UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 25, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-39411

Vital Farms, Inc.

(Exact name of registrant as specified in its charter)

Delaware	27-0496985
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3601 South Congress Avenue Suite C100 Austin, Texas	78704
(Address of principal executive offices)	(Zip Code)

(877) 455-3063

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	VITL	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2022, the registrant had 40,731,879 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

Page

Special Note Regarding Forward-Looking Statements		ii
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders' Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
	Signatures	65

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

•our expectations regarding our revenue, expenses and other operating results;

•our ability to acquire new customers and successfully retain existing customers;

•our ability to attract and retain our farmers, suppliers, distributors and co-manufacturers;

•our ability to sustain or increase our profitability;

•our ability to procure sufficient high-quality eggs, butter, cream and other raw materials;

•real or perceived quality with our products or other issues that adversely affect our brand and reputation;

•changes in the tastes and preferences of our consumers;

•the financial condition of, and our relationships with, our farmers suppliers, co-manufacturers, distributors, retailers and foodservice customers, as well as the health of the foodservice industry generally;

•the ability of our farmers suppliers and co-manufacturers to comply with food safety, environmental or other laws or regulations;

•the effects of a public health pandemic or contagious disease, such as COVID-19, or fear of such outbreaks, on our supply chain, the demand for our products, and on overall economic conditions and consumer confidence and spending levels;

•the impact of the recently completed expansion of our Egg Central Station facility on our revenue;

•future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;

•anticipated changes in our product offerings and our ability to innovate to offer successful new products;

•the costs and success of our marketing efforts, and our ability to promote our brand;

•our reliance on key personnel and our ability to identify, recruit and retain personnel;

•our ability to effectively manage our growth;

•the potential influence of our focus on a specific public benefit purpose and producing a positive effect for society;

•our environmental, sustainability and governance goals, opportunities and initiatives, as well as the standards and expectations of third parties regarding these matters;

•our ability to compete effectively with existing competitors and new market entrants;

•the impact of adverse economic conditions, including as a result of the war between Ukraine and Russia, increased interest rates and inflation;

•the sufficiency of our cash to meet our liquidity needs;

•seasonality; and

•the growth rates of the markets in which we compete.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. A summary of selected risks associated with our business is set forth at the

ii

beginning of the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

iii

PART I – FINANCIAL INFORMATION

VITAL FARMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share amounts)

	September 25, 2022			December 26, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	18,838		$	30,966
Investment securities, available-for-sale		68,076			68,621
Accounts receivable, net		33,128			26,938
Inventories		25,471			10,945
Prepaid expenses and other current assets		5,572			3,817
Total current assets		151,085			141,287
Property, plant and equipment, net		48,230			44,608
Operating lease right-of-use assets		2,238			—
Goodwill		3,858			3,858
Other assets		1,183			189
Total assets	$	206,594		$	189,942
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current liabilities:
Accounts payable	$	25,566		$	22,520
Accrued liabilities		23,686			15,143
Operating lease liabilities		1,444			—
Finance lease liabilities		5			327
Income taxes payable		112			—
Total current liabilities		50,813			37,990
Operating lease liabilities, non-current		1,011			—
Other liabilities		209			192
Total liabilities	$	52,033		$	38,182
Commitments and contingencies (Note 15)		—			—
Redeemable noncontrolling interest		—			175
Stockholders’ equity:
Common stock, $0.0001 par value per share, 310,000,000 shares authorized as of September 25, 2022 and December 26, 2021; 40,731,879 and 40,493,969 shares issued and outstanding as of September 25, 2022 and December 26, 2021, respectively		4			5
Additional paid-in capital		154,066			149,000
Retained earnings		2,294			2,746
Accumulated other comprehensive loss		(1,803	)		(281	)
Total stockholders’ equity attributable to Vital Farms, Inc. stockholders		154,561			151,470
Noncontrolling interests		—			115
Total stockholders’ equity	$	154,561		$	151,585
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity	$	206,594		$	189,942

See accompanying notes to the unaudited condensed consolidated financial statements.

