VITL - Earnings call transcript Q3 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by and welcome to Vital Farms Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn this conference call to Ashley DeSimone from ICR.

You may begin ma'am.

Ashley DeSimone

you. Thank welcome webcast. third and conference XXXX Vital and call to morning quarter Farms earnings Good call Russell and today's Jason On are Dale, Officer Chief Chief and Executive Financial Officer Chief Officer. Diez-Canseco, Operating President and everyone press filed earnings now third release should the this to By company's access quarter morning. have Vital is of relations available investors.vitalfarms.com. at investor the website This on section Farms'

based the These statements could management's laws. differ in release, results to call, filed with beliefs and to and results today. management on statements statements. measure. a the during XX, actual SEC detailed Before materially risks today's are call on the we materially that information on uncertainties the of that financial the September implied forward-looking current financial XX-Q course company's presented those or federal other to Form note begin, filings and of Please statements expressed today's described any non-GAAP on refer that quarterly those forward-looking forward-looking quarter please a the the will those note expectations and may this for of ended EBITDA, from to meaning call, the involve report unaudited within risks in that which made refer with adjusted for could and make SEC, cause the is all actual management XXXX from discussion securities Please cause is differ today's

accordance most prepared our call a also earnings adjusted locations. reconciliation our a financial information presented investors, note EBITDA information not considered GAAP. today is that the in with to or in release be conducting company non-GAAP this comparable substitute of information its GAAP. of our from remote While are the intended to presentation like refer respective provides I'd for this accordance measure as we for for believes in Please financial measure, to with to useful isolation

other like I'd or and Russell this Farms. delays, you may call for understanding. to the such, Chief We thank turn there advance brief minor in Officer now call. during to technical President Executive Russell. and As Vital of crosstalk be Diez-Canseco, over issues patience your

Russell Diez-Canseco

Thank for forward morning, then financial serving highlights, thanks call, are for progress as pleased will detail, an your our review briefly toward strong update as who, review the today's quarter will I today. in fiscal the We you another remainder then year. Good look third our joining On outlook you, our stakeholders everyone. quarter. continued provide and quarter this our results strategy, know our fabric And of business. to well commitment Ashley. report financial many more questions. Jason of on third discuss of our to We're updated our taking as to growth

increased to net of quarter third $XX.X X year. million Quarter revenue XXXX, compared the For last to XX%

were XXXX also XXX% We profitability. margin to basis quarter metrics. demonstrating third trends XXX of continue the improved key EBITDA from million, positive points profit the we egg one on Gross retail based the with egg brands dollar of the XX In XX% number and share XXXX, overall the pasture-raised dollar two egg ending weeks increased and see adjusted in year-over-year to market last number pasture-raised continued profit our X, sale. our $X.X September brands over U.S.

long expand that the innovation; in through to to areas two, expand channel; grow in focus continued headwinds will believe look three, penetration within We forward our Now on term. on for offering our medium food focus household of made We this term strategy to bringing remains product and our new to quarter. our it Foodservice four, our our customers. expand across Farms long business the our significant foodservice. strategy retail through consumer attract growth. a third includes I'll quarter the persisted limited to these the we service, greater additional one, With segment ability turn which to position footprint small growth growth respect awareness; progress Vital and

consumers. to both the that choosing our users penetration, strong result in we regard with see repeat of food COVID-XX. trends with to as produced to continue which consumers resonating number engagement First, mission believe bring table to rate we the in purchases a at ethically of associated household products with converting are a Repeat is and demonstrates new high our

