Earnings call transcript Q2 2023

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Operator

Good day, and thank you for standing by. Welcome to the Vital Farms Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the call over to your speaker today.

Matthew Siler

Thank you. to Webcast. Second welcome Conference XXXX and and Call morning, Vital Quarter Farms Earnings Good on call Officer; joined Sales Officer; to I'm today's Pete Officer. Thilo Chief President introduce Wrede, Executive and Chief our Financial Pappas, and happy by I'm Chief Russell Diez-Canseco,

press on Farms By earnings the section the have Vital Investor at quarter should morning. investors.vitalfarms.com. this everyone to the Relations issued now, second This website company's access XXXX release is available of

forward-looking current statements of federal risks this call, statements. beliefs cause make to materially could of statements management Through actual and that the the the forward-looking differ within may from securities are course meaning based expectations involve These described laws. those uncertainties these results on and management's and in

release with company's Form the a any to SEC Please expressed differ filed quarterly quarter June materially press or filings refer made from for those detailed XX-Q of cause the risks in XX, today's other the today. to on with and ended forward-looking that results XXXX, fiscal implied could the the actual for statements discussion today report SEC under

margin, Please to adjusted EBITDA will note management non-GAAP which refer are on financial adjusted and that EBITDA today's measures. call,

the for non-GAAP information measures these for believes is company the presented While presentation GAAP. provide investors, useful in with of intended be financial financial as considered substitute or a information to the accordance not information this in isolation

prepared reconciliation accordance earnings a their adjusted release of our most margin to for with respective in EBITDA refer measures adjusted to Please EBITDA GAAP. comparable and

of Diez-Canseco, the Vital to Officer President, Executive like I'd And to Russell turn over now Farms. Chief call

Russell Diez-Canseco

by updates stakeholders delivered how of we commitments on everyone, second I'll Thanks, our Matt. for time on your today. Good the to sharing our quarter. all start during thanks, and morning,

how continues partners. into brand Pete expand with footprint retail insight our to our its provide some will then

information your on results more provide and take we our questions. annual guidance Finally, before Thilo quarterly will in-depth our

achieved by was $XXX.X X%. growth which million increase Vital XX% prior growth volume Farms. about a another of XX.X% the quarter strong We from driven reflects revenue, price/mix in about The was It at of and net period. year

has X,XXX almost year, are approximately across retail stores XX,XXX the Our since and by U.S. locations our in available footprint last now products expanded

expanded margin basis $XX points to of of Our adjusted over another we performance achieving over by strong margin XX.X%. posted gross an and XXX EBITDA EBITDA adjusted XX.X%, at million, quarter

average XX% these dollar saw XX, delivered even June category three results during over quarter the egg only XXXX, strong second or growth of We retail though XX the each over weeks growth the of compared to past of the X% ended quarters.

recall, the As you the of this at we year. might anticipated dynamic beginning

our share significantly In Vital about relative dollar XXX the same this basis period Farms environment, grew points last by year. to

channels. We are tracked total egg of X% now about retail category in the

despite we that the We growth any brands channels premium that retail maintaining category period, our the X%. Farms the in built resonates during tracked have about ahead declines same about share, offers at with X% Our momentum also the time given strong proof be suffered volume overall during down over which many of category, volume same XX Vital at other points while grew of basis declined positive gained performance what happening frame. have unit time. a in may believe across consumers brand again

the we the inflation year, how of has think months a over makes across it egg is I and industry believe transpired This it evolve. may price industry experienced industry And recent performance to within prolonged an conventional eggs. last against primarily in impressive backdrop. a what sense The volatile period review

influenza, you us which of discuss caused Much driven supply a heard this before. by shock inflation avian was have by

size by produced, driving and declined block eggs fewer impacted were As birds higher virus, the land prices. of the were the U.S.

fiscal year. XXXX these built we for dynamics our recall, you'll As into the guidance

industry As block of in largely has year. the and from look recovered land at earlier we improved the today, dramatically supply the eggs has the U.S.

