Vital Farms, Inc. Q3 FY2024 earnings call

• Revenue Growth: Third quarter net revenue was $145M, up 31.3% y-o-y; YTD net revenue grew 31%, with volume up 25% vs 15% last year.
• Gross Margin: Q3 gross margin 36.9% (+368bps y-o-y), YTD 38.6% (+376bps y-o-y).
• Adjusted EBITDA: Q3 adjusted EBITDA $15.2M (+64.5% y-o-y); YTD adjusted EBITDA $67.6M, nearly doubling last year.
• Distribution: Total distribution points up 17.3% in natural channel to 461, 20.2% in food channel to 226.
• Supply Chain: Over 375 family farms; prep work ongoing for Indiana facility (late 2026 opening); accelerator farms in Indiana for practical knowledge.
• Butter: Relaunched in April, saw 5% net revenue growth in Q3 after supply issues.
• Leadership: Hired Chief People Officer and Chief Supply Chain Officer.

In the third quarter of 2024, Vital Farms achieved a net revenue of $145 million, representing a 31.3% increase compared to the previous year. Year-to-date, net revenue grew by 31%, with volume increasing by 25%, a significant acceleration from the 15% growth in the same period last year. Gross margins expanded, with the third quarter gross margin reaching 36.9%, an improvement of 368 basis points from the previous year. Year-to-date gross margin was 38.6%, up 376 basis points. Adjusted EBITDA in the third quarter was $15.2 million, a 64.5% increase year-over-year. For butter, after a relaunch in April, it saw a 5% net revenue growth in the third quarter following supply constraints earlier in the year. Butter's net revenue contribution is part of the overall business but specific percentage isn't detailed in the transcript.

• 2024 Guidance: Updated net revenue guidance to at least $600M (+27% y-o-y) from previous $590M; adjusted EBITDA guidance to at least $80M (+65% y-o-y) from previous $75M.
• CapEx: Reduced CapEx guidance to $30M-$40M from $35M-$45M due to timing of investments.
• Long-Term Goal: Target $1B net revenue by 2027 with gross margin ≥35% and EBITDA margin 12%-14%.

• Supply Chain: Maintenance work at ECS in Q3 slowed production, may impact Q4 growth.
• Commodity Costs: Fluctuations in feed costs could affect gross margin.
• Market Competition: Intense competition in egg and butter categories could impact market share.

Q: Nielsen data showed sequential demand increase, but water main break and maintenance. Comment on supply matching demand and facility impact.

A: Russell said it's a great problem to have, demand strong, but maintenance needed to continue running, no major limiting factor to year-end guidance.

Q: Fiscal 2025 outlook relative to 2023 guidance.

A: Russell said strong 2024 performance builds confidence in achieving 2027 $1B net revenue goal, but no immediate update.

Q: Flexibility in capacity.

A: Russell and Thilo said they build flexibility, but limits exist due to high standards and need for maintenance.

Q: Household penetration and buy rate.

A: Thilo said on track, buy rate increases more than expected, quality and connection with consumers driving loyalty.

Q: Marketing spend returns.

A: Thilo said marketing spend drives brand awareness, tracked through survey data showing better performance vs competitors.

Q: Gross margin sustainability.

A: Thilo said above long-term target, transportation costs and maintenance impact margin, but confident in 35% target by 2027.

Q: Backlog for new family farms in Indiana.

A: Russell said waiting to add farms until closer to Seymour facility opening, focusing on farms near Springfield for now.