Vital Farms, a Certified B Corporation that offers a range of ethically produced pasture-raised foods nationwide, today reported financial results for its second quarter ended June 28, 2020.
Russell Diez-Canseco, President and Chief Executive Officer of Vital Farms, commented, “We are pleased to report strong second quarter results following our successful IPO, driven in part by increased at-home consumption due to COVID-19. Our ability to keep grocery shelves stocked and consumers fed during this extraordinary time is due to the commitment of the many frontline workers across our supply chain, including our crewmembers, farmers, vendors and retail partners. We thank all of these essential workers for what they do each day to bring food to households across the country.”
Mr. Diez-Canseco continued, “Going forward, we will continue to execute our growth strategy while remaining true to our culture and values, both of which are rooted in a commitment to Conscious Capitalism and our belief that a company can only be sustainable for the long haul if it’s sustainable for all of its stakeholders – customers and consumers, employees, suppliers, communities and the environment, and stockholders.”
Successful Initial Public Offering
Subsequent to the quarter end, on August 4, 2020, the Company completed its initial public offering (“IPO”), in which it issued and sold 5,040,323 shares of common stock and certain of its stockholders offered and sold 5,659,250 shares of its common stock at a public offering price of $22.00 per share for net proceeds to the Company of approximately $99.5 million, after deducting underwriting discounts, commissions and estimated offering expenses. The Company did not receive any proceeds from the sale of shares by the selling stockholders. The Company continues to expect to use the net proceeds from the IPO for general corporate purposes, including working capital, operating expenses and capital expenditures, including to further fund the completion of an expansion of its shell egg processing facility, Egg Central Station. On September 4, 2020, subsequent to the IPO, there were 39,432,161 shares of common stock outstanding.
For the Three Months Ended June 28, 2020
Net revenue increased 84% to $59.3 million in the second quarter of 2020 compared to $32.3 million in the second quarter of 2019. Growth in net revenue in the second quarter of 2020 was driven primarily by volume increases to our distributors, including as a result of the stay-at-home trends associated with COVID-19, whereby customers increased their purchases of eggs and butter, and a higher turnover rate of sales to our retail customers. The increase was partially offset by sales incentives offered to customers in connection with egg and butter sales.
Gross profit was $22.7 million, or 38.3% of net revenue, in the second quarter of 2020, compared to $11.0 million, or 34.1% of net revenue, in the prior year period. The increases were primarily due to higher net sales, with a portion of the increase in gross margin also attributable to lower costs associated with warehousing and transportation of inventory.
Income from operations in the second quarter of 2020 was $9.1 million compared to $3.9 million in the second quarter of the prior year.
Net income was $5.9 million in the second quarter of 2020 compared to $2.8 million in the prior year period.
Net income per diluted share increased 100.0% to $0.16 compared to $0.08 per diluted share in the prior year quarter.
Adjusted EBITDA, was $9.3 million in the second quarter of 2020 compared to $4.4 million in the second quarter of 2019, primarily driven by expanded gross margin as well as leverage over fixed operating costs. Adjusted EBITDA is a non-GAAP financial measure defined under “Non-GAAP Financial Measures,” and is reconciled to net income, its closest comparable GAAP measure, at the end of this release.
Jason Dale, Chief Financial Officer and Chief Operating Officer commented, “We are pleased with our net revenue growth, gross margin expansion and the improvement we have achieved in Adjusted EBITDA, which gives us confidence in our ability to continue delivering growth and profitability as we scale small family farm food to a national audience.”
Balance Sheet and Cash Flow Highlights
The Company’s cash and cash equivalents were $17.1 million as of June 28, 2020 and total outstanding debt was $9.8 million. Cash and cash equivalents as of June 28, 2020 does not include the net proceeds from the Company’s IPO, nor does it reflect the Company’s payment in full of $1.9 million in outstanding borrowings under the Company’s equipment loan with PNC Bank, which were both completed after the end of the quarter. Net cash provided by operating activities was $17.7 million in the quarter ended June 28, 2020, compared to $2.0 million during the prior year period.
Capital expenditures totaled $5.4 million for the 26-weeks ended June 28, 2020 compared to $1.5 million in the prior year period.
Update on COVID-19 and Fiscal 2020 Outlook
The Company’s guidance continues to assume that there are no additional, significant disruptions to the supply chain, its customers or consumers, including any issues from adverse macroeconomic factors. In addition, the Company’s guidance reflects the expectation that in the back half of the year, the Company will continue to see elevated demand due to the stay-at-home trends associated with COVID-19, and will continue to allocate demand against the available shell egg supply. Given the uncertainty regarding the ultimate duration, magnitude and effects of the COVID-19 pandemic, we do not have certainty that these trends will continue.
The Company cannot provide a reconciliation between its forecasted Adjusted EBITDA and net revenue metrics without unreasonable effort due to the unavailability of reliable estimates for certain items. These items are not within the Company’s control and may vary greatly between periods and could significantly impact future financial results.
Conference Call and Webcast Details
The Company will host a conference call and webcast at 4:30 p.m. ET today to discuss the results. The live conference call can be accessed by dialing (833) 519-1345 from the U.S. or (914) 800-3907 internationally and using access code 9678986. Alternatively, participants may access the live webcast on the Vital Farms Investor Relations website at https://investors.vitalfarms.com under “Events.” The webcast will be archived for 30 days.
About Vital Farms
Vital Farms, a Certified B Corporation, offers a range of ethically produced pasture-raised foods nationwide. Started on a single farm in Austin, Texas, in 2007, Vital Farms is the leading U.S. brand of pasture-raised eggs and butter by retail dollar sales. Vital Farms’ ethics are exemplified by its focus on the humane treatment of farm animals and sustainable farming practices. In addition, as a Delaware Public Benefit Corporation, Vital Farms also prioritizes the long-term benefits of each of its stakeholders, including farmers and suppliers, customers and consumers, communities and the environment, and crew members and stockholders. Vital Farms’ pasture-raised products, including shell eggs, butter, hard-boiled eggs, ghee, Egg Bites and liquid whole eggs, are sold in approximately 14,000 stores nationwide.
Contacts:
Media:
Nisha Devarajan
Nisha.Devarajan@vitalfarms.com
Investors:
Ashley DeSimone
Ashley.DeSimone@icrinc.com