Our December XXXX. of and household from XXXX, up as September penetration of sequential X.X% up basis XXXX, X.X% as basis on a as increased of XX June to points

purchasers the period, XXXX, stocked-up already XX, Farms premium Vital following purchased have September these COVID and We XX% the become household repeat X, In new the buying ending weeks willingness ending Farms those XXX,XXX purchasers, multiple times XX-week approximately weeks. April eight repeat of During our pay a eggs. for those XX households purchased strong period, Vital eggs demonstrate during metrics XX% to penetration brand. believe consumers'

products. Vital shop where in especially well sales and a for for for transparency, prefer for food COVID-XX that believe a is willingness they believe the positioned that continue increased catalyst on ethical given be also natural premium to grocery has to demand growth. and pay focused accelerated will We e-commerce We Farms to consumers demand values of Vital our brands sustainability, to the meet Farms

have period the at time compared September increased online and XXX% ending collect has key mortar sales weeks weeks one retailer at increased brick the year. XX year to retailer click and compared a XXX% our For period August And example, X, the same ago. last XX the over fresh over to our national XX a grocery sales same ending

store within channel. stores, increased mainstream to total of Farms' In our the a Vital channel. the now primarily over growth by retail count within quarter, growth XX,XXX XXX the over third Turning comprising to grocery

Farms mainstream our distribution to increased across customers share and year-over-year Despite capturing the in distributed We of robust of expanded natural robust. egg velocities channels also continue the total retail the key products the total expanded brand This at expand Vital velocity category. the number channels. retail distribution, to Farms led remain has and both dollar mainstream an growth natural Vital brain and

and offerings we new to successfully product launched sourced from of on ramped up innovation made existing ethically have focused XXX distribution stores. remain ingredients. line our new August, bites both through in our we And single-serve Bites, Egg over refrigerated In we extending categories. Finally,

members, Now employees and for suppliers, an our update our of and farmers diversity our our we on our broader components leadership and communities, call our to both the customers who initiatives, our and commitment team include consumers, our stockholders. crew environment, our whom stakeholders

Pappas categories emerging and sales food he companies, leading Chief and over Sales for a of Peter an on beverage as both consumer play Farms team. of XX Vital multinational experience will new Officer. instrumental leadership our understanding First, believe advancing to talent we added I'm In our deep channels, years and our an to role With strategy. pleased senior we've update and October share brings growth Peter late joined our

Peter As Chief oversee [indiscernible]. Sales retail of sales Vital Officer, will Farms across products and

country vulnerable our pandemic, to are a our and the race, as as well navigate who with including we nationwide COVID-XX marginalized. as committed those are reckoning Finally, continues supporting community stakeholders, to

believe NAACP grow Fund, our that with others. in Council and X and the remainder and Vital to us call diversity operations, the Defense We Feeding quarter successful initiatives These commenced eggs number we the empathy National now deliver day the year. food knowledge serve to committed quarter is banks incredibly of pasteurized donate of This as to including stakeholders. who and third through the I'll million America well-positioned Club turn help outlook partnering food for believe to day values Boys remain we to Girls and our walk principles Farms Legal our more partnering and with Diversity we and a to over Jason, ability communities, of and insecure of sustainable will you over our to financials to our a practice for donating guide business. America,

Jason Dale

the third channel term increase particular. $XX.X or last Thank everyone. poised good for results We're revenue a meaningful building brand to very we ahead. with morning penetration quarter We've was pleased the in trusted Net in in quarter our ethical and million made believe that retail compared significant XX% as long investments third financial you, the we And quarter year. opportunities food are what is our Russell. growth

