InvestorPresentation 2016 and Q1’17 · 2017-05-24 · • OPCO E-ommerce sales in 2016 Grew 3%...
Transcript of InvestorPresentation 2016 and Q1’17 · 2017-05-24 · • OPCO E-ommerce sales in 2016 Grew 3%...
InvestorPresentation
2016 and Q1’17
OTCQX: OPCOwww.ourpets.com/investors
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Investment Thesis
2Confidential
Safe Harbor Statement
This presentation may contain various “forward-looking statements” within the meaning of Section 27A of the Securities Act of1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which represent ourexpectations or beliefs concerning future events. Forward-looking statements generally include words such as “anticipates,”“believes,” “expects,” “planned,” “scheduled,” or similar expressions and statements. Although we believe these forward-lookingstatements are based on reasonable assumptions, statements made regarding future results are subject to a number ofassumptions, uncertainties, and risks that could cause future results to be materially different from the results stated or implied inthis presentation. Uncertainties, risks, and other factors that may cause actual results or performance to differ materially from anyresults of performance expressed or implied by forward-looking statements in this presentation include: (1) our ability to manageour operating expenses and realize operating efficiencies, (2) our ability to maintain and grow our sales with existing and newcustomers, (3) our ability to retain existing members of our senior management team and to attract additional managementemployees, (4) our ability to manage fluctuations in the availability and cost of key materials and tools of production, (5) generaleconomic conditions that might impact demand for our products, (6) competition from existing or new participants in the petproducts industry, (7) our ability to design and bring to market new products on a timely and profitable basis, (8) challenges to ourpatents or trademarks on existing or new products, or (9) our ability to secure access to sufficient capital on favourable terms tomanage and grow our business. We caution that these risk factors are not exclusive. Additionally, we do not undertake to updateany forward looking statements that may be made from time to time by or on behalf of us except as required by law.
• Pet industry is large, healthy and recession resistant
• OurPet’s (OPCO) is one of the few non-retail pet pure plays
• Strong intellectual property portfolio
• Successful two-brand strategy
• Solidly positioned for growth and disciplined for profitability
• Strong management, people, systems and products
3Confidential
Why Invest in OurPet’s?
Business Model
Innovative Product Offerings Backed by Strong R&D and Patents
Positioning with Leading Retailers
✓ Products are brought to market after careful investment in behavioral and technology research
✓ Focus on products with proven efficacy
✓ Strong sell-through history with retailers such as Wal-Mart, PetSmart, and Petco
✓ Private label business helps maintain shelf space within pet specialty retailers
Specific Pet Industry Trends
✓ Consolidation of vendors within leading retailers
✓ Millennials are picking Pets over People
✓ Growth in Toys & Accessories continue
✓ 75% of Americans in their 30s have dogs, while 51% have cats
✓ #1 ranking within product category position at Amazon and Walmart
✓ Broad retail presence across pet specialty and food, drug & mass retailers, as well as within e-commerce
✓ The Waste & Odor control market represents a particularly attractive, growing segment
✓ Aversion to developing commodity products
✓ Formidable patent fencing process
4Mintel, September 2016 Confidential
Technology + Pet Knowledge = Innovation
• Founded in 1995 by Dr. Steve Tsengas and Dean Tsengas - “Big Dog Feeder®”
• Focused on high growth categories in non-food pet products
• Interactive cat and dog toys and accessories ($1B/year category)
• Feline waste and odor control solutions ($250M/year category)
• Healthy feeding/storage systems ($100M/year category)
• Products designed to:
• Satisfy the mental/physical health, safety and comfort of pets
• Satisfy the pet owners pleasure and convenience of owning a pet
• Satisfy the needs of retailers for innovative, upscale, profitable products
