GlobeNewswire Inc | Nov 9, 2021 07:20AM EST

November 09, 2021

Record Net Revenue of $64.6 millionIncreasing 2021 Net Revenue Guidance

AUSTIN, Texas, Nov. 09, 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 third quarter ended September 26, 2021.

Financial highlights for the third quarter of 2021 include:

-- Net Revenue increases 21.1% to $64.6 million -- Net Loss of $1.3 million -- Adjusted EBITDA of $0.2 million1

We delivered record net revenue for the second consecutive quarter, increased our network of family farms to over 250, expanded retail distribution to over 18,000 stores, and over 5.5 million households continue to trust our pasture-raised eggs, said Russell Diez-Canseco, President and CEO, Vital Farms.

We are pleased to raise our fiscal year revenue outlook which reflects our confidence in sustaining the strong momentum weve seen across the business.

Diez-Canseco continued, We believe our financial performance and continued growth is a testament to how we operate the business in the interest of our stakeholdersfarmers, suppliers, crew members, customers, consumers, communities, environment, and stockholdersa model that not only promises resilience to these core groups but also producesrobust returns over time.

For the Three Months Ended September 26, 2021

Net revenue increased 21.1% to $64.6 million in the third quarter of 2021, compared to $53.4 million in the third quarter of 2020. Net revenue grew 37.7% on a two-year compound annual growth rate, which demonstrates the growth trajectory of the business as it eliminates the one-time impact of COVID-19-related pantry loading in the year-ago periods. Growth in net revenue in the third quarter of 2021 was due to continued growth in egg-related sales, driven by volume increases at our customers as well as distribution gains at both new and existing retail partners and an increase in butter-related sales.

Gross profit was $19.9 million, or 30.7% of net revenue, in the third quarter of 2021, compared to $18.4 million in the prior year period. The change in gross profit was primarily driven by higher sales. The change in gross margin was primarily attributable to an increase in grain input costs, which peaked in the second quarter of 2021 and began to flow through our income statement this quarter given our contract structure with our farmers, along with higher planned promotional spend as we return to normalized levels at retailers.

Loss from operations in the third quarter of 2021 was $1.8 million, compared to income from operations of $2.4 million in the third quarter of the prior year. The change in income from operations was primarily due to incremental costs associated with additional head count to support growth and higher freight costs.

Net loss was $1.3 million in the third quarter of 2021 compared to net income of $1.7 million in the prior year period.

Net loss per diluted share was ($0.03) compared to net income of $0.04 per diluted share in the prior year quarter.

Adjusted EBITDA was $0.2 million in the third quarter of 2021, compared to $3.7 million in the third quarter of 2020, primarily due to increases in grain input costs, incremental costs due to additional head count to support growth and higher freight costs. 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 $97.6 million as of September 26, 2021, and we had no outstanding debt. Net cash provided by operating activities was $12.3 million for the 39-weeks ended September 26, 2021, compared to $15.0 million for the 39-weeks ended September 27, 2020.

Capital expenditures totaled $14.2 million for the 39-weeks ended September 26, 2021, compared to $6.7 million in the prior year period.

Bo Meissner, Chief Financial Officer commented, We are pleased with our record third quarter revenue and our two-year CAGR of 37.7%. We will continue to invest behind our strategy with the goal of driving meaningful net revenue growth as we provide honest food to even 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 now expects net revenue between $253 to $256 million, an increase of 18-19% compared to 2020. -- Management is also tightening its expectation on Adjusted EBITDA and anticipates it will be in the range of $8 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) 519-1345 from the U.S. or (914) 800-3907 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 250 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 inover18,000 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, cream 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 fiscalquarterended June 27, 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)(Unaudited)

13-Weeks Ended 39-Weeks Ended September 27, September 27, September 27, September 27, 2021 2020 2021 2020 Net revenue $ 64,627 $ 53,367 $ 183,496 $ 160,287 Cost of goods 44,788 35,017 120,394 103,384 soldGross profit 19,839 18,350 63,102 56,903 Operating expenses:Selling,general and 15,326 12,185 42,053 31,832 administrativeShipping and 6,318 3,752 16,755 10,693 distributionTotaloperating 21,644 15,937 58,808 42,525 expenses(Loss) incomefrom (1,805 ) 2,413 4,294 14,378 operationsOther(expense) income, net:Interest (11 ) (110 ) (42 ) (365 )expenseOther income 2 (21 ) 300 (182 )(expense), netTotal other(expense) (9 ) (131 ) 258 (547 )income, netNet (loss)income before (1,814 ) 2,282 4,552 13,831 income taxes(Benefit)provision for (486 ) 620 (1,485 ) 4,300 income taxesNet (loss) (1,328 ) 1,662 6,037 9,531 incomeLess: Net lossattributableto (6 ) (15 ) (41 ) (54 )noncontrollinginterestsNet (loss)incomeattributableto Vital $ (1,322 ) $ 1,677 $ 6,078 $ 9,585 Farms, Inc.commonstockholdersNet (loss)income pershareattributable to VitalFarms, Inc.stockholders:Basic: $ (0.03 ) $ 0.05 $ 0.15 $ 0.33 Diluted: $ (0.03 ) $ 0.04 $ 0.14 $ 0.29 Weightedaverage common sharesoutstanding:Basic: 40,196,410 34,044,994 39,910,063 28,664,914 Diluted: 40,196,410 39,111,018 43,380,711 33,275,902

VITAL FARMS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands, except share amounts)