or our Our total $XX.X million our revenue and high net rate increase $X.XX the million last last some offset turnover and includes net to increase The shipping increase and to customers compared our with increase and per at was or sales which distribution commercial the third increase exceed was revenue and $XX.X third an net customers connection freight or resulted with in million, to million, excess The XX% of an to increase was quarter million, revenue, income incentives labor and and increased to costs gross costs in of due quarter in to in due revenue a $X.X XX% of insurance revenue existing associated third million, XX% the for million gives was to to gross to or increase butter of employee-related million offered $X.X in of professional The primarily of Total in to by compared and increase full an portion lower expanded increase with per revenue primarily quarter associated primarily diluted our in fees in QX million increase Gross partially egg year. costs SG&A on share revenue customers, new primarily net third expenses. or and increase Total $X.X to confidence million $XXX programs marketing of XXX an were COVID-XX. and distribution sales operations resulted spending for SG&A trends profit costs expectation QX year. to a direct associated to that was growth year Growth net retail was million, an from of The part for volume year-over-year. $X.X stay-at-home expenses of and overall year, of of public new in operating gross sales, in year. last primarily butter rate income which diluted due for quarter XXXX. butter XXXX net material last sales. in XX% million in primarily $XX.X the and $X.XX the or Net million shipping compared of our $X.X margin. for XX% the share, was due overhead million the year-over-year eggs of strong us $XX.X representing in a of leverage a expenses a quarter to attributable XXXX. $X.X in increase the in XXXX a margin to volume, the basis was to compared million with third driven status in from sales by a expansion XXXX, of of point in of of due to operations, profit newly company, net egg party $X.X compared due quarter distribution third was This $X.X in increase $X.X products. expenses revenue in support compared related and our increased $X.X distribution costs. expenses quarter The as headcount in

distributors, volume the operating adjusted XXXX compared $XX operations in in all well EBITDA due offset our the in commercial increases XXX% was represents in costs. to third overall gross we mind, XXXX, in fixed support for partially to over was million our million EBITDA to million $XX an by status of to SG&A XXXX. and primarily newly due increase insurance part quarter million and third increased in Our of expect as be company. due improvement in full increase leverage $X.X to of $X.X With fees of a an adjusted as to costs adjusted professional the to EBITDA quarter margin The year increase as public was for The our this headcount increase. which range expanded the to

September XX, CapEx period. cash CapEx million $X.X $X.X compared September year for for driven million $X.X debt XX-week by Adjusted September compared prior ended balance At used XX, continued The ongoing outstanding as was was Now, had XX, XXXX station. equipment of the prior period. $X year adjusted million in the XXXX in of we our to $XXX.X XX-week the of shifting to $XX for increase primarily from period total expansion structure. million the to of operations operations well of cash as central for from million, net and a a ended XXXX, was our purchases capital period cash operations net million.

robust food. and the As years believe market We we be turn confident for continue the that to produced Farms in now, achieve With to a come. Vital look to remain for I'll over has what opportunity ethically strong many today will call Russell. we back ahead results at to

Russell Diez-Canseco

shareholders Thanks, trust consumers for Jason. value driving pasture-raised We We a commitment your as our expect your taking to and the brand, production. and forward remain interest Farms. today we call from Thanks stay look for now to focused what on food true in ethical Vital to questions. joining

Operator

[Operator First Morgan with Kaufman comes question Instructions] from Pamela Stanley.

Pamela Kaufman

year-to-date. ask a good it your deceleration to Hi, relative wanted the growth you've about growth outlook the to for implies Obviously, in morning. embedded fourth assumptions that the seen I quarter.

assumptions a half. about you're wanted So get to conservative and into I the back sense outlook the how what virus the embedding for just is

Jason Dale

to Russell, me you want there? start

Russell Diez-Canseco

Yes, that'd great. be

Jason Dale

Pam. great so question, Okay,

I that saw looking quarter. at what we pantry trends - of on of I is comment specifically the really and the we that in change the from we're saw So in peak definitely we kind stocking quarter. of But can't the it way saw the midst we QX think a

the forward as QX, saw in year end having that thing similar just the through a the we pulling kind we look of close throughout exist think, we're very through we and year, I that this QX out. as in of

say range So not range, I in extremely deliver the I I that be in ton we're that a think not gives about the that say confident and us range it's outside delivering confidence ultra-conservative, there. but within would wouldn't to that giving, we're

Russell Diez-Canseco

The there's time remember to buy would so integrated add chain, you kind if our I our is only a our from changing we that supply small family thing exclusively to partners of volume. eggs lead and farm

predictable unlimited quarter. the in run, given So there upside isn't in is pretty any short our and supply darn