• Strong, diversified product portfolio across two brands (approximately 1,000 SKUs)
• Solid pipeline of new, innovative products and line extensions
• 170 patents issued/pending
Source: Packaged Facts 2014-2015
The OurPet’s Company
5Confidential
The OurPet’s Company
Market Trends
U.S. Pet Industry
• Third largest consumer market ($77B in 2015)
• Projected total U.S. retail sales of expected to grow to approximately $96B by 2020
• Forecasted compound annual growth rate over 4% through 2020
• 65% of households own a pet, totaling 82.5 million pet owners
• Dogs owned by 44% and cats by 35% of households
• Average annual spending on non-food pet products: $1,049 for dogs, $846 for cats
• Recession resistant
Pet Accessories and Treats Category
• Represents about 19% of U.S. pet industry annual sales
• Annual category sales of approximately $15.2B
• Forecasted compound annual growth rate of 3% through 2020
• Pets are living longer: 36% of dogs and 37% of cats are “seniors”
6Confidential
Source: Packaged Facts U.S. Pet Market Outlook 2015-2016/APPA National Pet Owner’s Survey, 2014-2015
Premium brand and pet specialty channel of products for
“pet parents”
• OurPet’s displays are located in Pet Speciality Retailors• PetCo• Petsmart• PetValu
Pet-specialty quality products at affordable prices for pet
enthusiasts
• PET Zone displays are located in Food, Drug & Mass Retailors• Walmart• Kroger• Target
7CONFIDENTIAL
Dual Brand Strategy
Pet Specialty41%
Food, Drug, & Mass44%
E-Commerce10%
Other5%
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Customers/Distribution Channels
CONFIDENTIAL
Products Categories
Product Overview - Full Year 2016
Total Revenue Toys & Accessories Waste Management Solutions
Feeding Solutions
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37%
62%
1%
Dog
Cat
Other
9%
91%
0%
Dog
Cat
Other 86%
10% 4%
Dog
Cat
Other
18%
79%
3%
Dog
Cat
Other
Confidential
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Toys & Accessories
Interactive
Electronic
• Catty Whack™ Electronic Motion Toy• Patented Electronic RealMouse®
• Bird in a Cage™ Electronic Motion Toy• Wobble base keeps cat pouncing
• Whirling Wiggler™ Spinner Toy• Dual butterfly’s provide lifelike flying
action
• Many types of cat and dog toys for different types of play
• Patented dog toys• IQ Treat Ball®
• Flappy® Toys
• Atomic Treat Ball®
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Toys & Accessories
North American Catnip
Cat Scratcher – Multi Surface
• Cats love to scratch a variety of surfaces and angles
• Innovative leader with patented catnip technologies
• Loose Catnip Flakes• 100% Filled Toys, Refillable Toys• Spray & Liquid• Catnip Gel• Compressed Catnip• Edibles (Tuna Flakes)
Feeding Solutions
Big Dog Feeder®(OurPet’s First Product)
High Rise Diner
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Barking Bistro®3- position feeder
All these feeders are Made in USA
Category Creator & Innovator: Complete Program of Feeders and Storage Systems
CONFIDENTIAL
Wonderbowl® Selective Feeder
Chalkboard Bowls
No-Tip BowlsOval Cat Dish
Store-N-Feed® Single
Slow Feed Bowls
Festiva Bowls
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Feeding Solutions: New Product Pipeline
is a method of electrically depositing metals such as Chrome on special plastic.
• MetalShield™ finish has a luxurious look
• Durable, chip resistant coating
• Dishwasher safe
• MetalShield™ technology discourages the growth of surface bacteria
• MetalShield™ does not release toxic colorants or plasticizers when exposed to food
• Patent-Pending technique makes it easy to make elaborate, sophisticated designs on products
CONFIDENTIAL
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Waste Management Solutions
Litter Disposal Systems
Switchgrass Natural Cat Litter™ with BioChar
• Holds waste odors with activated carbon traps • High water absorption• Sturdy clumping action• Biodegradable – not apt to cause problems, similar to clay
litters, if inhaled• 100% natural• Minimal dust & light weight
• Innovative and convenient systems featuring: No Touch, Odor Control and No-Stick Technologies
• Partnership with Israel-based PauleeCleantec
Smart Scoop® Automatic Litter Box
odorLESS™ Disposable Litter Boxes
Proudly Made in U.S.A.
