Vital Farms(VITL) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Highlights and Business Update 2.1. Key Financial Highlights (Q2 2025 vs Q2 2024) Vital Farms delivered strong Q2 2025 results with significant growth in net revenue and Adjusted EBITDA Key Financial Data for Q2 2025 (vs Q2 2024): | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenue | $184.8 million | $147.4 million | +25.4% | | Gross Margin | 38.9% | 39.1% | -0.2% | | Net Income | $16.6 million | $16.3 million | +1.8% | | Diluted Net Income Per Share | $0.36 | $0.36 | 0% | | Adjusted EBITDA | $29.9 million | $23.3 million | +28.3% | 2.2. CEO Commentary and Operational Achievements The CEO highlighted the strong business model, brand growth, and key milestones in supply chain expansion - The company's business model is robust, with consumer brand awareness increasing annually[2] - Key milestones were achieved in supply chain expansion, including adding 50 new farms this quarter, bringing the total to over 500 family farms with 9 million contracted laying hens[2] - The Seymour facility was redesigned with groundbreaking for additional capacity planned to come online in 2027; installation of a third production line at Springfield continues, expected to complete in Q4 this year; the first accelerator farm is now operational[2] - Successful implementation of strategic pricing measures, combined with strong brand loyalty, led the company to raise its full-year revenue guidance[2] - The company is committed to ethical food production and sustainable growth, and is on track to achieve its $1 billion revenue target by 2027[2] Detailed Second Quarter 2025 Financial Performance 3.1. Income Statement Analysis Net revenue growth was driven by price/mix and volume, while investments in scale slightly impacted gross margin - Q2 2025 net revenue increased 25.4% to $184.8 million, driven by $15.7 million in price/mix benefits and $21.7 million in volume-related growth[3] - Gross profit grew to $71.8 million, but gross margin slightly decreased from 39.1% to 38.9% due to investments in scaling the business (increased labor and overhead), partially offset by favorable price/mix benefits[4] - Income from operations increased to $23.8 million, driven by higher revenue and gross profit, partially offset by increased marketing, shipping, distribution, and employee-related costs[6] - Net income increased to $16.6 million, with diluted net income per share flat at $0.36, driven by revenue and operating income growth but partially offset by higher taxes due to fewer tax benefits from non-qualified stock option exercises and restricted stock unit vestings[7] - Adjusted EBITDA increased to $29.9 million, representing 16.2% of net revenue, primarily due to higher sales and gross margin, partially offset by increased employee investments[8] 3.2. Balance Sheet and Cash Flow Overview The company maintained a strong cash position with no debt, though operating cash flow decreased while capital expenditures rose - As of June 29, 2025, cash, cash equivalents, and marketable securities totaled $155 million, and the company had no outstanding debt[10] Cash Flow Overview (26 Weeks Ended June 29, 2025 vs 26 Weeks Ended June 30, 2024): | Metric | 26 Weeks 2025 | 26 Weeks 2024 | Change | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $4.5 million | $40.1 million | -88.8% | | Capital Expenditures | $10.0 million | $6.9 million | +44.9% | Fiscal Year 2025 Outlook and Strategic Initiatives 4.1. Updated Financial Guidance The company raised its FY2025 guidance for net revenue and Adjusted EBITDA, reflecting strong business performance Updated FY2025 Guidance (vs FY2024): | Metric | New Guidance | Growth Rate (vs FY2024) | Old Guidance | | :--- | :--- | :--- | :--- | | Net Revenue | At least $770 million | At least 27% | At least $740 million | | Adjusted EBITDA | At least $110 million | At least 26% | At least $100 million | - The raised guidance is attributed to strong performance in the core business, successful implementation of strategic pricing, robust consumer demand, and improved supply from an expanded family farm network[12] - Profit pressure from tariff