GlobeNewswire Inc | Aug 10, 2021 07:20AM EDT

August 10, 2021

Record Net Revenue of $60.3 millionIncreasing Capacity Across Farmer NetworkEgg Central Station Expansion on Track for Mid-2022 Completion

AUSTIN, Texas, Aug. 10, 2021 (GLOBE NEWSWIRE) -- Vital Farms (Nasdaq: VITL), 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 27, 2021.

-- 2Q 2021 Net Revenue increases 1.7% to $60.3 million -- 2Q 2021 Net Income of $3.9 million -- 2Q 2021 Adjusted EBITDA of $5.1 million1

We are very pleased with our second quarter results, as we posted the highest quarterly revenue in company history. We achieved positive net revenue growth, lapping the 84% growth during this period last year which was driven by COVID-19 pantry loading, said Russell Diez-Canseco, President and CEO, Vital Farms. We continue to exceed our original growth targets, both by implementing strategic marketing initiatives that drove household penetration to over 5.5 million households and by building collaborative retail relationships that grew retail distribution to over 17,250 stores. We grew our food service business with the addition of new regional concepts, and just introduced two new product innovations, Breakfast Bars and Spreadable Tub Pasture-Raised Butter with Sea Salt and Avocado Oil.

Diez-Canseco continued, The sustained growth Vital Farms has demonstrated in our first year as a public company is a testament to investments weve made in our crew members, in increasing capacity across our farmer network, which now stands at over 225 family farms, and in the further expansion of Egg Central Station, our egg washing and packing facility. Looking ahead, we believe we are well-positioned for the future and will continue to execute our plan of investing across the business to further drive growth and fulfill our mission to bring ethical food to the table.

For the Three Months Ended June 27, 2021

Net revenue was $60.3 million in the second quarter of 2021, compared to $59.3 million in the second quarter of 2020. Our revenues grew 36.7% on a two-year compound annual growth rate, which we believe better demonstrates the growth trajectory of the business as it eliminates the one-time impact of COVID-19-related pantry loading in the year-ago period. Growth in net revenue in the second quarter of 2021 was driven primarily by continued growth in egg-related sales driven by increased household penetration and new distribution gains at both new and existing retail partners.

Gross profit was $21.9 million, or 36.4% of net revenue, in the second quarter of 2021, compared to $22.7 million in the prior year period. The change in gross profit was attributable to an increase in promotional spending with the return to a more normal cadence of industry activity as we lap an unprecedented period in the second quarter of 2020, which saw little to no promotion. We also experienced higher grain input costs on shell eggs.

Income from operations in the second quarter of 2021 was $3.0 million, compared to $9.1 million in the second quarter of the prior year. The change in income from operations was primarily due to incremental costs associated with becoming a public company, higher freight costs, and incremental marketing investments.

Net income was $3.9 million in the second quarter of 2021 compared to $6.0 million in the prior year period.

Net income per diluted share was $0.09 compared to $0.16 per diluted share in the prior year quarter.

Adjusted EBITDA was $5.1 million in the second quarter of 2021, compared to $9.3 million in the second quarter of 2020, primarily due to incremental costs from becoming a public company, higher freight costs, and incremental marketing investments. 1Adjusted 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.

Balance Sheet and Cash Flow Highlights

Vital Farms cash and cash equivalents and investment securities were $106.3 million as of June 27, 2021, and we had no outstanding debt. Net cash provided by operating activities was $15.0 million in the quarter ended June 27, 2021, compared to $17.7 million during the prior year period.

Capital expenditures totaled $7.8 million for the 26-weeks ended June 27, 2021, compared to $5.4 million in the prior year period.

Bo Meissner, Chief Financial Officer commented, We are pleased with our record second quarter revenue and our two-year CAGR of 36.7%, as well as our overall financial performance in the first half of the year. We will continue to invest behind our growth strategy with the goal of driving meaningful net revenue growth as we provide honest food to more and more families across the U.S.