Kitty Potty™ Litter Box
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The smarter way to love your pet with one complete system!
• The Intelligent Pet Care™ products are changing the face of traditional waste management systems, pet feeders, and pet water systems.
• Allows pet parents to monitor their pets’ essential functions as they would their own via the dedicated OurPets® IntelligentPetLink™ app.
New Products: Intelligent Pet Care™
SmartScoop® – Intelligent Litter Box SmartLink™ Feeder – Intelligent Pet Bowl SmartLink™ Feeder –Intelligent Water Fountain
SmartLink™ Feeder TagSmartLink™ Gateway – WiFi Pet Care Connector
Health Monitoring System +
CONFIDENTIAL
E-Commerce
• E-Commerce sales will comprise 20% of all sales within the next 5 years
• Internet Sales account for almost 10% of all OPCO sales
• OPCO has made E-Commerce a primary strategic initiative
• OPCO has allocated resources to continue growing E-Commerce business
• OPCO E-Commerce sales in 2016 Grew 3% over 2015 but 61% in Q1’17
• Amazon.com is going worldwide
• Walmart – Jet.com
• Petsmart – Chewey.com
• Petco – Drs. Foster & Smith
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85%
15%
Private Label vs. Branded Sales
Branded
Private Label
CONFIDENTIAL
75% of Sales are Covered by Patents
43%
10%
41%
5%
Sales by Channel
Food, Drug, &Mass
E-Commerce
Pet Specialty
Other
91%
9%
Domestic vs. International Sales
US
International
6%2%
53%
34%
0%
1%
4%
Sales by Product Category
Edibles/Consumables
Housing
Toys/Accessories
Bowls/Feeders
Health/Wellness
Universal/Other
Waste & Odor Control
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$18
$20
$22
$24
$26
$28
2012 2013 2014 2015 2016
Mill
ion
s
Net Sales
CONFIDENTIAL
$4
$5
$6
$7
$8
$9
2012 2013 2014 2015 2016
Mill
ion
s
Gross Profit
$0
$0
$1
$1
$2
2012 2013 2014 2015 2016
Mill
ion
s
Net Income
0%
2%
4%
6%
8%
10%
12%
14%
2012 2013 2014 2015 2016
EBITDA as % of Net Sales
Financials
Demonstrated commitment to growing both top and bottom lines
Dollars and shares outstanding in millions except per share amounts
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2012 2013 2014 2015 2016
Net Sales 20.2 21.5 22.8 23.8 27.1
Gross Profit Margin 26.0% 31.0% 29.9% 31.7% 32.3%
Income from Operations 0.4 1.7 1.2 2.2 2.7
Income Tax expense (benefit) -0.1 0.7 0.4 0.8 0.5
Net Income 0.2 1.1 0.8 1.3 2.1
Net Income per share $0.01 $0.06 $0.04 $0.07 $0.11
Weighted average number of shares and common share equivalents outstanding
16.2 18.3 18.2 19.3 20.1
CONFIDENTIAL
Financial Trends
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Fourth Quarter 2016 Financial Results
2016 Financial Results
$'s in '000's 2016 2015 % Change 2016 2015 % Change
Net sales $8,197 $6,648 23.30% $27,070 $23,819 13.65%
Gross profit margin 35.44% 31.96% 10.89% 32.33% 31.70% 1.99%
Income from operations $1,247 $732 70.36% $2,683 $1,428 87.89%
Income tax expense $37 $254 -85.43% $531 $497 6.84%
Net income $1,228 $451 172.28% $2,145 $886 142.10%
Net income per common share $0.06 $0.02 200.00% $0.11 $0.04 150.00%
CONFIDENTIAL
(1) Percentage points
(2) After dividend requirements for preferred stock
Financials
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$'s in '000's 2017 2016 % Change
Net sales $6,537 $6,176 5.84%
Gross profit margin 32.50% 29.66% 9.58%
Income from operations $481 $415 15.80%
Income tax expense $66 $143 -54.00%
Net income $,383 $267 43.81%
Net income per common share
$0.02 $0.01 100.00%
CONFIDENTIAL
(1) Percentage points
(2) After dividend requirements for preferred stock
Financials
Q1’2017 vs. Q1’2016
Strong Management Team and People
22CONFIDENTIAL
Director of Marketing
Rachelle Rabasi
• Pet industry is large, healthy and recession resistant
• OurPet’s is one of the few non-retail pet pure plays
• Strong intellectual property portfolio
• Successful two-brand strategy
• Solidly positioned for growth and disciplined for profitability
• Strong management, people, systems and products
23Confidential
Why Invest in OurPet’s?
