Talk about a frustrating day! Huge earnings again from Vital Farms as I expected even on a day the Nasdaq is up huge and the stock goes up 6% briefly before heading back to flat. I was hoping to cash out today, but I’m holding unless the market comes to its senses before close.

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Third Quarter Net Revenue $110.4 million, up 20.0% versus Prior Year Period

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Raises 2023 Adjusted EBITDA Forecast

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AUSTIN, Texas, Nov. 02, 2023 (GLOBE NEWSWIRE) -- Vital Farms (Nasdaq: VITL), a Certified B Corporation that offers a range of ethically produced foods nationwide, today reported financial results for its third quarter ended September 24, 2023.

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Financial highlights for the third quarter include:

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Third Quarter 2023 Net Revenue increase of 20.0% to $110.4 million

Third Quarter 2023 Net Income of $4.5 million

Third Quarter 2023 Adjusted EBITDA of $9.3 million1

"The Vital Farms brand continues to gain new consumers, and our company produced another quarter of strong results, including 20% top-line growth and gross margin above 33%. As a result of our strong year-to-date profitability, we are increasing our full year Adjusted EBITDA guidance again this quarter," said Russell Diez-Canseco, Vital Farms' President and CEO.

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Diez-Canseco continued, "We are even more confident in the current trajectory of our business and equally excited about the long-term potential of our company to further improve the lives of people, animals, and the planet through food. We provided a look into the future of Vital Farms at our recent Analyst Day in Austin, which included greater detail on our potential to bolster demand by gaining new retail partners, increase our current assortment at existing retail partners, and drive a significant increase in household penetration by unleashing the power of our marketing team. We are confident Vital Farms is well on its way to becoming a billion-dollar brand."

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1 Adjusted EBITDA is a non-GAAP financial measure defined in the section titled "Non-GAAP Financial Measures" below and is reconciled to net income (loss), its closest comparable GAAP measure, at the end of this release.

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For the 13 Weeks Ended September 24, 2023

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Net revenue increased 20.0% to $110.4 million in the third quarter of 2023, compared to $92.0 million in the third quarter of 2022. Net revenue growth in the third quarter of 2023 was driven by higher prices and volume gains of 13%. The volume growth was driven by increases at both new and existing retail customers.

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Gross profit was $36.7 million, or 33.2% of net revenue, in the third quarter of 2023, compared to $29.5 million, or 32.0% of net revenue, in the prior year quarter. Gross profit growth was primarily driven by higher sales. Gross margin benefited from increased pricing across our portfolio, partially offset by headwinds that included higher input costs (inclusive of commodity impacts) across our shell egg business as well as higher packaging costs.

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Income from operations in the third quarter of 2023 was $5.2 million, compared to income from operations of $2.0 million in the third quarter of 2022. The change in income from operations was primarily attributable to higher sales and gross profit, partially offset by higher marketing costs to support brand development and increased employee-related expenses as we grew headcount to support our growth.

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Net income was $4.5 million in the third quarter of 2023, compared to net income of $0.7 million in the prior year quarter. The change in net income was primarily due to higher sales and improved gross profit performance, partially offset by increased marketing spend and higher employee-related expenses.

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Net income per diluted share was $0.10 for the third quarter of 2023, compared to net income per diluted share of $0.02 in the prior year quarter.

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Adjusted EBITDA was $9.3 million, or 8.4% of net revenue, in the third quarter of 2023, compared to $5.2 million, or 5.7% of net revenue, in the third quarter of 2022. The change in Adjusted EBITDA was primarily due to higher sales and improved gross profit performance, partially offset by increased marketing spend and higher employee-related expenses. Our Adjusted EBITDA excludes certain non-cash items. Adjusted EBITDA is a non-GAAP financial measure defined in the section titled "Non-GAAP Financial Measures" below and is reconciled to net income, its closest comparable GAAP measure, at the end of this release.

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Balance Sheet and Cash Flow Highlights

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Cash, cash equivalents and marketable securities were $96.1 million as of September 24, 2023, and we had no outstanding debt. Net cash provided by operating activities was $27.2 million for the 39-week period ended September 24, 2023, compared to net cash used in operating activities of $3.4 million for the 39-week period ended September 25, 2022.

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Capital expenditures totaled $9.1 million in the 39-week period ended September 24, 2023, compared to $6.9 million in the prior year period.

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Update on Fiscal 2023 Outlook

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Thilo Wrede, Vital Farms' Chief Financial Officer, commented: "Even though we have begun to lap the top-line benefits that we saw due to commodity egg supply constraints as a result of avian influenza, we are delivering double-digit volume growth - a testament to the strength of our brand. Additionally, while we are judiciously managing prices, we continue to gain share and expand our profit margins. We believe that we are well positioned to deliver our increased guidance for fiscal year 2023."

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For the full fiscal year 2023, management still expects net revenue of more than $465 million, which includes Vital Farms' expectation of the highest single net revenue period in company history in the fourth quarter.

Management now expects Adjusted EBITDA of more than $40 million for the full fiscal year 2023.

Finally, management now expects fiscal year 2023 capital expenditures in the range of $11 million to $16 million.

Long-Term Financial Targets

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By the end of fiscal year 2027, management expects to generate annual net revenue of more than $1 billion in Vital Farms' current categories.

Management expects gross margin of at least 35% of net revenue by fiscal year 2027.

Management expects Adjusted EBITDA Margin in the range of 12% to 14% of net revenue by fiscal year 2027.

Vital Farms' guidance continues to assume that there are no additional significant disruptions to the supply chain or its customers or consumers, including any issues from adverse macroeconomic factors. Vital Farms cannot provide a reconciliation between its forecasted Adjusted EBITDA and net income (loss) and Adjusted EBITDA Margin and net income (loss) margin, their most directly comparable GAAP measures, without unreasonable effort due to the unavailability of reliable estimates for income taxes, among other items. These items are not within our control and may vary greatly between periods and could significantly impact future financial results.