Vital Farms (NasdaqGM:VITL) Q3 2025 Earnings Call November 04, 2025 08:30 AM ET Speaker0Good day, and thank you for standing by. Welcome to Vital Farms Third Quarter twenty twenty five Earnings Conference Call and Webcast. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.I would now like to hand it over to your host, Brian Shipman, Vice President of Investor Relat ...

Financial Performance - Net revenue for Q3 2025 increased by 37.2% to $198.9 million compared to $145.0 million in Q3 2024 [49] - Gross profit increased by 40.2% to $75.0 million in Q3 2025 [46, 51] - Gross margin increased to 37.7% in Q3 2025 from 36.9% in Q3 2024 [46, 51] - Adjusted EBITDA increased by 79.7% to $27.4 million in Q3 2025 [46] - Adjusted EBITDA margin was 13.8% in Q3 2025, compared to 10.5% in Q3 2024 [46] - Net income increased by 120.5% to $16.4 million in Q3 2025 [46] Future Targets and Guidance - The company is aiming to deliver $1 billion in net sales by 2027 [29] - The company updated 2025 guidance includes net revenue of at least $775 million and adjusted EBITDA of at least $115 million [53] Operational Metrics - Shell egg household penetration is growing [33, 34] - The company's products are in more than 23,500 retail stores [26]

Financial Performance - The company reported net revenue of $198.9 million for the 13-week period ended September 28, 2025, compared to $145.0 million for the same period in 2024, representing a growth of approximately 37.2%[111] - Adjusted EBITDA for the 39-week period ended September 28, 2025, was $84.8 million, up from $67.6 million in the same period in 2024, indicating a year-over-year increase of about 25.5%[111] - Net revenue for the 39-week period ended September 28, 2025, was $545.9 million, representing a $105.6 million increase or 24% compared to $440.3 million for the same period in 2024[157] - Net income for the 13-week period ended September 28, 2025, was $16.4 million, representing 8% of net revenue, compared to $7.4 million, or 5% of net revenue, in the same period in 2024[142] - The company had net income of $50.0 million for the 39-week period ended September 28, 2025, compared to $42.8 million in 2024[155] - The company reported a net income of $49,958,000 for the 39-week period ended September 28, 2025, compared to $42,808,000 for the same period in 2024, reflecting a year-over-year increase of 16.3%[186] Revenue Composition - Eggs and egg-related products generated $192.6 million in net revenue, approximately 97% of total net revenue, in the 13-week period ended September 28, 2025[131] - Whole Foods accounted for approximately 20% and 21% of retail sales for the 13-week periods ended September 28, 2025, and September 29, 2024, respectively[127] Expenses and Costs - Selling, general and administrative expenses increased by $8.3 million, or 23%, to $44.4 million for the 13-week period ended September 28, 2025, primarily due to business expansion and increased marketing costs[147][150] - Selling, general and administrative expenses rose by $18.7 million, or 19%, totaling $115.3 million, accounting for 21% of net revenue[160] - The income tax provision increased by $8.5 million, or 81%, to $18.9 million, reflecting higher net income for the 39-week period[166] - The company anticipates an increase in cost of goods sold due to the development of a second egg washing and packing facility in Indiana[137] Cash Position and Investments - The company has a cash position of $145.1 million as of September 28, 2025, along with $60.0 million available under its JPMorgan Credit Facility, ensuring sufficient liquidity for long-term growth investments[119] - The net cash used in investing activities was $(84,336,000), significantly lower than the net cash provided of $8,355,000 in the prior year, indicating increased investments in U.S. Treasury Bills and property, plant, and equipment[176][178] - The company expects to incur approximately $110.0 million to $130.0 million in capital expenditures for a new egg washing and packing facility over the next 12 months[171] Market and Operational Insights - The company has a household penetration rate of approximately 10.8% for its shell eggs, compared to 97.3% for the overall shell egg category in the U.S., indicating significant growth potential[124] - The company is expanding its retail presence, with strong relationships with major retailers such as Kroger, Target, and Walmart, and offers 23 retail SKUs through a multi-channel distribution network[104] - As of September 28, 2025, approximately 23,500 stores are selling the company's products, with expectations for the retail channel to remain the largest source of net revenue[128] - The company has experienced outbreaks of Highly Pathogenic Avian Influenza (HPAI) and Egg Drop Syndrome (EDS), which could impact supply and pricing in the egg market, although it has not faced material disruptions to date[112][113] - The company incurred incremental farm recruitment costs in 2024, expected to range from $30.0 million to $40.0 million in fiscal 2025 due to elevated construction costs associated with new farms[103] Economic and Market Risks - The company anticipates that economic uncertainties, including inflation and interest rate volatility, may affect its operations and financial position in the near future[115] - The company has not reported any material changes in its exposure to market risks, which include fluctuations in raw materials, inflation, and interest rates[194][195] Seasonal Trends - The company experienced seasonal fluctuations in demand, with sales peaking before major holidays and declining during summer months, impacting quarterly comparisons[188] Compliance and Financial Ratios - The company maintained compliance with the JPMorgan Credit Facility, which requires a net leverage ratio of no greater than 3.25 to 1.00 and a fixed charge coverage ratio of no less than 1.35 to 1.00[174] Other Financial Metrics - Interest expense decreased by $46,000, or 18%, to $213, primarily due to a reduction in interest paid on finance leases[149] - Interest income for the 39-week period ended September 28, 2025, was $3.8 million, a slight increase of $3, or 0%, compared to the previous year[164] - Other expense, net for the 39-week period ended September 28, 2025, was $(1.3) million, an increase of $0.9 million or 243% compared to $(0.4) million in 2024[165] - The decrease in net cash provided by operating activities was primarily due to a $39.1 million decrease in changes in operating assets and liabilities, partially offset by a $9.8 million increase in non-cash adjustments and a $7.2 million increase in net income[177] Marketing and Future Plans - The company anticipates increased marketing expenditures during fiscal 2025 to support long-term marketing goals[171]

