• Net Revenue: $145 million, up 31.3% year-over-year.
• Gross Margin: Improved 368 basis points to 36.9% for the quarter.
• Adjusted EBITDA: $15.2 million, up 64.5% year-over-year.
• Adjusted EBITDA Margin: Improved to 10.5%, up 212 basis points from last year.
• Net Income: $7.4 million or $0.16 per diluted share.
• SG&A Expenses: $36.1 million or 24.9% of net revenue.
• Cash and Cash Equivalents: $163 million as of September 29, 2024.
• Distribution Points Growth: Increased by 17.3% in the natural channel and 20.2% in the food channel.
• Family Farms Network: Expanded to more than 375 farms.

• Warning! GuruFocus has detected 3 Warning Signs with VITL.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Vital Farms Inc (NASDAQ:VITL) reported a strong third quarter with net revenue up 31.3% to $145 million.
• Gross margin improved significantly by 368 basis points to 36.9% in the quarter.
• Adjusted EBITDA increased by 64.5% to $15.2 million, with a margin improvement to 10.5%.
• The company expanded its distribution points by 17.3% in the natural channel and 20.2% in the food channel.
• Vital Farms Inc (NASDAQ:VITL) is on track to meet its long-term goal of $1 billion in net revenue by 2027, supported by strategic supply chain investments.

Negative Points

• The company faced a water main break in Springfield, which resulted in two days of lost production.
• There are concerns about the ability to match supply with the strong demand due to capacity constraints.
• Maintenance work at Egg Central Station (ECS) led to slowed production during the quarter.
• Increased SG&A expenses were noted, driven by marketing, stock-based compensation, and higher employee headcount.
• The company anticipates potential production slowdowns in the fourth quarter due to ongoing maintenance efforts.

Q & A Highlights

Q: Can you comment on your ability to match supply with demand given the water main break and maintenance during the third quarter? A: Russell Diez-Canseco, President and CEO, explained that despite challenges, demand remained strong, and they managed to meet their operating plans. The company is focused on maintaining production levels and does not see these issues as limiting factors for their increased guidance for the year.

Q: How do you see category dynamics evolving, especially with elevated promotions in the commoditized egg sector? A: Peter Pappas, Chief Sales Officer, noted that Vital Farms' demand remains high despite increased promotional activity in the commoditized sector. The company has been judicious with promotions and maintains stable pricing, which has not affected demand.

Q: Given the strong performance in 2024, how should we think about fiscal 2025 relative to your long-term growth algorithm? A: Russell Diez-Canseco stated that the strong performance this year builds confidence in achieving their long-term goal of $1 billion in net revenue by 2027. However, they are not updating guidance at this point but are focused on maximizing the brand's potential.

Q: How much flexibility is there in your capacity to accommodate unexpected demand increases? A: Russell Diez-Canseco explained that while they have built flexibility into their operating model, there are limits to how much they can increase capacity in the short term. The company does not rely on the wholesale market to fill production gaps due to their high standards.

Q: Can you discuss the impact of stockouts at retailers and whether it affects your sales? A: Russell Diez-Canseco acknowledged that while stockouts can occur, they are not significantly impacting sales. The company is running at full capacity and continues to raise guidance, indicating strong demand beyond their projections.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.