The Vita o pany(COCO) - 2024 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2024, including balance sheets, income statements, and cash flows, with a net income of $14.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $289,042 | $285,682 | | Total Current Assets | $266,702 | $262,937 | | Cash and cash equivalents | $122,978 | $132,537 | | Inventory | $56,764 | $50,757 | | Total Liabilities | $79,352 | $83,245 | | Total Current Liabilities | $79,002 | $82,585 | | Total Stockholders' Equity | $209,690 | $202,437 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $111,698 | $109,759 | | Gross Profit | $47,177 | $33,661 | | Income from Operations | $18,959 | $6,704 | | Net Income | $14,238 | $6,705 | | Diluted EPS | $0.24 | $0.12 | Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(267) | $9,436 | | Net cash used in investing activities | $(124) | $(449) | | Net cash provided by (used in) financing activities | $(9,086) | $597 | | Net (decrease)/increase in cash and cash equivalents | $(9,557) | $9,771 | Notes to Condensed Consolidated Financial Statements These notes detail significant accounting policies, revenue disaggregation, debt, derivatives, and segment reporting, along with share repurchase activities and customer concentration Net Revenue by Product and Segment (Q1 2024 vs Q1 2023, in thousands) | Segment / Product | Q1 2024 Net Revenue | Q1 2023 Net Revenue | | :--- | :--- | :--- | | Americas | $96,091 | $96,772 | | Vita Coco Coconut Water | $69,522 | $69,138 | | Private Label | $24,273 | $25,050 | | Other | $2,296 | $2,584 | | International | $15,607 | $12,987 | | Vita Coco Coconut Water | $9,665 | $9,558 | | Private Label | $5,152 | $2,666 | | Other | $790 | $763 | | Consolidated Total | $111,698 | $109,759 | - The company had no outstanding balance on its $60 million revolving credit facility as of March 31, 2024, and was in compliance with all financial covenants[28][21] Major Customer Concentration | Customer | Net Sales (Q1 2024) | Accounts Receivable (Mar 31, 2024) | | :--- | :--- | :--- | | Customer A | 25% | 18% | | Customer B | 22% | 21% | - The company uses forward currency swaps to mitigate currency risk for purchases in BRL, MYR, and THB, and for intercompany transactions involving GBP and CAD[26][36][38] As of March 31, 2024, the notional amount of outstanding derivative contracts was approximately $105 million[26][36][38] - Under its share repurchase program, the company repurchased 391,544 shares for $9.2 million during the three months ended March 31, 2024[56][35] As of that date, $29.9 million remained available for future repurchases[56][35] Earnings Per Share Calculation (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income (in thousands) | $14,238 | $6,705 | | Weighted-average shares—basic | 56,589,565 | 56,046,904 | | Weighted-average shares—diluted | 58,746,631 | 57,351,405 | | EPS—basic | $0.25 | $0.12 | | EPS—diluted | $0.24 | $0.12 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial performance, highlighting a 1.8% net sales increase, significant gross margin expansion to 42.2%, and strong Adjusted EBITDA growth to $21.2 million, supported by robust liquidity Net Sales Change by Segment (Q1 2024 vs Q1 2023) | Segment | Q1 2024 Net Sales (in thousands) | YoY Change | Key Drivers | | :--- | :--- | :--- | :--- | | Americas | $96,091 | (0.7)% | Volume decline of 2.0% partially offset by price/mix benefits | | International | $15,607 | 20.2% | Price/mix benefits and volume growth of 7.8%, led by Europe | - Gross profit increased 40.2% to $47.2 million, with gross margin expanding by 11.5 percentage points to 42.2%[166][197] This was primarily due to significantly lower transportation costs (ocean freight and domestic logistics) and favorable net pricing for Vita Coco Coconut Water[166][197] - Selling, general, and administrative (SG&A) expenses increased by 4.7% to $28.2 million, mainly due to a $1.9 million rise in personnel-related expenses[167][187] Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income | $14,238 | $6,705 | | EBITDA | $16,654 | $8,693 | | Stock-based compensation | $2,109 | $2,162 | | Unrealized (gain)/loss on derivative instruments | $2,525 | $(1,213) | | Foreign currency (gain)/loss | $(58) | $(611) | | Adjusted EBITDA | $21,230 | $9,031 | - Cash used in operating activities was $0.3 million, a decrease of $9.7 million from the prior year, primarily due to increases in working capital which offset higher net income[253] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company identifies primary market risks as interest rate, foreign currency, inflation, and credit risk, actively managing currency exposure while noting customer concentration - The company uses derivative financial instruments to hedge foreign currency exposure, with total notional values of forward contracts at $105.0 million as of March 31, 2024[263][265] - Inflationary pressures continue to increase transportation, labor, and manufacturing costs, impacting cost of goods sold and operating expenses[267] - Significant credit risk concentration exists, with two major customers accounting for approximately 47% of consolidated net sales for the three months ended March 31, 2024[268] The company has not experienced credit issues with these customers[268] Item 4. Controls and Procedures The Principal Executive and Financial Officers concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[162] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls[163] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company reports that it is not currently a party to any material legal proceedings - As of the reporting date, the company is not involved in any material legal proceedings[278] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes to the company's risk factors were reported for the quarter ended March 31, 2024[279] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity, including the repurchase of 391,544 shares for $9.2 million during Q1 2024 Share Repurchase Activity (Q1 2024) | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Value Remaining for Purchase (in millions) | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2024 | 391,544 | $23.59 | $30.0 | | Feb 1 - Feb 29, 2024 | — | $— | $— | | Mar 1 - Mar 31, 2024 | — | $— | $— | Item 5. Other Information The company disclosed that three of its officers—the Chief Operating Officer, Chief Marketing Officer, and Chief Sales Officer—adopted Rule 10b5-1 trading plans in March 2024 for the future sale of company securities Adoption of Rule 10b5-1 Trading Plans (March 2024) | Name | Title | Date of Adoption | | :--- | :--- | :--- | | Jonathan Burth | Chief Operating Officer | March 15, 2024 | | Jane Prior | Chief Marketing Officer | March 15, 2024 | | Charles van Es | Chief Sales Officer | March 15, 2024 | Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and XBRL data files Signatures The report is duly signed by the company's Chief Executive Officer, Martin Roper, and Chief Financial Officer, Corey Baker, on May 2, 2024