Financial Performance - Third Quarter Net Revenue reached a record $198.9 million, up 37.2% compared to $145.0 million in the prior year period[2] - Adjusted EBITDA for the third quarter was $27.4 million, representing 13.8% of net revenue, compared to $15.2 million, or 10.5% of net revenue, in the same quarter last year[11] - Gross profit was $75.0 million, or 37.7% of net revenue, up from $53.5 million, or 36.9% of net revenue, in the prior year's third quarter[7] - Net income for the third quarter was $16.4 million, compared to $7.4 million in the prior year quarter, with net income per diluted share increasing to $0.36 from $0.16[10] - Net revenue for the 39 weeks ended September 28, 2025, was $545.892 million, a 24% increase from $440.318 million for the same period in 2024[25] - Gross profit for the 39 weeks ended September 28, 2025, was $209.257 million, up 23% from $170.050 million in 2024[25] - Net income for the 39 weeks ended September 28, 2025, reached $49.958 million, representing a 16.5% increase compared to $42.808 million in 2024[25] - Adjusted EBITDA for the 39 weeks ended September 28, 2025, was $84.784 million, a 25.4% increase from $67.579 million in 2024[35] - The company reported a net income margin of 9.2% for the 39 weeks ended September 28, 2025, compared to 9.7% in 2024[35] Outlook and Growth - The company raised its Fiscal Year 2025 Net Revenue Outlook to at least $775 million, a 28% increase from 2024[15] - The company remains on track to achieve its $1 billion net revenue target by 2027[2] - The company expects capital expenditures in the range of $80 million to $100 million for future growth initiatives[16] Capital Expenditures and Assets - Capital expenditures for the 39-week period ended September 28, 2025, totaled $44.0 million, compared to $10.5 million in the same period last year[14] - Cash and cash equivalents decreased to $93.796 million as of September 28, 2025, from $150.601 million at the end of December 2024[27] - Total assets increased to $481.504 million as of September 28, 2025, up from $359.332 million at the end of December 2024[27] - Total liabilities rose to $150.288 million as of September 28, 2025, compared to $90.030 million at the end of December 2024[27] - The company incurred $44.024 million in capital expenditures for property, plant, and equipment during the 39 weeks ended September 28, 2025[29] Operational Efficiency - Approximately 75 new family farms were added during the quarter, bringing the total network to 575 family farms[2] - The new ERP system went live, and a third production line was added at Egg Central Station in Springfield, enhancing operational efficiency[4] Stock-Based Compensation - Stock-based compensation expense for the 39 weeks ended September 28, 2025, was $9.126 million, an increase from $7.572 million in 2024[35] Margin Calculations - Net income margin is calculated by dividing net income by net revenue[36] - Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by net revenue[36]

