Natural Grocers by Vitamin tage(NGVC) - 2025 Q3 - Quarterly Results

Executive Summary Third Quarter Fiscal 2025 Highlights Natural Grocers exceeded expectations in Q3 FY25, delivering strong results across key metrics including a 7.4% increase in daily average comparable sales and a 25% increase in diluted EPS, leading to an upward revision of the fiscal 2025 outlook. The company also managed a temporary disruption from a distributor's cybersecurity incident - Third quarter performance exceeded expectations with outstanding results across all key metrics, including daily average comparable sales growth of 7.4% and a 25% increase in diluted earnings per share[3] - The company raised its fiscal 2025 outlook for daily average comparable store sales growth and diluted earnings per share based on strong Q3 results[3] - A temporary cybersecurity incident at primary distributor United Natural Foods, Inc. (UNFI) adversely impacted Q3 FY25 daily average comparable store sales by 1.0 to 1.5 percentage points and diluted EPS by $0.04 to $0.05, but operations have substantially normalized[3] Key Financial Highlights (Q3 FY25 vs Q3 FY24) | Metric | Q3 FY25 | Change YoY | | :-------------------------------- | :---------- | :--------- | | Net sales | $328.7 million | +6.3% | | Daily average comparable store sales growth | 7.4% | N/A | | Net income | $11.6 million | +26.0% | | Diluted earnings per share | $0.50 | +25.0% | | Adjusted EBITDA | $24.4 million | +10.1% | Operating Results Third Quarter Fiscal 2025 Performance The company reported robust third-quarter results with significant increases in net sales, comparable store sales, gross profit, and net income, demonstrating strong operational leverage and effective promotional strategies despite a minor impact from a cybersecurity incident Third Quarter Fiscal 2025 Key Financials | Metric | Q3 FY25 (in millions) | Q3 FY24 (in millions) | YoY Change | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Net sales | $328.7 | $309.1 | +6.3% | | Daily average comparable store sales growth | 7.4% | N/A | N/A | | Gross profit | $98.3 | $90.3 | +8.8% | | Gross margin | 29.9% | 29.2% | +70 bps | | Operating income | $15.6 | $12.8 | +21.3% | | Operating margin | 4.7% | 4.2% | +50 bps | | Net income | $11.6 | $9.2 | +26.0% | | Diluted earnings per share | $0.50 | $0.40 | +25.0% | | Adjusted EBITDA | $24.4 | $22.2 | +10.1% | - The increase in gross margin was primarily attributed to effective promotions[5] - Store expenses as a percentage of net sales decreased to 21.8% from 21.9%, reflecting expense leverage[6] - Administrative expenses increased 14.7% to $10.9 million, driven by higher technology and compensation expenses, rising to 3.3% of net sales from 3.1%[8] First Nine Months Fiscal 2025 Performance For the first nine months of fiscal 2025, the company achieved substantial growth in net sales, comparable store sales, gross profit, and net income, reflecting sustained strong performance and improved operating efficiency First Nine Months Fiscal 2025 Key Financials | Metric | 9M FY25 (in millions) | 9M FY24 (in millions) | YoY Change | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Net sales | $994.7 | $918.9 | +8.2% | | Daily average comparable store sales growth | 8.4% | N/A | N/A | | Gross profit | $298.9 | $269.4 | +10.9% | | Gross margin | 30.0% | 29.3% | +70 bps | | Operating income | $46.5 | $34.9 | +33.2% | | Operating margin | 4.7% | 3.8% | +90 bps | | Net income | $34.6 | $24.9 | +39.0% | | Diluted earnings per share | $1.49 | $1.08 | +37.9% | | Adjusted EBITDA | $73.5 | $60.6 | +21.2% | - The increase in gross margin was driven by higher product margin primarily attributed to effective promotions, and store occupancy cost leverage[12] - Store expenses as a percentage of net sales decreased to 21.9% from 22.3%, reflecting expense leverage[13] - Administrative expenses increased 17.6% to $33.5 million, primarily driven by higher compensation and technology expenses, rising to 3.4% of net sales from 3.1%[14] Financial Position and Capital Allocation Balance Sheet and Cash Flow Summary As of June 30, 2025, the company reported a healthy cash balance and no outstanding borrowings on its revolving credit facility, supported by strong cash generation from operations which funded capital expenditures for store growth - The Company had $13.2 million in cash and cash equivalents as of June 30, 2025[17] - There were no outstanding borrowings on its $72.5 million revolving credit facility[17] - During the first nine months of fiscal 2025, the Company generated $39.7 million in cash from operations[17] - Net capital expenditures for the first nine months of fiscal 2025 were $22.9 million, primarily for new and relocated/remodeled stores[17] Dividend Announcement The company announced the declaration of a quarterly cash dividend of $0.12 per common share, payable in September 2025 - A quarterly cash dividend of $0.12 per common share was declared[18] - The dividend will be paid on September 17, 2025, to stockholders of record as of September 2, 2025[18] Growth and Outlook Store Growth and Development The company ended the third quarter with 169 stores across 21 states and has recently remodeled one store, indicating ongoing investment in its retail footprint - The Company ended the third quarter with 169 stores in 21 states[19] - Since June 30, 2025, one store has been remodeled[19] Fiscal 2025 and 2026 Outlook Natural Grocers has raised its fiscal 2025 outlook for comparable store sales growth and diluted EPS, while adjusting its store development plans and providing initial new store targets for fiscal 2026 Updated Fiscal 2025 and New Fiscal 2026 Outlook | Metric | Prior Outlook (FY25) | Updated Outlook (FY25) | Outlook (FY26) | | :--------------------------------- | :------------------- | :--------------------- | :------------- | | Number