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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 June 26, 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 August 1, 2022, the registrant had 40,680,033 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 (Loss) Income	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	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION	33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
	Signatures	62

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 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 suppliers, co-manufacturers, distributors, retailers and foodservice customers, as well as the health of the foodservice industry generally;

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

• the effects of the ongoing COVID-19 pandemic, or of other global outbreaks of pandemics or contagious diseases or fear of such outbreaks, including on our supply chain, the demand for our products, and on overall economic conditions and consumer confidence and spending levels;

• the expansion of our Egg Central Station facility and its impact on 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 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 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

ii

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)

	June 26, 2022			December 26, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	22,082		$	30,966
Investment securities, available-for-sale		68,257			68,621
Accounts receivable, net		31,110			26,938
Inventories		19,100			10,945
Prepaid expenses and other current assets		2,797			3,817
Total current assets		143,346			141,287
Property, plant and equipment, net		47,887			44,608
Operating lease right-of-use assets		2,578			—
Goodwill		3,858			3,858
Other assets		2,511			189
Total assets	$	200,180		$	189,942
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current liabilities:
Accounts payable	$	25,258		$	22,520
Accrued liabilities		19,145			15,143
Operating lease liabilities		1,425			—
Finance lease liabilities		88			327
Income taxes payable		112			—
Total current liabilities		46,028			37,990
Operating lease liabilities, non-current		1,377			—
Other liabilities		210			192
Total liabilities	$	47,615		$	38,182
Commitments and contingencies (Note 15)		—			—
Redeemable noncontrolling interest		175			175
Stockholders’ equity:
Common stock, $0.0001 par value per share, 310,000,000 shares authorized as of June 26, 2022 and    December 26, 2021; 40,679,414 and 40,493,969 shares issued and outstanding as of June 26, 2022    and December 26, 2021, respectively		5			5
Additional paid-in capital		152,317			149,000
Retained earnings		1,571			2,746
Accumulated other comprehensive loss		(1,447	)		(281	)
Total stockholders’ equity attributable to Vital Farms, Inc. stockholders		152,446			151,470
Noncontrolling interests		(56	)		115
Total stockholders’ equity	$	152,390		$	151,585
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity	$	200,180		$	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						26-Weeks Ended
	June 26, 2022			June 27, 2021			June 26, 2022			June 27, 2021
Net revenue	$	82,870		$	60,324		$	159,929		$	118,869
Cost of goods sold		57,931			38,391			113,289			75,606
Gross profit		24,939			21,933			46,640			43,263
Operating expenses:
Selling, general and administrative		17,007			13,544			34,632			26,726
Shipping and distribution		7,211			5,374			15,373			10,437
Total operating expenses		24,218			18,918			50,005			37,163
Income (loss) from operations		721			3,015			(3,365	)		6,100
Other income (expense), net:
Interest expense		(7	)		(13	)		(15	)		(31	)
Other income (expense), net		158			186			337			297
Total other income (expense), net		151			173			322			266
Net income (loss) before income taxes		872			3,188			(3,043	)		6,366
Income tax provision (benefit)		680			(695	)		(1,697	)		(999	)
Net income (loss)		192			3,883			(1,346	)		7,365
Less: Net loss attributable to    noncontrolling interests		(7	)		(24	)		(8	)		(34	)
Net income (loss) attributable to Vital Farms, Inc.    common stockholders	$	199		$	3,907		$	(1,338	)	$	7,399
Net income (loss) per share attributable to Vital    Farms, Inc. stockholders:
Basic:	$	0.00		$	0.10		$	(0.03	)	$	0.19
Diluted:	$	0.00		$	0.09		$	(0.03	)	$	0.17
Weighted average common shares outstanding:
Basic:		40,628,416			40,000,136			40,580,598			39,767,127
Diluted:		42,694,767			43,375,668			40,580,598			43,444,101

See accompanying notes to the unaudited condensed consolidated financial statements

2

VITAL FARMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Amounts in thousands)

(Unaudited)

	13-Weeks Ended						26-Weeks Ended
	June 26, 2022			June 27, 2021			June 26, 2022			June 27, 2021
Net income (loss)	$	192		$	3,883		$	(1,346	)	$	7,365
Other comprehensive loss
Unrealized holding loss on available-for-sale securities, net of deferred tax    benefit of $118 and $7 for the 13-weeks ended June 26, 2022    and June 27, 2021, respectively and $361 and $14 for the    26-weeks ended June 26, 2022 and June 27, 2022, respectively		(383	)		(26	)		(1,166	)		(48	)
Total comprehensive (loss) income	$	(191	)	$	3,857		$	(2,512	)	$	7,317

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

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				Treasury Stock													Total Stockholders’ Equity Attributable
	Amount		Shares		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 27, 2020	$	175		44,938,958	$	5		(5,494,918	)	$	(16,276	)	$	144,311	$	14,039	$	(31	)	$	142,048		$	163		$	142,211
Exercise of stock options		—		300,266		—		—			—			525		—		—			525			—			525
Stock-based compensation expense		—		—		—		—			—			853		—		—			853			—			853
Net loss attributable to non-    controlling interests - stockholders		—		—		—		—			—			—		—		—			—			(11	)		(11	)
Other comprehensive loss, net		—		—		—		—			—			—		—		(22	)		(22	)		—			(22	)
Net income attributable to Vital    Farms, Inc. stockholders		—		—		—		—			—			—		3,491		—			3,491			—			3,491
Balances as of March 28, 2021	$	175		45,239,224	$	5		(5,494,918	)	$	(16,276	)	$	145,689	$	17,530	$	(53	)	$	146,895		$	152		$	147,047
Exercise of stock options		—		393,922		—		—			—			978		—		—			978			—			978
Vesting of restricted stock units		—		15,000		—		—			—			—		—		—			—			—			—