Update on Fiscal 2021 Outlook

Vital Farms guidance continues to assume that there are no additional significant disruptions to the supply chain, or its customers or consumers, including any issues from adverse macroeconomic factors.

-- For the full year 2021, management is reaffirming guidance for net revenue between $246 to $253 million, an increase of 15-18% compared to 2020. -- Management is also reaffirming its expectation that Adjusted EBITDA will be in the range of $7 to $9 million for the full year 2021.

Vital Farms 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 our control and may vary greatly between periods and could significantly impact future financial results.

Conference Call and Webcast DetailsVital Farms will host a conference call and webcast at 8:30 a.m. ET today to discuss the results. The live conference call can be accessed by dialing (833) 519-1233 from the U.S. or (914) 800-3806 internationally and using access code 4665467. 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 in 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 now a national consumer brand that works with over 225 small family farms and 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 prioritizesthe 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 inover17,250 stores nationwide. For moreinformation, visit www.vitalfarms.com.

Forward-Looking StatementsThis press release and the earnings call referencing this press release contain forward-looking statements, as that term is defined under the federal securities laws, including but not limited to statements regarding Vital Farms market opportunity, anticipated growth, and future financial performance, including managements outlook for fiscal year 2021. These forward-looking statements are based on Vital Farms current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause Vital Farms actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement.

The risks and uncertainties referred to above include, but are not limited to: the effects of the current COVID-19 pandemiconVital Farmssupply chain, the demand foritsproducts, and on overall economic conditions and consumer confidence and spending levels;Vital Farmsexpectations regardingitsrevenue, expenses and other operating results;Vital Farmsability to acquire new customers, tosuccessfully retain existing customersandto attract and retainitssuppliers, distributors and co-manufacturers;Vital Farmsability to sustain or increase our profitability;Vital Farmsability to procure sufficient high quality eggs, butter and other raw materials;real or perceived quality withVital Farmsproducts or other issues that adversely affectVital Farmsbrand and reputation; changes in the tastes and preferences of consumers;the financialcondition of, andVital Farmsrelationships with,itssuppliers, co-manufacturers, distributors, retailers and foodservice customers, as well as the health of the foodservice industry generally; the ability ofVital Farmssuppliers and co-manufacturers to comply with food safety, environmental or other laws or regulations;future investments initsbusiness, anticipated capital expenditures and estimates regarding capital requirements; the costs and success of marketing efforts.Vital Farmsability to effectively manageitsgrowthand to compete effectively with existing competitors and new market entrants;the potential negative impact of Vital Farmsfocus on a specific public benefit purpose and producing a positive effect for societyon itsfinancial performance;seasonality; and the growth rates of the markets in whichVital Farmscompetes.

These risks and uncertainties are more fully described inVital Farmsfilings with the Securities and Exchange Commission, including in the section entitledRisk Factors initsQuarterlyReporton Form 10-Qfor the fiscalquarterendedMarch27, 2021 and other filings and reports thatVital Farmsmay file from time to time with the SEC.Moreover,Vital Farmsoperatesin a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for management to predict all risks, nor canVital Farmsassess the impact of all factors onitsbusiness or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statementsVital Farmsmay make.In light ofthese risks, uncertainties and assumptions,Vital Farmscannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Forward-looking statements representmanagementsbeliefs and assumptions only as of the date of this press release.Vital Farmsdisclaimsany obligation to update forward-looking statementsexcept as required by law.