of new stores | 3 to 4 | 2 | 6 to 8 | | Number of relocations/remodels | 2 to 4 | 3 | N/A | | Daily average comparable store sales growth | 6.5% to 7.5% | 7.25% to 7.75% | N/A | | Diluted earnings per share | $1.78 to $1.86 | $1.90 to $1.95 | N/A | | Capital expenditures (in millions) | $36 to $44 | $30 to $33 | N/A | Company Overview and Disclosures About Natural Grocers by Vitamin Cottage Natural Grocers is an expanding specialty retailer focused on natural and organic products, adhering to strict quality guidelines, offering nutrition education, and operating in a flexible, smaller-store format - Natural Grocers by Vitamin Cottage, Inc. is an expanding specialty retailer of natural and organic groceries, body care products, and dietary supplements[22] - The company adheres to strict quality guidelines, selling only USDA certified organic produce, exclusively pasture-raised, non-confinement dairy products, and free-range eggs, and avoiding artificial ingredients[22] - Natural Grocers offers affordable prices in a shopper-friendly retail environment and provides extensive free science-based nutrition education programs[22] - The company, founded in 1955, currently operates 169 stores in 21 states[22] Forward-Looking Statements The release contains forward-looking statements based on management's current expectations, which are subject to various risks and uncertainties that could cause actual results to differ materially. The company disclaims any obligation to update these statements - Statements in the release are 'forward-looking statements' based on management's current expectations and are subject to uncertainty and changes in circumstances[24] - Actual results could differ materially due to various factors including political, economic, inflationary, competitive, market, and regulatory risks detailed in the Company's SEC filings (Form 10-K and 10-Q)[24][25] - The Company undertakes no obligation to publicly update forward-looking statements, except as required by securities laws[24] Consolidated Financial Statements (GAAP) Consolidated Statements of Income The consolidated statements of income show the company's revenues, expenses, and net income for the three and nine months ended June 30, 2025, highlighting significant year-over-year growth in profitability Consolidated Statements of Income (Selected Data) | Metric (in thousands) | Q3 FY25 | Q3 FY24 | 9M FY25 | 9M FY24 | | :-------------------- | :------ | :------ | :------ | :------ | | Net sales | $328,705 | $309,082 | $994,695 | $918,924 | | Gross profit | $98,279 | $90,331 | $298,851 | $269,448 | | Operating income | $15,587 | $12,847 | $46,488 | $34,911 | | Net income | $11,605 | $9,209 | $34,644 | $24,925 | | Diluted EPS | $0.50 | $0.40 | $1.49 | $1.08 | Consolidated Balance Sheets The consolidated balance sheets provide a snapshot of the company's assets, liabilities, and stockholders' equity as of June 30, 2025, and September 30, 2024, indicating a stable financial structure with increased equity Consolidated Balance Sheets (Selected Data) | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------- | :------------ | :----------------- | | Total assets | $658,997 | $655,476 | | Total liabilities | $456,496 | $481,222 | | Total stockholders' equity | $202,501 | $174,254 | | Cash and cash equivalents | $13,178 | $8,871 | Consolidated Statements of Cash Flows The consolidated statements of cash flows detail the cash generated from operating, investing, and financing activities for the nine months ended June 30, 2025, showing positive cash flow from operations Consolidated Statements of Cash Flows (Selected Data) | Metric (in thousands) | 9M FY25 | 9M FY24 | | :-------------------------------- | :------ | :------ | | Net cash provided by operating activities | $39,677 | $49,280 | | Net cash used in investing activities | $(22,942) | $(31,808) | | Net cash used in financing activities | $(12,428) | $(21,899) | | Net increase (decrease) in cash | $4,307 | $(4,427) | | Cash and cash equivalents, end of period | $13,178 | $13,915 | Non-GAAP Financial Measures EBITDA and Adjusted EBITDA Reconciliation The company reconciles net income to EBITDA and Adjusted EBITDA, showing significant year-over-year growth in both non-GAAP measures for the third quarter and first nine months of fiscal 2025, reflecting improved operational performance EBITDA and Adjusted EBITDA Reconciliation | Metric (in thousands) | Q3 FY25 | Q3 FY24 | 9M FY25 | 9M FY24 | | :-------------------- | :------ | :------ | :------ | :------ | | Net income | $11,605 | $9,209 | $34,644 | $24,925 | | EBITDA | $23,540 | $20,692 | $70,279 | $57,909 | | Adjusted EBITDA | $24,385 | $22,156 | $73,500 | $60,635 | - EBITDA increased 13.8% to $23.5 million for Q3 FY25 and 21.4% to $70.3 million for 9M FY25[35] - Adjusted EBITDA increased 10.1% to $24.4 million for Q3 FY25 and 21.2% to $73.5 million for 9M FY25[36] Management's Rationale and Limitations Management uses EBITDA and Adjusted EBITDA as supplemental measures to assess operating performance and compare store performance consistently, but acknowledges their limitations as analytical tools that do not represent cash expenditures or substitute for GAAP results - Management believes EBITDA and Adjusted EBITDA enhance understanding of operating performance by removing non-cash depreciation/amortization and items not directly from core operations, assisting in consistent store performance comparison[37][38] - EBITDA is a component of a measure in the company's financial covenants under its credit facility[37] - Limitations include not reflecting cash expenditures for capital, working capital, debt service, or taxes, and not accounting for asset replacement costs, thus they should not be considered in isolation or as a substitute for GAAP results[39][40][41]