1

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)

(Unaudited)

	13-Weeks Ended						39-Weeks Ended
	September 25, 2022			September 26, 2021			September 25, 2022			September 26, 2021
Net revenue	$	92,040		$	64,627		$	251,969		$	183,496
Cost of goods sold		62,549			44,788			175,838			120,394
Gross profit		29,491			19,839			76,131			63,102
Operating expenses:
Selling, general and administrative		20,561			15,326			55,193			42,053
Shipping and distribution		6,906			6,318			22,279			16,755
Total operating expenses		27,467			21,644			77,472			58,808
Income (loss) from operations		2,024			(1,805	)		(1,341	)		4,294
Other income (expense), net:
Interest expense		(12	)		(11	)		(27	)		(42	)
Other income (expense), net		164			3			501			300
Total other income (expense), net		152			(8	)		474			258
Net income (loss) before income taxes		2,176			(1,813	)		(867	)		4,552
Income tax provision (benefit)		1,465			(486	)		(232	)		(1,485	)
Net income (loss)		711			(1,327	)		(635	)		6,037
Less: Net loss attributable to    noncontrolling interests		(12	)		(6	)		(21	)		(41	)
Net income (loss) attributable to Vital Farms, Inc.    common stockholders	$	723		$	(1,321	)	$	(614	)	$	6,078
Net income (loss) per share attributable to Vital    Farms, Inc. stockholders:
Basic:	$	0.02		$	(0.03	)	$	(0.02	)	$	0.15
Diluted:	$	0.02		$	(0.03	)	$	(0.02	)	$	0.14
Weighted average common shares outstanding:
Basic:		40,695,014			40,196,410			40,618,736			39,910,063
Diluted:		42,879,818			40,196,410			40,618,736			43,380,711

See accompanying notes to the unaudited condensed consolidated financial statements

2

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

(Unaudited)

	13-Weeks Ended						39-Weeks Ended
	September 25, 2022			September 26, 2021			September 25, 2022			September 26, 2021
Net income (loss)	$	711		$	(1,327	)	$	(635	)	$	6,037
Other comprehensive loss
Unrealized holding loss on available-for-sale securities, net of deferred tax    benefit of $110 and $5 for the 13-week periods ended September 25, 2022    and September 26, 2021, respectively and $471 and $19 for the    39-week periods ended September 25, 2022 and September 26, 2021, respectively		(356	)		(21	)		(1,522	)		(69	)
Total comprehensive income (loss)	$	355		$	(1,348	)	$	(2,157	)	$	5,968

See accompanying notes to the unaudited condensed consolidated financial statements

3

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)

	Redeemable Noncontrolling Interest			Common Stock														Total Stockholders’ Equity Attributable
	Amount			Shares		Amount			Additional Paid-In Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			to Vital Farms, Inc. Stockholders			Noncontrolling Interests			Total Stockholders’ Equity
Balances as of December 26, 2021	$	175			40,493,969	$	5		$	149,000		$	2,746		$	(281	)	$	151,470		$	115		$	151,585
Exercise of stock options		—			102,328		—			254			—			—			254			—			254
Stock-based compensation expense		—			—		—			1,296			—			—			1,296			—			1,296
Net loss attributable to non-    controlling interests - stockholders		—			—		—			—			162			—			162			(164	)		(2	)
Other comprehensive loss, net		—			—		—			—			—			(783	)		(783	)		—			(783	)
Net loss attributable to    Vital Farms, Inc. stockholders		—			—		—			—			(1,536	)		—			(1,536	)		—			(1,536	)
Balances as of March 27, 2022	$	175			40,596,297	$	5		$	150,550		$	1,372		$	(1,064	)	$	150,863		$	(49	)	$	150,814
Exercise of stock options		—			35,573		—			143			—			—			143			—			143
Vesting of restricted stock units		—			47,544		—			(9	)		—			—			(9	)		—			(9	)
Stock-based compensation    expense		—			—		—			1,633			—			—			1,633			—			1,633
Net loss attributable to non-    controlling interests -    stockholders		—			—		—			—			—			—			—			(7	)		(7	)
Other comprehensive loss, net		—			—		—			—			—			(383	)		(383	)		—			(383	)
Net income attributable to    Vital Farms, Inc. stockholders		—			—		—			—			199			—			199			—			199
Balances as of June 26, 2022	$	175			40,679,414	$	5		$	152,317		$	1,571		$	(1,447	)	$	152,446		$	(56	)	$	152,390
Exercise of stock options		—			49,941		—			171			—			—			171			—			171
Vesting of restricted stock units		—			2,524		—			—			—			—			—			—			—
Stock-based compensation    expense		—			—		—			1,578			—			—			1,578			—			1,578
Dissolution of equity investment		(175	)		—		(1	)		—			—			—			(1	)		68			67
Net loss attributable to non-    controlling interests -    stockholders		—			—		—			—			—			—			—			(12	)		(12	)
Other comprehensive loss, net		—			—		—			—			—			(356	)		(