order efficiency and reduce miles as we expand our distribution network and then manufacturing scale. And I'll just touch on, as we -- I'll touch on this last line in a minute. But one of the things that's really important to note is as we add increments of capacity, we are improving the technology to manufacture Freshpet food significantly. So each time we actually have innovated -- in plant 2 -- we've added higher speed lines in Bethlehem to plant 1. And as we look to Ennis, we continue to enhance the technology and we add even higher speed lines with less labor. So you're going to see significant benefit there. This just summarizes the most important thing about our business. It's a consumer-centric model. Everything we do is around pleasing the consumer, driving more consumers into the franchise. And then the output of that is really a business that is exceptionally strong. I'll just touch on -- just as a recap, the core of this is really around our fresh food ideology and continuing our mission of enhancing the bond between pet owners and their pets. We offer a brand portfolio that is extraordinary, whether it's forms, whether it's flavors, whether it's across the channels that Scott touched on meeting the needs, whether it's price points or different channel shoppers. We have our fridge network across -- which offers 1.3 million of cubic feet, over $1 billion investment in the manufacturing capability. And then our scale benefits, as I talked about, generates significant margin accretion over time. So thank you guys very much for joining the presentation. Sorry, we went briefly over, and we look forward to the breakout to answer more questions.

Thank you, Scott.