Form S-1 •fable of Contents • our continued investment in our highly-effective marketing and brand-building; and • our continued innovation, including the expansion of existing product lines, the introduction of new product types and the introduction of new product lines that are tailored to meet evolving consumer preferences and the needs of different pets. The revenue per pound of new products that we introduce across our product lines is typically higher than the average revenue per pound of existing products in our portfolio due to their more specialized and higher cost formulas. These factors have powered our growth at a faster rate than the overall pet food industry. Over the past three years, our net sales have increased at a CAGR of 38% as compared to the overall pet food sales as measured in Tracked Channels which has increased at a CAGR of 3%. While we expect these trends to continue to drive our growth for the near future, we believe that our growth rate will decline in the future as our scale increases. However, our results of operations and business face the following challenges and uncertainties: • our ability to introduce new product offerings that will gain broad market acceptance; • reduced traffic trends at national pet superstores; lower overall pet food market growth during the last two years; • competitive threats from other pet foods companies; and • our ability to pass along increases in commodity costs to our customers and ultimately to consumers. Gross Profit Gross profit is our net sales less cost of goods sold. Our cost of goods sold consists primarily of costs of ingredients and packaging materials, manufacturing costs and costs associated with our warehouses and distribution network. which arc influenced by a number of factors including transportation costs and fuel charges. These components arc subject to fluctuations in certain commodities and inflation. Grow margin measures our gross profit as a percentage of