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Core Insights - Vital Farms reported a significant increase in net revenue for the third quarter of 2025, rising by 37.2% to $198.9 million compared to $145.0 million in the same quarter of 2024 [1] - The company's gross margin improved to 37.7%, up from 36.9% year-over-year [1] - Net income for the third quarter reached $16.4 million, indicating a positive financial performance [1] Financial Performance - Net Revenue: Increased by 37.2% to $198.9 million from $145.0 million [1] - Gross Margin: Improved to 37.7% compared to 36.9% [1] - Net Income: Reported at $16.4 million [1]

Industry Overview - The natural foods industry is transitioning from a niche market to a mainstream powerhouse, driven by increased consumer awareness regarding personal health and environmental impact [2] - Consumers are prioritizing clean eating, ethical sourcing, and sustainability, leading to a preference for natural and organic products [2][3] - Government actions, including stricter food labeling regulations, are supporting this shift away from heavily processed foods [3] Market Growth and Trends - The global healthy foods market is projected to reach $2.26 trillion by 2035, indicating significant growth potential [5] - Companies are investing in plant-based alternatives, functional foods, and sustainable farming technologies to meet evolving consumer demands [5] - E-commerce is enhancing accessibility to natural foods, allowing consumers to easily shop for organic and gluten-free products [5] Key Companies Vital Farms, Inc. (VITL) - Vital Farms focuses on transparency and ethical farming practices, resonating with consumers who value sustainability and high-quality nutrition [7] - The company is scaling its supply chain to meet rising demand, working with over 500 family farms and managing more than 9 million hens [8] - Vital Farms aims for $1 billion in net revenues by 2027, supported by retail expansion and innovative marketing strategies [9] United Natural Foods, Inc. (UNFI) - UNFI is the leading distributor of natural, organic, and specialty foods, with a focus on creating long-term value in a $90 billion market [10] - The company’s Natural segment grew by 9% in fiscal 2025, outpacing broader market trends [11] - UNFI is enhancing its technological capabilities to support supplier success and improve product availability [12] Conagra Brands, Inc. (CAG) - Conagra is modernizing its portfolio to align with consumer demand for natural and high-quality foods, particularly in frozen and snack categories [13] - The company is introducing more natural, high-protein, and minimally processed meals, with recent product launches aimed at attracting health-conscious consumers [14] - Conagra's strategy includes blending convenience with quality ingredients to sustain growth in the natural and organic segments [15]

Core Viewpoint - Vital Farms, a Certified B Corporation, is set to report its financial results for Q3 2025 on November 4, 2025, before market open [1] Financial Reporting - The financial results will cover the period ended September 28, 2025 [1] - A conference call and webcast will be held at 8:30 a.m. ET on the same day to discuss the results [1] - North American listeners can participate by dialing +1-800-715-9871 [1]

Core Insights - Vital Farms (VITL) is positioned to potentially continue its earnings-beat streak in the upcoming report, having a history of surpassing earnings estimates with an average surprise of 37.82% over the last two quarters [1][2]. Earnings Performance - In the last reported quarter, Vital Farms achieved earnings of $0.36 per share, exceeding the Zacks Consensus Estimate of $0.27 per share, resulting in a surprise of 33.33% [2]. - For the previous quarter, the company was expected to report earnings of $0.26 per share but delivered $0.37 per share, leading to a surprise of 42.31% [2]. Earnings Estimates and Predictions - There has been a favorable change in earnings estimates for Vital Farms, with a positive Zacks Earnings ESP (Expected Surprise Prediction) indicating a strong likelihood of an earnings beat [5][8]. - The current Earnings ESP for Vital Farms is +8.84%, suggesting that analysts have recently become more optimistic about the company's earnings prospects [8]. Zacks Rank and Success Rate - Vital Farms holds a Zacks Rank of 1 (Strong Buy), which, when combined with a positive Earnings ESP, indicates a high probability of another earnings beat [8]. - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% success rate in beating consensus estimates [6].

Core Insights - Vital Farms (NASDAQ: VITL) specializes in selling premium pasture-raised eggs, targeting consumers who prioritize health, animal welfare, and environmental sustainability [1] Company Overview - Vital Farms caters to a market segment that is increasingly concerned about the ethical implications of food production, specifically avoiding mass-produced eggs from factory farms [1] Market Position - The company positions itself as a leader in the premium egg market, appealing to health-conscious consumers who are willing to pay a premium for higher quality and ethically sourced products [1]