prices inventory moved influenza averages, after on have As outbreak. returned, occurred conventional last below similar eggs has the historic avian to which what is

seeing as getting are and short-term retail partners cadence. a to normal are producers promotional We activity back

given expected us. We year are a point return the of the retailers calendar promotions you on supply surprise to see and increase from some the of this at deals may not to eggs

first We would have these purposely eventually avoided industry dynamics, reverse. of the knowing XXXX, issues promotions half in the given

in the to to Vital returns drive of said, We year level our business discount be are chasing gains the will unsustainable volume deals back prepared consumers With dilute quick that as that with activity of some resume brand. to Farms promotional normal. half not premium

to continue to our and grow methodically the our will work partners category. brand with build We retail

is supply withstand issues and our continue changes operating We're relationships rapid behind the with that development current to our in to to well industry. impact will on are and the there environment unique continue situation the thoughtful and our growth. While likely are focused still us, supply propel of we positioned we our believe the chain farmers,

past me Let will for business the this that focused our goal. we our from start, and intentional the of stakeholders, positive years has driving towards have long-term our goal drive each reiterating choices stockholders. outcomes been remain we of by including over This several about conclude we made on been to the the

a contributes day stakeholders, to which We decisions and enduring fully make advantage. each believe provides consider success every of competitive the our our we

XXXX environment year. flexibility plan Our half has to the latter regardless operating of always in of external the drive in the success built

We are fiscal our have revenue the XXXX net in year our of trajectory raising adjusted outlook for great business confidence and and EBITDA.

here now in Chief Officer, provide some financial who our focus will Pappas, the our strategy Pete around Sales context long-term later details the around at our of introduce sales further provide And call. to will Farms. I'm happy Thilo Vital outlook

Peter Pappas

everyone. Thank you, good Russell, morning, and

to brand way gauge a one Vital expand planet us purpose of of because the animals are Our basis. people, improving sustained distribution customers to health is brand committed the ability on through of choose the my know and an Farms and to they extension a In we our lives food. the experience, is

In talk what mind, substantial to this growth a to shelf SKUs With deliberate and doing long-term words, about in doors market getting other have want doors. in our we driven that the regard efforts, presence. have I bit existing on more more in through in we're

As are across Russell retail locations our footprint We've with added as continue expand over United successfully a we to almost new earlier, mentioned XX,XXX XX States. products stores approximately partners. And months. last in result, the our retail now the available X,XXX

of about the the Vital to drive the Farms. channel, six across I'm retail SKUs food store per competitor additional items for with on it egg approximately our largest average is also have currently below which our currently and place bullish can extremely net SKUs. We revenue partners current shelves opportunity well who incremental branded X.X an offers

higher have velocity average. SKUs the than our of category Most a

In sense. are that fact, core relative have of high to performers retailers' current we in legacy SKUs SKUs our some

continue Vital existing retail more adding will coming lead incremental that our shelves in category years. confident SKUs better that to we demonstrate to their SKUs they partners to As Farms assortment to the add to performance, we're

on partners This provides Blues newer also to Restorative both strategy innovations our retail opportunity to the add or drive shelf. where the depth at and True like growth legacy

cornerstone maintaining customer to satisfaction. our of Our a consistency we've category been for the of our to relationships and has strong many leader success building with commitment quality, emerged that and testament a share proud our as to our in growth. I'm customers retailers,

retailers, We both by heavily unique journey Through we've beneficial the tailored and our and able recognize in providing address are service expectations. beyond going have been support, mutually partners above our communication faced in fostering challenges crucial and and that collaborations. mission, retailers and understand we invested to exceptional and

sales for We've food the positioning time identify our unwavering to your without our I'd visibility your possible confidence in for onboard of been accessibility. and products Thank Farms and hard dedicated to to today. in you organization have trust and trust service talent brand their not for new retailers for gratitude partners sincere would place also the and valued retailers, across support. Vital my progress worked strategically maximum operators the crew This and continued and and retail and express tenacity like our our our leaders.

over I'll pass to Thilo. that, it With

Thilo Wrede

you, XX, our fiscal then provide guidance XXXX. Hello, increased I about for year will us and financial the results I joining for thank Pete. XXXX. the everyone, our second details more will June review ended for Thank you today. quarter

strong As revenue earlier, with period. another prior the by to was of compared we XX.X% growth of Russell price/mix volume had net year XX% driven quarter X%. increase and $XXX.X mentioned about million, This an of of

The at was driven existing customers. new volume increases and growth retail both by

growth a which avian QX, volume benefit In XX% of volume in bit a Let year put period, the over influenza. context. to due prior onetime the growth we included me achieved

said this was a we high quarter, single-digit Last benefit.

the but market, adjust and was in In volatile our to manage much to as benefit, of for teens. had this the baseline became customer algorithms returned volume underlying Excluding QX, normal the return order supply in retailers through noisy QX more supply data. high patterns growth order

As normalizing, We result, us for supply retail mid-single-digit even irregular throughout still that a experience though QX. empty customer estimate demand could shelves patterns one order by egg reduced was these percentage.