Contacts:

Media:Nisha DevarajanNisha.Devarajan@vitalfarms.com

Investors:Matt SilerMatt.Siler@vitalfarms.com

VITAL FARMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except share amounts) 13-Weeks Ended 26-Weeks Ended June 27, June 28, June 27, June 28, 2021 2020 2021 2020Net revenue $ 60,324 $ 59,341 $ 118,869 $ 106,920 Cost of goods 38,391 36,643 75,606 68,367 soldGross profit 21,933 22,698 43,263 38,553 Operating expenses:Selling,general and 13,544 9,970 26,726 19,648 administrativeShipping and 5,374 3,666 10,437 6,940 distributionTotaloperating 18,918 13,636 37,163 26,588 expensesIncome from 3,015 9,062 6,100 11,965 operationsOther income(expense), net:Interest (13 ) (97 ) (31 ) (255 ) expenseOther income 186 (181 ) 297 (161 ) (expense), netTotal otherincome 173 (278 ) 266 (416 ) (expense), netNet incomebefore income 3,188 8,784 6,366 11,549 taxesProvision(benefit) for (695 ) 2,848 (999 ) 3,679 income taxesNet income 3,883 5,936 7,365 7,870 Less: Net lossattributableto (24 ) (28 ) (34 ) (39 ) noncontrollinginterestsNet incomeattributableto Vital $ 3,907 $ 5,964 $ 7,399 $ 7,909 Farms, Inc.commonstockholdersNet income pershareattributable to VitalFarms, Inc.stockholders:Basic: $ 0.10 $ 0.23 $ 0.19 $ 0.30 Diluted: $ 0.09 $ 0.16 $ 0.17 $ 0.21 Weightedaverage common sharesoutstanding:Basic: 40,000,136 26,007,459 39,767,127 25,974,873 Diluted: 43,375,668 37,896,742 43,444,101 37,755,675



VITAL FARMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share amounts) June 27, December 2021 27, 2020 (Unaudited) Assets Current assets: Cash and cash equivalents $ 37,349 $ 29,544 Investment securities 68,988 68,357 Accounts receivable, net 18,137 20,934 Inventories 13,719 12,902 Income taxes receivable 1,368 1,554 Prepaid expenses and other current assets 1,913 3,965 Total current assets 141,474 137,256 Property, plant and equipment, net 36,330 30,118 Goodwill 3,858 3,858 Deposits 46 142 Total assets $ 181,708 $ 171,374 Liabilities, Redeemable Noncontrolling Interest and Stockholders? EquityCurrent liabilities: Accounts payable $ 15,902 $ 15,489 Accrued liabilities 10,453 9,845 Lease obligation, current 482 471 Contingent consideration, current 58 109 Total current liabilities 26,895 25,914 Lease obligation, net of current portion 83 327 Contingent consideration, non-current ? 18 Deferred tax liabilities, net 1,340 2,537 Other liability, non-current 192 192 Total liabilities 28,510 28,988 Commitments and contingencies (Note 15) Redeemable noncontrolling interest 175 175 Stockholders? equity: Common stock, $0.0001 par value per share,310,000,000 shares authorized as of June 27, 2021(unaudited) and December 27, 2020; 40,153,228 and 5 5 39,444,040 shares issued and outstanding as ofJune 27, 2021 (unaudited) and December 27, 2020,respectivelyTreasury stock, at cost, 5,494,918 common sharesas of June 27, 2021 (unaudited) and December 27, (16,276 ) (16,276 ) 2020Additional paid-in capital 147,808 144,311 Retained earnings 21,437 14,039 Accumulated other comprehensive loss (79 ) (31 ) Total stockholders? equity attributable to Vital 152,895 142,048 Farms, Inc. stockholdersNoncontrolling interests 128 163 Total stockholders? equity $ 153,023 $ 142,211 Total liabilities, redeemable noncontrolling $ 181,708 $ 171,374 interest, and stockholders? equity