• Trading and Stock Characteristics
• Organization Chart
• Capitalization Structure
• EBITDA Details
• Switchgrass Natural Cat Litter™ with BioChar
• OurPet’s History
24CONFIDENTIAL
Appendix
Trading and Stock Characteristics
25CONFIDENTIAL
• Ticker: OPCO
• Exchange: OTCQX
• 17,808,569 shares outstanding (21,000,000 fully diluted)
• 7,000,000 Float
• 700 shareholders
• Stock price-$1.61, High $1.65 , Low $.63
• EPS 2016 - $.11
• P/E ratio range – 12.5 to 14.5
• Avg volume/day – 25,000
www.ourpets.com/investors
26CONFIDENTIAL
Organization Chart
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Authorized OutstandingCommon Stock
Equivalents
Common Stock 50,000,000 17,808,569 17,808,569
Preferred Stock
No Series 4,825,000 63,500 635,000
Series 2009 175,000 123,616 1,236,160
Options 1,750,000 497,167 497,167
Warrants N/A 827,682 827,682
Total 19,320,534 21,004,578
CONFIDENTIAL
Capitalization Structure
The above table reconciles the Company’s disclosure of Net Income per GAAP with the non GAAP financial measure EBITDA (Earnings before Interest,Taxes, Depreciation and Amortization.) As the investment community has often requested the EBITDA calculation to help them evaluate performance,Management has chosen to provide this disclosure. Although EBITDA is widely used in the investment community as a benchmark to reflect operatingperformance, financing capability and liquidity, it is not regarded as a measure of operating performance and liquidity under generally acceptedaccounting principles (“GAAP”). It also does not represent cash flows from operating activities. In addition, the Company’s EBITDA may not be comparableto similar indicators provided by other companies. The Presentation of this additional information is not meant to be considered in isolation or as asubstitute for net income (loss), or any component thereof, in accordance with GAAP.
28CONFIDENTIAL
EBITDA Calculation
What is Switchgrass?A hardy, natural grass that is exclusive to and grows in North America and does not require fertilization, use of chemical sprays (pesticides, herbicides & fungicides) or use of toxins. It is a biodegradable, flushable material. Primarily used for flood control, landscaping & thermal fuel (pelletized form)
What is Biochar?A highly absorbent, non-marking, specially produced activated carbon. Due to it’s absorptive properties, it’s used for water absorption, retention and odor control
Why Switchgrass Natural Cat Litter™ with BioChar?
• Holds waste odors with activated carbon traps • High water absorption• Sturdy clumping action• Biodegradable – not apt to cause problems,
similar to clay litters, if inhaled• 100% Natural• Minimal dust & Light weight• Made in the USA
Switchgrass Natural Cat Litter™ with BioChar
It’s what customers want!
CONFIDENTIAL
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OurPet’s History
Confidential