impacts and planned promotional activities is expected in the second half of the year, but these factors are fully incorporated into the guidance[12] - The company is confident in achieving its $1 billion net revenue target by 2027[12] 4.2. Capital Expenditure and Growth Strategy The company significantly increased its FY2025 capital expenditure guidance to accelerate capacity expansion projects FY2025 Capital Expenditure Guidance: | Metric | New Guidance | Old Guidance | | :--- | :--- | :--- | | Capital Expenditures | $90 million to $110 million | $50 million to $60 million | - The increase in capital expenditure reflects a strategic decision to build two production lines simultaneously at the Seymour, Indiana facility and add on-site cold storage to meet future demand and optimize capital efficiency[12][13] - The capital plan also includes investments in a new production line at Springfield Egg Central Station, accelerator farms, and a digital transformation project expected to go live in early fall 2025[13] Company Profile and Important Disclosures 5.1. About Vital Farms Vital Farms is a certified B Corporation and public benefit corporation focused on ethically produced food - Vital Farms (Nasdaq: VITL) is a certified B Corporation that offers a range of ethically produced foods nationwide[16] - The company partners with over 500 family farms and is the leading U.S. brand of pasture-raised eggs by retail dollar sales[16] - Its ethical philosophy is demonstrated through the humane treatment of farm animals and sustainable farming practices[16] - As a Delaware public benefit corporation, Vital Farms prioritizes the long-term interests of all its stakeholders, including farmers, suppliers, customers, consumers, communities, the environment, employees, and stockholders[16] - Products include shell eggs, butter, hard-boiled eggs, and liquid whole eggs, sold in over 23,500 stores and to hundreds of foodservice operators nationwide[16] 5.2. Forward-Looking Statements and Risk Factors The report contains forward-looking statements subject to significant risks and uncertainties detailed in SEC filings - This press release contains "forward-looking" statements concerning market opportunities, brand strength, anticipated growth, supply chain constraints, digital transformation projects, specifications and timing for the Seymour and Springfield facilities, and future revenue and financial performance[17] - These statements are based on Vital Farms' current assumptions, expectations, and beliefs and are subject to significant risks, uncertainties, assumptions, and changes in circumstances that may cause actual results, performance, or achievements to differ materially from those expressed in any forward-looking statement[17] - Risks and uncertainties include, but are not limited to, the ability to attract and retain customers and suppliers, profitability, food safety issues, changes in consumer preferences, agricultural disease outbreaks, international trade policies, economic conditions, capital expenditure requirements, and the competitive environment[18][19] - These risks and uncertainties are described in more detail in its filings with the SEC, including the Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2025[20] 5.3. Non-GAAP Financial Measures Explanation The company uses non-GAAP measures like Adjusted EBITDA to supplement GAAP results for performance evaluation - Management believes that Adjusted EBITDA and Adjusted EBITDA margin, as non-GAAP financial measures, provide investors with useful supplemental information to evaluate the company's performance[29] - Adjusted EBITDA is calculated as net income, adjusted to exclude depreciation and amortization, stock-based compensation expense, income tax (benefit) or provision, interest expense, and interest income[30] - Limitations of these non-GAAP measures include not reflecting future capital commitments, capital expenditures, stock-based compensation expense, other non-operating expenses like interest expense, and tax payments[31] - These measures may not be comparable to similarly titled measures of other companies due to potential differences