VITAL FARMS, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Amounts in thousands) 26-Weeks Ended June 27, June 28, 2021 2020Cash flows provided by operating activities: Net income $ 7,365 $ 7,870 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 1,620 954 Bad debt recovery (67 ) (150 ) Stock-based compensation expense 1,994 744 Deferred taxes (1,198 ) 1,551 Other 180 22 Changes in operating assets and liabilities: Accounts receivable 2,864 241 Inventories (1,052 ) 2,860 Income taxes (receivable) payable 185 1,970 Prepaid expenses and other current assets 2,052 848 Deposits and other assets 96 (28 ) Accounts payable 361 2,290 Accrued liabilities and other liabilities 614 (1,444 ) Net cash provided by operating activities $ 15,014 $ 17,728 Cash flows used in investing activities: Purchases of property, plant and equipment (7,811 ) (5,388 ) Purchases of available-for-sale debt securities (27,630 ) ? Sales, maturities, and call redemptions of 27,036 ? available-for-sale debt securitiesNet cash used in investing activities $ (8,405 ) $ (5,388 ) Cash flows provided by financing activities: Proceeds from borrowings under term loan ? 5,000 Proceeds from borrowings under equipment loan ? 1,461 Proceeds from Paycheck Protection Program loan ? 2,593 Repayment of revolving line of credit ? (1,325 ) Repayment of equipment loan ? (98 ) Repayment of term loan ? (335 ) Repayment of Paycheck Protection Program loan ? (2,593 ) Payment of contingent consideration (75 ) (89 ) Payment of deferred offering costs ? (1,364 ) Principal payments under finance lease obligation (233 ) (222 ) Proceeds from exercise of stock options 1,503 170 Proceeds from exercise of warrant ? 282 Net cash provided by financing activities $ 1,195 $ 3,480 Net increase in cash and cash equivalents 7,805 15,820 Cash and cash equivalents at beginning of the 29,544 1,274 periodCash and cash equivalents at end of the period $ 37,349 $ 17,094 Supplemental disclosure of cash flow information: Cash paid for interest $ 32 $ 261 Cash paid for income taxes $ 4 $ 10 Supplemental disclosure of non-cash investing and financing activities:Purchases of property, plant and equipmentincluded in accounts payable and accrued $ 51 $ 254 liabilitiesDeferred offering costs in accounts payable and $ ? $ 974 accrued liabilities

Non-GAAP Financial MeasuresWe report our financial results in accordance with GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure, provides investors with additional useful information in evaluating our performance.

We calculate Adjusted EBITDA as net income, adjusted to exclude: (1) depreciation and amortization; (2) provision for income taxes; (3) stock-based compensation expense; (4) interest expense; (5) interest expense; (6) change in fair value of contingent consideration; (7) interest income; and (8) net litigation settlement gain.

Adjusted EBITDA is a financial measure that is not required by, or presented in accordance with GAAP. We believe that Adjusted EBITDA, when taken together with our financial results presented in accordance with GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA is helpful to our investors as it is a measure used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.

Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of the limitations of Adjusted EBITDA include that (1) it does not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures, (3) it does not consider the impact of stock-based compensation expense, (4) it does not reflect other non-operating expenses, including interest expense, (5) it does not consider the impact of any contingent consideration liability valuation adjustments and (6) it does not reflect tax payments that may represent a reduction in cash available to us. In addition, our use of Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA alongside other financial measures, including our net income and other results stated in accordance with GAAP.

The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure stated in accordance with GAAP, for the quarters presented:

VITAL FARMS, INC. ADJUSTED EBITDA RECONCILIATION (Amounts in thousands) 13-Weeks Ended 26-Weeks Ended June 27, June 28, June 27, June 28, 2021 2020 2021 2020 (in thousands) (in thousands) Net income $ 3,883 $ 5,936 $ 7,365 $ 7,870 Depreciation and 835 498 1,620 954 amortization Provision (benefit) for (695 ) 2,848 (999 ) 3,679 income tax Stock-based 1,141 296 1,994 744 compensation expense Interest expense 13 97 31 255 Change in fair value of contingent 14 (327 ) 19 (350 ) consideration(1) Interest income (89 ) (9 ) (186 ) (14 ) Net litigation ? (20 ) ? (20 ) settlement gain Adjusted EBITDA 5,102 9,319 9,844 13,118 Amount reflects the change in fair value of a contingent consideration(1 ) liability in connection with our 2014 acquisitionof certain assets of Heartland Eggs