September December 26, 27, 2021 2020 (Unaudited) Assets Current assets: Cash and cash equivalents $ 27,844 $ 29,544 Investment securities 69,805 68,357 Accounts receivable, net 22,302 20,934 Inventories 14,578 12,902 Income taxes receivable 1,339 1,554 Prepaid expenses and other current assets 4,784 3,965 Total current assets 140,652 137,256 Property, plant and equipment, net 42,169 30,118 Goodwill 3,858 3,858 Deposits 256 142 Total assets $ 186,935 $ 171,374 Liabilities, Redeemable Noncontrolling Interest and Stockholders? EquityCurrent liabilities: Accounts payable $ 17,368 $ 15,489 Accrued liabilities 14,465 9,845 Lease obligation, current 447 471 Contingent consideration, current 35 109 Total current liabilities 32,315 25,914 Lease obligation, net of current portion ? 327 Contingent consideration, non-current ? 18 Deferred tax liabilities, net 849 2,537 Other liability, non-current 191 192 Total liabilities 33,355 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 September 26,2021 (unaudited) and December 27, 2020; 5 5 40,302,470 and 39,444,040 shares issued andoutstanding as of September 26, 2021 (unaudited)and December 27, 2020, respectivelyTreasury stock, at cost, zero and 5,494,918common shares as of September 26, 2021 ? (16,276 )(unaudited) and December 27, 2020, respectively(Note 11)Additional paid-in capital 146,983 144,311 Retained earnings 6,395 14,039 Accumulated other comprehensive loss (100 ) (31 )Total stockholders? equity attributable to Vital 153,283 142,048 Farms, Inc. stockholdersNoncontrolling interests 122 163 Total stockholders? equity $ 153,405 $ 142,211 Total liabilities, redeemable noncontrolling $ 186,935 $ 171,374 interest, and stockholders? equity

VITAL FARMS, INC.CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(Amounts in thousands)(Unaudited)

39-Weeks Ended September September 26, 27, 2021 2020 Cash flows provided by operating activities: Net income $ 6,037 $ 9,531 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 2,526 1,568 Non-cash interest expense ? 5 Bad debt expense (recovery) 65 (63 )Inventory provisions 186 155 Change in fair value of contingent consideration 34 (342 )Stock-based compensation expense 3,192 1,481 Loss on disposal of property, plant and equipment 108 259 Deferred taxes (1,688 ) 1,382 Non-cash interest income (190 ) (14 )Changes in operating assets and liabilities: Accounts receivable (1,433 ) (1,380 )Inventories (1,862 ) 1,063 Income taxes receivable 214 1,293 Income taxes payable ? 364 Prepaid expenses and other current assets (818 ) (1,970 )Deposits and other assets (114 ) 11 Accounts payable 1,385 2,207 Accrued liabilities and other liabilities 4,626 (507 )Net cash provided by operating activities $ 12,268 $ 15,043 Cash flows used in investing activities: Purchases of property, plant and equipment (14,192 ) (6,728 )Purchases of available-for-sale debt securities (43,363 ) ? Sales, maturities, and call redemptions of 42,029 ? available-for-sale debt securitiesRepayment of notes receivable provided to related ? 846 partiesNet cash used in investing activities $ (15,526 ) $ (5,882 )Cash flows provided by financing activities: Proceeds from issuance of common stock pursuant to ? 99,671 the initial public offering, net of issuance costsProceeds 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 ? (2,015 )Repayment of term loan ? (618 )Repayment of Paycheck Protection Program loan ? (2,593 )Payment of contingent consideration (126 ) (140 )Principal payments under finance lease obligation (351 ) (335 )Proceeds from exercise of stock options 2,035 203 Proceeds from exercise of warrant ? 282 Net cash provided by financing activities $ 1,558 $ 102,184 Net (decrease) increase in cash and cash equivalents (1,700 ) 111,345 Cash and cash equivalents at beginning of the period 29,544 1,274 Cash and cash equivalents at end of the period 27,844 112,619 Supplemental disclosure of cash flow information: Cash paid for interest $ 38 $ 358 Cash paid for income taxes $ 4 $ 1,150 Supplemental disclosure of non-cash investing andfinancing activities:Purchases of property, plant and equipment included $ 494 $ 331 in accounts payable and 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.

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.

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) change in fair value of contingent consideration; (6) interest income; and (7) net litigation settlement gain.

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 (loss), the most directly comparable financial measure stated in accordance with GAAP, for the 13-week and 39-week periods presented:

VITAL FARMS, INC.ADJUSTED EBITDA RECONCILIATION(Amounts in thousands)(Unaudited)

13-Weeks Ended 39-Weeks Ended September September September September 26, 27, 26, 27, 2021 2020 2021 2020 Net (loss) income $ (1,328 ) $ 1,662 $ 6,037 $ 9,531 Depreciation and 907 614 2,527 1,568 amortization(Benefit) provision for (486 ) 620 (1,485 ) 4,300 income taxStock-based compensation 1,198 737 3,192 1,481 expenseInterest expense 11 110 42 365 Change in fair value ofcontingent consideration^ 14 8 34 (342 )(^1)Interest income (95 ) (10 ) (280 ) (24 )Net litigation settlement ? ? ? (20 )gainAdjusted EBITDA $ 221 $ 3,741 $ 10,067 $ 16,859

(1)Amount reflects the change in fair value of a contingent consideration liability in connection with our 2014 acquisition of certain assets of Heartland Eggs