in calculation and should be evaluated in conjunction with GAAP financial measures[31] Condensed Consolidated Financial Statements 6.1. Condensed Consolidated Statements of Income This section presents the unaudited condensed consolidated statements of income for the specified periods | | | | 13-Weeks Ended | | | | 26-Weeks Ended | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | June 29, | | | June 30, | | June 29, | | June 30, | | | 2025 | | | 2024 | | 2025 | | 2024 | | Net revenue | $ | 184,767 | $ | 147,388 | $ | 346,956 | $ | 295,316 | | Cost of goods sold | | 112,985 | | 89,710 | | 212,661 | | 178,742 | | Gross profit | | 71,782 | | 57,678 | | 134,295 | | 116,574 | | Operating expenses: | | | | | | | | | | Selling, general and administrative | | 38,987 | | 33,336 | | 70,897 | | 60,467 | | Shipping and distribution | | 9,000 | | 7,203 | | 17,835 | | 14,799 | | Total operating expenses | | 47,987 | | 40,539 | | 88,732 | | 75,266 | | Income from operations | | 23,795 | | 17,139 | | 45,563 | | 41,308 | | Other income (expense), net: | | | | | | | | | | Interest expense | | (218) | | (257) | | (453) | | (512) | | Interest income | | 1,332 | | 1,316 | | 2,544 | | 2,404 | | Other expense, net | | (378) | | (87) | | (781) | | (364) | | Total other income (expense), net | | 736 | | 972 | | 1,310 | | 1,528 | | Net income before income taxes | | 24,531 | | 18,111 | | 46,873 | | 42,836 | | Income tax provision | | 7,893 | | 1,772 | | 13,334 | | 7,474 | | Net income | $ | 16,638 | $ | 16,339 | $ | 33,539 | $ | 35,362 | | Net income per share: | | | | | | | | | | Basic: | $ | 0.37 | $ | 0.38 | $ | 0.76 | $ | 0.84 | | Diluted: | $ | 0.36 | $ | 0.36 | $ | 0.73 | $ | 0.79 | | Weighted average common shares outstanding: | | | | | | | | | | Basic: | | 44,591,484 | | 42,500,355 | | 44,421,116 | | 42,148,992 | | Diluted: | | 45,804,158 | | 45,248,792 | | 45,815,874 | | 44,600,401 | 6.2. Condensed Consolidated Balance Sheets This section presents the unaudited condensed consolidated balance sheets as of the specified dates | | | June 29, | | December 29, | | --- | --- | --- | --- | --- | | | | 2025 | | 2024 | | | | (Unaudited) | | | | Assets | | | | | | Current assets: | | | | | | Cash and cash equivalents | $ | 108,224 | $ | 150,601 | | Investment securities, available-for-sale | | 46,773 | | 9,692 | | Accounts receivable, net of allowance for credit losses of $857 and $691 as of June 29, | | | | | | 2025 and December 29, 2024, respectively | | 68,405 | | 54,342 | | Inventories | | 42,710 | | 23,666 | | Prepaid expenses and other current assets, net of allowance for credit losses of $522 and | | | | | | $240 as of June 29, 2025 and December 29, 2024, respectively | | 6,428 | | 7,740 | | Assets held for sale | | 2,667 | | — | | Total current assets | | 275,207 | | 246,041 | | Property, plant and equipment, net | | 111,155 | | 84,521 | | Operating lease right-of-use assets | | 31,196 | | 19,617 | | Goodwill and other assets | | 13,194 | | 9,153 | | Total assets | $ | 430,752 | $ | 359,332 | | Liabilities and Stockholders' Equity | | | | | | Current liabilities: | | | | | | Accounts payable | $ | 66,352 | $ | 38,582 | | Accrued liabilities | | 34,037 | | 31,328 | | Operating lease liabilities, current | | 5,368 | | 3,849 | | Finance lease liabilities, current | | 4,401 | | 3,932 | | Income taxes payable | | 690 | | 838 | | Total current liabilities | | 110,848 | | 78,529 | | Operating lease liabilities, non-current | | 1,361 | | 2,918 | | Finance lease liabilities, non-current | | 6,458 | | 8,011 | | Other liabilities | | 2,307 | | 572 | | Total liabilities | $ | 120,974 | $ | 90,030 | | Commitments and contingencies | | | | | | Stockholders' equity: | | | | | | Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized as of June | | | | | | 29, 2025 and December 29, 2024; no shares issued and outstanding as of June 29, 2025 | | | | | | and December 29, 2024 | | — | | — | | Common stock, $0.0001 par value per share, 310,000,000 shares authorized as of June | | | | | | 29, 2025 and December 29, 2024; 44,661,608 and 44,042,355 shares issued and | | | | | | outstanding as of June 29, 2025 and December 29, 2024, respectively | | 4 | | 4 | | Additional paid-in capital | | 193,119 | | 186,182 | | Retained earnings | | 116,652 | | 83,113 | | Accumulated other comprehensive income | | 3 | | 3 | | Total stockholders' equity | $ | 309,778 | $ | 269,302 | | Total liabilities and stockholders' equity | $ | 430,752 | $ | 359,332 | 6.3. Condensed Consolidated Statements of Cash Flows This section presents the unaudited condensed consolidated statements of cash flows for the specified periods | | | | 26-Weeks Ended | | | --- | --- | --- | --- | --- | | | | June 29, | | June 30, | | | | 2025 | | 2024 | | Cash flows from operating activities: | | | | | | Net income | $ | 33,539 | $ | 35,362 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Depreciation and amortization | | 6,727 | | 6,499 | | Reduction in the carrying amount of right-of-use assets | | 3,691 | | 1,658 | | Amortization and accretion of available-for-sale debt securities | | (296) | | 76 | | Amortization of debt issuance costs | | 43 | | 19 | | Stock-based compensation expense | | 5,887 | | 4,898 | | Deferred taxes | | (24) | | — | | Uncertain tax positions | | 1,735 | | — | | Net realized losses on derivative instruments | | 822 | | 346 | | Other | | 1,293 | | (132) | | Net change in operating assets and liabilities | | (48,904) | | (8,644) | | Net cash provided by operating activities | $ | 4,513 | $ | 40,082 | | Cash flows from investing activities: | | | | | | Purchases of property, plant and equipment | | (9,994) | | (6,914) | | Purchases and settlements of derivative instruments | | 264 | | (669) | | Purchases of available-for-sale securities | | (45,079) | | — | | Maturities and call redemptions of available-for-sale debt securities | | 7,890 | | 13,335 | | Proceeds from the sale of available-for-sale debt securities | | 404 | | — | | Proceeds from the sale of property, plant and equipment | | 608 | | 1 | | Net cash (used in) provided by investing activities | $ | (45,907) | $ | 5,753 | | Cash flows from financing activities: | | | | | | Proceeds from exercise of stock options | | 3,649 | | 6,448 | | Proceeds from issuance of common stock under employee stock purchase plan | | 379 | | 178 | | Payment of tax withholding obligation on vested restricted stock unit shares | | (2,978) | | (1,351) | | Principal payments under finance lease obligations | | (2,033) | | (1,672) | | Payment of financing costs | | — | | (414) | | Net cash (used in) provided by financing activities | $ | (983) | $ | 3,189 | | Net (decrease) increase in cash and cash equivalents | | (42,377) | | 49,024 | | Cash and cash equivalents at beginning of the period | | 150,601 | | 84,149 | | Cash and cash equivalents at end of the period | $ | 108,224 | $ | 133,173 | | Supplemental disclosure of cash flow information: | | | | | | Cash paid for interest | $ | 410 | $ | 512 | | Cash paid for income taxes | | 11,772 | | 11,344 | | Supplemental disclosure of non-cash investing and financing activities: | | | | | | Purchases of property, plant and equipment included in accounts payable and accrued | | | | | | liabilities | $ | 25,590 | $ | 150 | 6.4. Adjusted EBITDA Reconciliation This section presents the unaudited reconciliation of net income to Adjusted EBITDA for the specified periods | | 13-Weeks Ended | | | | | 26-Weeks Ended | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | June 29, | | June 30, | | June 29, | | June 30, | | | | 2025 | | 2024 | | 2025 | | 2024 | | | | (in thousands) | | | | (in thousands) | | | | | Net income | $ | 16,638 | $ | 16,339 | $ 33,539 | $ | | 35,362 | | 1 Depreciation and amortization | | 3,468 | | 3,288 | 6,727 | | | 6,499 | | Stock-based compensation expense | | 3,034 | | 2,916 | 5,887 | | | 4,898 | | Income tax provision | | 7,893 | | 1,772 | 13,334 | | | 7,474 | | Interest expense | | 218 | | 257 | 453 | | | 512 | | Interest income | | (1,332) | | (1,316) | (2,544) | | | (2,404) | | Adjusted EBITDA | $ | 29,919 | $ | 23,256 | $ 57,396 | $ | | 52,341 | | Net revenue | $ | 184,767 | $ | 147,388 | $ 346,956 | $ | | 295,316 | | 2 Net income margin | 9.0% | | | 11.1% | | 9.7% | | 12.0% | | 3 Adjusted EBITDA margin | 16.2% | | | 15.8% | | 16.5% | | 17.7% |