one have normal expected a have order of that levels. we Now than had fourth books our returned more more supply, to

revenue $XX.X Gross dollars XX.X% second profit of quarter for net of profit of $XX.X million million XXXX second of or compared benefited was revenue quarter XX.X% XXXX. net headwinds, expansion or Gross for was our the the increased XXX than portfolio, gross of sales higher a margin few costs the more across packaging higher including higher and input costs. from primarily offsetting and basis point a pricing result to

of for employee-related SG&A support the was the or increased continued increase and growth. XX.X% as by to million The were grew $XX.X revenue marketing some second of primarily XX.X% $XX.X net driven net to quarter or last in we million SG&A higher in expenses headcount second year. our quarter compared costs expenses revenue

a revenue. as year-over-year of declined net SG&A expenses, marketing Excluding percent

Shipping and revenue in and second million revenue quarter million net $X.X in driven was to expenses X.X% better in distribution by rates net haul $X.X decline relative were The and decrease the second distribution truckload or or of utilization. of X.X% quarter a the line shipping XXXX. of expenses in

quarter or of was for quarter despite spend That marks increase planned adjusted year. EBITDA of previously million second and net $XX.X quarter EBITDA second marketing compared XX.X% was net the XXXX. for mentioned to revenue of in consecutive of margin million revenue the Adjusted the the the for achieved double-digit $X.X or X.X% second

capital update lastly, an And structure. on our

million, $XX.X increase marketable of cash, compared due As of had to first million equivalents XXXX, June and business $XX XX, the results. of strong to an the total we securities quarter cash

outstanding. We have no debt

update than now of prior more $XX expectation want expect Before We Furthermore, million, our of EBITDA concluding adjusted the prior of than you million, up call, fiscal from expectation year more XXXX raised now more of on our to million. more we than from guidance. expect revenue $XXX net our I up $XXX million. than $XX

second be will posted year that in we We of still expect the a the half year, first half. due the second In gross the half normal half continue back spending the anticipate what of of the to we primarily in the the promotional more below year to have continue margin SG&A, of the compared first to in higher half return to marketing cadence XXXX. in of

now Lastly, million of planning expenditures we of in prior range our $XX to below forecast the year are to XXXX million. for $XX $XX million million, fiscal capital $XX

line questions, the to reiterate open would for we points. a like I few Before

First, challenging successfully declined the in to that several navigated category we continue have and volume egg across this the grow quarter. dynamics category our anticipated

to taking retailer consumer and competitors protect different value approach pricing equation we the of are to a than of brand. our many our Second,

as at distribution volume can new dollar Third, and Vital existing our we be Farms. partners seen for growing retail and in continue share expand the to

be your investment. Thank your for have in for take the today With that, you to Farms Vital your and with now questions. time happy that interest we in placed you will and us confidence

Operator

Pamela [Operator please Morgan the first line Pamela, go comes from ahead. Instructions] The call Stanley. of Kaufman of

Pamela Kaufman

EBITDA Good the given But guidance in the the see $XX the a million good much in half lower quarter. morning. increased EBITDA to about guidance implies second margin. a first versus EBITDA half million in $XX It's performance raise your in second and

and what's driving outlook moderation how conservatism in the much profitability? this of for is your So

Thilo Wrede

the thanks question. for Pam,

how performance play. One from plays and order dislocations the at the that that I a quarter we few exactly, second are and reminder good in talked for a us was underlying were expected, there a quarter-to-quarter was while variances there's the think for as is, there the out. things patterns few we this quarter quarter --

sure we And make of if getting so to that ahead want. just we skis, are our want you not

So there is some there. in conservatism

with EBITDA And promotional ahead spending, all marketing our the margin And into weigh spend up half. planned want second those planning we into plays that get to the part sure on as we in other -- to The we bit is between get a don't make are conservatism our of cadence, we we that, to increases our are more guidance that and planning outlook. mentioned, some in skis. obviously and take we regular

Pamela Kaufman

just third quarter more patterns maybe in customer you you from Okay. the order you're what on And And then in can the quarter? elaborate second bit so what a far? seeing observed

Peter Pappas

Pam, this is Pete.

that the a things was in in dramatic orders of we One spike QX as AI. result of a saw

of a balance. order typically algorithms, of patterns drive as have adjust little spike. that now moderate was to -- into of little bit supplies retailer which a back result a As got the we What to kind those bit lot of a took time for saw come

the come those as orders supplies -- So balance. have into

to we're in orders start more return much What And normal we're -- see is now increase an normal to patterns. order as we to well. starting those a as seeing promote, a

bullish way with think have now algorithms have with that about we well we're these in in place. the really we the So I supply half imbalance. plans we're come up that planned have the back poised particularly that very And year, the the