Pamela Kaufman

further added a you've in retailers compare the - the about and visibility Got within added and it, your that's you it like quarter. the customers? And can of has lot like obviously, reception counts the on then retailers helpful. talk velocities been quarter? gains new what at consumer the you skew did the new during seems How Can new distribution

Russell Diez-Canseco

we start. I trending a terms the retailers, pleased our successful in is results. off in to got it's in and see ensuring early with to days playbook, newest how of time kind pretty So playbook historically wasn't we've a a business new our of doors. last our launching But remember that get retailer the around good can't

of our striking that kind really retail amount Beyond eating trusted from of velocities see terms we resulting we're it. reflecting last consumption increased in in see of are that, that to in terms in we balance doors the the future right new from care of that visibility and doors that general the the mentioned and just COVID so that of monitoring growth the sort We're and household little taking new make and be between having to sure to from of retail partners. of flexible our dynamic nature growth, as portion these and we the quarter, a trends

Pamela Kaufman

Great, thank you.

Operator

comes next Christopher from question Stifel. with Our Growe

Christopher Growe

morning. good Hi,

Russell Diez-Canseco

Good morning, Chris.

Christopher Growe

helping that attracting the consumers just if keep did for I new spending Is brand franchise? promotional consumers hoping question amongst nice marketing? consumers. in basically the those the these a new I had you quarter? around to you so Obviously, the sustain rate how new you've kind there could related it, repeat this you're in to restart got Is and consumers to some these incremental of you're

Russell Diez-Canseco

time the repeat to were see my which least shelf the says at were eggs trier's on for thanks we then the of few a able frankly, not COVID to potentially to maybe when was of right household what continued with And in new of healthy those all it on really of didn't broaden rate, the is looks XX% repeat continued like think multiple at spend. a that me education into the from It I one about Yes, loyal we available awareness which conversion convert and maths And gratifying, consumers very that. different. but just rates, they we've early building to the considering have loyalty. Farms every journey look years marketing marketing as Vital our grow that rate, focused efforts try to to part brand, strongly the we why so through consumer understand a to penetration, at we of lot should way something were helping involve customers,

particular message retain, our a we'd It's And transparency. focused that the so I want we're great giving consumer consumer say lot back. in fostering that community versus to wouldn't for of retaining at in this to points to reasons great and all really terms education all a we're that come them an others doing franchise, our to different and new values rooted from

Christopher Growe

understand, you $X that? there's guidance helping just it your sales And pretty the I margin, EBITDA better The to related margin the ranges Thank drive for business $X for incremental that. of, question, incremental within what's to million strong. But Is something a that that business is variability get the quick there. margin? you fix which costs, those in on looks there some this just I got kind going from as up, to guess, leverage for degree is just million costs sort the midpoint maybe of call that's do that I these that? incremental underneath that. I incremental And sales? then XX about just guess up and want

Russell Diez-Canseco

Chris. great Yes, question

think it's I twofold.

you this mean, still, the in quarter. I think saw we're I

getting would movers better being Eggs be margin, Station. saw like the is while point about higher what the monetize side this the getting journey things just down mid-XXs talked Central lot had gross in efficiencies Our still at and on we at than think our able I QX a time. from sequentially has we to that come to Egg and off through us of like Absent of

there's there I incremental the I giving us fixed sure we're think perspective. portion for volume getting a mean, So a a then costs. over cost those it's just leverage from and there,

Christopher Growe

then input And just costs. anything Okay. around

will if some or of where to sense input were a you outlook your further your stands? is incremental, quarter, input seen costs you costs from of just you've that get overall So down move mentioned third down those the

Russell Diez-Canseco

to expect similar Again, we're can't what would in get look But to very we quarter. it. things currently doing specific this to

Christopher Growe

time. so much Thanks for your

Operator

Adam Samuelson from next comes Our with Goldman Sachs. question

Adam Samuelson

morning, Good you. thank Yes, everyone.

