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 24, 2023

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 30, 2023 the registrant had 41,602,263 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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
	Signatures	68

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) 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, 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 suppliers, distributors and co-manufacturers;

•our ability to maintain relationships with our existing farm networks or further expand such networks;

•our ability to sustain or increase our profitability;

•our expectations regarding our future growth in the foodservice channel, including commercial and non-commercial foodservice business;

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

•real or perceived quality or food safety issues 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 effects of outbreaks of agricultural diseases, such as avian influenza, or the perception that such outbreaks may occur or regulatory or market responses to such outbreaks 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 completed expansion of our Egg Central Station facility or future expansions of our processing capacity 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;

•our ability to successfully enter into new product categories;

•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 unfavorable global economic and political conditions, increased interest rates and inflation;

ii

•the sufficiency of our cash, cash equivalents, marketable securities and availability of credit under our credit facility 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 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. A summary of selected risks associated with our business is set forth at the 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. 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. 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 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 to reflect events or circumstances after the date of this Quarterly Report 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 24, 2023			December 25, 2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	56,810		$	12,914
Investment securities, available-for-sale		39,256			65,814
Accounts receivable, net		37,401			38,895
Inventories		38,271			26,849
Prepaid expenses and other current assets		5,026			5,142
Total current assets		176,764			149,614
Property, plant and equipment, net		67,859			59,155
Operating lease right-of-use assets		1,512			1,895
Goodwill and other assets		3,904			4,002
Total assets	$	250,039		$	214,666
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	21,970		$	25,972
Accrued liabilities		26,729			18,477
Operating lease liabilities, current		685			1,208
Finance lease liabilities, current		3,118			1,570
Income taxes payable		456			425
Total current liabilities		52,958			47,652
Operating lease liabilities, non-current		961			892
Finance lease liabilities, non-current		11,120			7,023
Other liabilities		2,125			767
Total liabilities	$	67,164		$	56,334
Commitments and contingencies (Note 19)
Stockholders’ equity:
Common stock, $0.0001 par value per share, 310,000,000 shares authorized as of September 24, 2023 and December 25, 2022; 41,574,449 and 40,746,990 shares issued and outstanding as of September 24, 2023 and December 25, 2022, respectively		4			4
Additional paid-in capital		161,081			155,716
Retained earnings		22,515			4,159
Accumulated other comprehensive loss		(725	)		(1,547	)
Total stockholders’ equity	$	182,875		$	158,332
Total liabilities and stockholders’ equity	$	250,039		$	214,666

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 24, 2023			September 25, 2022			September 24, 2023			September 25, 2022
Net revenue	$	110,429		$	92,040		$	336,046		$	251,969
Cost of goods sold		73,764			62,549			218,913			175,838
Gross profit		36,665			29,491			117,133			76,131
Operating expenses:
Selling, general and administrative		25,081			20,561			72,935			55,193
Shipping and distribution		6,355			6,906			20,034			22,279
Total operating expenses		31,436			27,467			92,969			77,472
Income (loss) from operations		5,229			2,024			24,164			(1,341	)
Other (expense) income, net:
Interest expense		(238	)		(12	)		(513	)		(27	)
Interest income		707			312			1,497			652
Other expense, net		(642	)		(148	)		(2,508	)		(151	)
Total other (expense) income, net		(173	)		152			(1,524	)		474
Net income (loss) before income taxes		5,056			2,176			22,640			(867	)
Income tax provision (benefit)		533			1,465			4,284			(232	)
Net income (loss)		4,523			711			18,356			(635	)
Less: Net loss attributable to    noncontrolling interests		—			(12	)		—			(21	)
Net income (loss) attributable to Vital Farms, Inc.    common stockholders	$	4,523		$	723		$	18,356		$	(614	)
Net income (loss) per share attributable to Vital    Farms, Inc. stockholders:
Basic:	$	0.11		$	0.02		$	0.45		$	(0.02	)
Diluted:	$	0.10		$	0.02		$	0.42		$	(0.02	)
Weighted average common shares outstanding:
Basic:		41,375,008			40,695,014			41,037,778			40,618,736
Diluted:		43,135,579			42,879,818			43,299,898			40,618,736

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 24, 2023			September 25, 2022			September 24, 2023			September 25, 2022
Net income (loss)	$	4,523		$	711		$	18,356		$	(635	)
Other comprehensive income (loss), before tax:
Available-for-sale debt securities:
Unrealized net holding gain (loss)		271			(562	)		916			(2,159	)
Amounts reclassified for realized losses to earnings		53			96			182			166
Available-for-sale debt securities, before tax		324			(466	)		1,098			(1,993	)
Other comprehensive income (loss), before tax		324			(466	)		1,098			(1,993	)
Income tax (expense) benefit related to items of other comprehensive income (loss)		(85	)		110			(276	)		471
Other comprehensive income (loss), net of tax		239			(356	)		822			(1,522	)
Comprehensive income (loss)		4,762			355			19,178			(2,157	)
Less: Comprehensive loss attributable to noncontrolling interests		—			(12	)		—			(21	)
Comprehensive income (loss) attributable to Vital Farms, Inc. common stockholders	$	4,762		$	367		$	19,178		$	(2,136	)

See accompanying notes to the unaudited condensed consolidated financial statements.

3

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)

	Common Stock
	Shares			Amount		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balances as of December 25, 2022		40,746,990		$	4	$	155,716		$	4,159	$	(1,547	)	$	158,332
Vesting of restricted stock units		127,595			—		—			—		—			—
Shares withheld for tax liability on vested restricted stock units		(35,535	)		—		—			—		—			—
Stock-based compensation expense		—			—		1,627			—		—			1,627
Other comprehensive income, net		—			—		—			—		421			421
Net income		—			—		—			7,150		—			7,150
Balances as of March 26, 2023		40,839,050		$	4	$	157,343		$	11,309	$	(1,126	)	$	167,530
Exercise of stock options		307,500			—		110			—		—			110
Vesting of restricted stock units		79,030			—		—			—		—			—
Shares withheld for tax liability on vested restricted stock units		(3,924	)		—		(636	)		—		—			(636	)
Shares issued under employee stock purchase plan		11,011			—		135			—		—			135
Stock-based compensation expense		—			—		2,060			—		—			2,060
Other comprehensive income, net		—			—		—			—		162			162
Net income		—			—		—			6,683		—			6,683
Balances as of June 25, 2023		41,232,667		$	4	$	159,012		$	17,992	$	(964	)	$	176,044
Exercise of stock options		335,000			—		286			—		—			286
Vesting of restricted stock units		9,525			—		—			—		—			—
Shares withheld for tax liability on vested restricted stock units		(2,743	)		—		(32	)		—		—			(32	)
Stock-based compensation expense		—			—		1,815			—		—			1,815
Other comprehensive income, net		—			—		—			—		239			239
Net income		—			—		—			4,523		—			4,523
Balances as of September 24, 2023		41,574,449		$	4	$	161,081		$	22,515	$	(725	)	$	182,875

See accompanying notes to the unaudited condensed consolidated financial statements.

4

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			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 noncontrolling 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			—