So I sense over with any hoping traction who on the several early next the seen just we've doors putting and it's in that I get that of what guess byproduct first, you've the I quarters? with with was know kind but early, to Egg the and more launched momentum terms in of retailers

Russell Diez-Canseco

to launched this despite is our the lead the that that products competing. appear Yes, two data in seen pleased I call of I We've other a expectations the and one just keep have think market I premium the that, out our that so in evidence of relative saw a shows premium positioning at with it's year But are disguised. to is strong; with point, been a clear we customers, and lead well would in I One product. results taken launch, single our a this having it relative products a resonating new we're as launch couple results. and that I'll think point be things. recently to price early at And price we've the premium point

Adam Samuelson

it? in want details tracking sense you to marketing you that's into of the year in velocity on continue been just had push and strength helpful. rate, the we was I the back of of growth I opportunity in think that slide. gains it's they be years. getting there this now to new get that Capitalize driving in in in to driving XXXX. a plan to then full Does sales stock of was COVID kind and the penetration The the a think versus and can ahead has we gains think sales velocity just seem have? about it plan post do you last the And and how up. and kind of, those customers the one-time kind the distribution you with Okay, well or the And some and of household, couple of terms it do there driving And have really of matter about distribution brand repeat that new where just the talked products capitalize of the people doors or going

Russell Diez-Canseco

Adam. terrific, that's Now,

of my headline be new acceleration stance would So households not changed has our growth. that pillars of the on

penetration we're seen, us. in So of have And we've mean, on steady penetration, year them household some may digit after household going there's march low as still much increasing I to continue so pulled room a leverage of year. to while and been after still forward, you've single that we ahead of year and we're build.

In to growing the I of more retailers. new existing partnerships, retail function, our successful really doors, are with of focus putting our addition, addition products think, even on and in we sales lead in Pappas Peter driving growing penetration

foot got in gas firmly areas. on we've So both our placed the pedal

Adam Samuelson

in. It's and any Okay. pricing shipping be forward? freight several costs just squeeze If in just we in the last truck costs and of sense or a months should moving the one one a on get that LTL I and to up pretty distribution last run step notable just mindful sensitivity up been wanted over could

Russell Diez-Canseco

that's great question, Yes, a Adam.

and We impacted anything be as plans out. next we as continue together would communicate haven't that for to fit. specifically putting that us we our outsized, mindful would seen anything of at call we we'll that that see Again, look certainly be year,

Adam Samuelson

appreciate Thanks. pass it the I Great. call. I'll on.

Operator

question comes Credit Suisse. next Our with Moskow from Robert

Robert Moskow

Thanks, of a couple I questions. had

the timeframe Regarding activity, they the you timeframe higher, to the you're measured can rates, that because that measuring. repeat to repeat the repeat look repeat when I go tend longer rates, you

what months, that do. June. from who the you a XX%, repeat around initially is seems you for consistent more It six is capture to had is just sale data higher, because time which to try have people with rate your the pretty in So repeat

time it's frame if you're or longer that not. a So a timeframe, different measuring or wanted to I know

Russell Diez-Canseco

new that in XX% stock the up, rate then period and XX-week is repeat, X, XX% first, multiple or period today buyer the And in a weeks who ending sort XXXX. five-month September April of presented a those on made ending we a eight repeat is of based XX. the the So the

Robert Moskow

measurement said then. believe I think I Actually, back Are back of you if in June; data was XX% did you your the you Okay. XX%. a number similar this repeat around analysis that maybe I this is wrong up? typical, or because that It be those you repeat to more pretty have post of get chance households higher, to stock a am a could again?

Russell Diez-Canseco

for logic much the that or year as to and an I we to earlier. meaningful to franchise. appears terms attracting that think XX% [ph] the sense a fact investment it is makes try of two enough of My first time those or time, have think in your retained, historically focus in don't tried this them three for on frankly, triers simply as the of we comparison very be first time extended that COVID limited with I during make and people period people data us order the between

And think we'll in it, bit going like so terms on hell reaching tailwind I to in and consumers essence, hold take we're to was them. new a of a to little fight of this

Robert Moskow

ago? give couple that believe my that is, then I can question a update us mention months of an was new your of on And other you CFO? Okay. there's

Russell Diez-Canseco

Absolutely.

him portion of performing have allow So, specifically we're to in And Bo still his XXXX. That Meissner plan transition excited that on the back of the the believe August, us beginning take well. intent on Dale track. to and role. He's at on COO with is focus to Jason he joined that and role I CFO would

everything's on Year. So New we come on the closer that get and to track more as to

Operator

from with comes Bank Montreal. Our next question of [indiscernible]

Unidentified Analyst

everyone. morning, Good

you questions, constraints? said of earlier couple by a production limited you have can but that in Do for were Egg talk about just increase how any your might that? you like XXXX? can and you this you quickly misheard, I quarter what sounds have Just is, one It

Russell Diez-Canseco

is timeframe. us. a for definitely comfortable eight so talked XX up But supply to put that the Yes, the comfortably bit lead us time year, down is a about previously, again, can for new this little we've we months to closer months' speed about

mindful and long support long been the demand demand working we how of on because out growth don't have profile the I about what so times in that that down situation of and lead of up we too forward get we to need the have we you that, looks do remember, And business looking us. very a we in terms we ahead actively mean, measuring previously, always what too do think in to as we we like the see as Again, be short. have forecasting or where We to future. end in

put And so, what planning of to we we're looking month forms kind down. and the doing every beyond week, need that out every work year about

Unidentified Analyst

the next or It thought think would plans have think for you there increasing well? four side as the believe given Would your that eight months? to our not be that that penetration, a household higher, you would have been on believe seems to would would you about reasonable increasing initial reason what

Russell Diez-Canseco

timeline put and XX, think, seeing of so fruition in support what again, in if I can us growth takes we I that most But start think of lot we're rate, that in start some down to lead the Well, on do XX. to you come time, a will of just that that. that to actually that

Unidentified Analyst

it, volume and given it the very next of term margin at operating your leverage, And nature? much. Okay. left these It margin increases, the levels, Can volume, given like operating your sustainability more if is maybe be in stays and structure grow is you sustainable. able into Thank structure? is to the short sustainable. you it's versus there. how leverage how question it's leverage, you're leverage talk much the margin If the about operating should seems if not it's I'll the sustainable the leave volume the My

Russell Diez-Canseco

bet. You

long-term I talked for think, in again, about for goals So we the business gross our and margin brand for range. mid-XX directionally the the

around are hovering We range. that

we also spend we COVID-XX say think, retail leverage the just probably still the noise some winds promotional a portion But have tail and environment happening that's side, of I that just certainly in what's are getting things like in some smaller because I the and it. still space. out would from of

different So a range. within I It's seeing think sustainable we're than dramatically we're what at not it's today. where

Unidentified Analyst

Great, thank you very much.

Operator

turn any showing like Russ I'm call closing further to not at this I questions would And for back remarks. any the to time.

Russell Diez-Canseco

Well, for us thanks, today. everybody, joining

small treating on to wholeheartedly We Farms You to mission crew stakeholders. core shareholders. XX a our as community Vital it's belief partners family interest food and that commitment I know, members, table our delivers ago. to food. appreciate has our And positive a ethical ethical partners, farmer embarked years outcomes always our consumers, your believe been or for business bring your our everyone, stakeholders in the our the in whether

Finally, end as and health all year, wish We forward speaking I you this to you approach with happiness. again extraordinary good soon. look of we the

Operator

presentation. concludes this gentlemen, and Ladies today's

You may now disconnect and have a day. wonderful

Vital Farms (VITL) 10 Nov 202020 Q3 Earnings call transcript