Thilo Wrede

Everybody, up here. bring standby the for trying technical sec. to a We're figure issue please out

Operator

comes UBS. question of next now open. from line Cody, is Cody your Ross The the of line

Cody Ross

going Thank couple in understand your on us for are more of everyone. light taking to decision you your good dig A help back promotions you're about and in promotional what questions competitors our thinking doing. your into pull and how in you And especially Can your questions me. increasing for Great. morning, XQ? remarks, prepared just forward, intensity of

Russell Diez-Canseco

it's Cody, be Good with Russell. you. to

as industry thing led our the return the a guidance So was throughout the foretold the when of sort normal I of we as at is, dislocation, first and a as we describing time Pete gave predictably supply ordered would they beginning from the scarcity to some return time the a to year, to to say, plenty. switch had of and way in retailers distributors to of that

of impact some from tested inventory of up warehouses of that, and largely in The drawing QX, went around down their maybe they now, we're short-term and underordering shelves some having but stock underordering a and and then kind I built sort bit. believe bounced outs and occurred in over was then that ordering and on to for this having it they

missed single-digit, frankly, in-stock that growth a of The sort net hundred of, levels that result of thought points just it think I deliver by, which not the we would we guess, basis is was we of couple on seeing we QX. probably could that in

that priced the price a supply against were backdrop, overshoot, highly that perceptions also we to commodity time predicted same lead retailers playing So amongst recover a it's were very their looking full that eggs way the At to time very would out probably for producers. when in return an QX. and from especially to

sort dozen in result reality across really a label net or a ads The we're $X.XX which as promotional low commodity multi of as some don't $X.XX a one more sort eggs to of importantly, dozen ad the for And pack. splash front-page private of plans seeing the but against I very is limited, hot to X. throw front-page on try the our country intentional of price hot want for is a

driving again want we issues, opposed and until So until through add to Pete, driving can that? we're happy perception volume our then out the as to to you strategy consumers through of do those start retailers anything dislocations to to price wait their of their trial and supply of talk continue to promotions. very sort short-term regain promotions clean producers until oversupply out other play short-term kind

Peter Pappas

Thanks, Yes. Rusty.

add follow of we thing is be protective volume subsidize promotions. to the of very things. do summer I brand, we principles is is very, two we need One think through only and see want that one not would the I the a to

really off well The period. bulk of as in back-to-school our the kicks as in holiday volumes now

in retail all us This those our in you'll has begin retailers. partners. partnership with see been So frames in orchestrated our promoting with time support

in that is structure to deep given lot role really categories they the these We're offset be at discounting where, that our to understand And time, So position and a the they play driving. we provide that performance. this B, do, candidly, we a given A, we're we for the quite them. point to margin not of need margin then velocity that in promoting an

Cody Ross

Two quick helpful. super if ones more That's from I me, may.

your inform this seems trial makes Just naturally how as call of everyone coming today little rates repeat supply like this it's bit purchase supply down -- through just you a all the coming is help have back that more online? performed noise through Can sense. on, on

Thilo Wrede

Russell. ahead, Go

Russell Diez-Canseco

still not to going just repeat our seen rates. reality consistent big change repeat haven't that in But we've before it's out frankly, part And was we coming trial up that I improve as funnel. seen focus to conversion I'm team's to marketing The consistently to a behavior or during of down. of change pretty say and big loyalty get seeing purchase a continue a is to Yes. we really those a big COVID.

Cody Ross

Great. That's super me. helpful. Last one for

announced You share, high-level and expect can Can I September. that any leave in Analyst you we guys may an to just Day, on topics there. extent be it that thoughts will the addressed you some what believe, I recently can,

Russell Diez-Canseco

you're Pete you going us? to Are -- coming, join Cody. We hope

Cody Ross

with goal the goal. in now. college swing, right football the That's Often, That's so. September good full in sounds

Russell Diez-Canseco

it Thilo make Matt your while. and to worth are going

Cody Ross

That sounds good.

Thilo Wrede

gives accomplish us the plans. bit those a talk longer-term confidence with years don't opportunity for will how are, our the so what good financial able is that if what time is plans few college I community since which those -- a swing spend to be intention But the can we'll to we been about more plans, it's Cody, to So IPO, a know accomplish football. we then us

company an get the an bit know you and financial conversations community few more be will in-depth better. the I'm be to to opportunity maybe met have a haven't And opportunity it sit most of down to new, I a for yet, well. as will

Cody Ross

good. for taking sounds questions. Thank you luck. Best That our of

Russell Diez-Canseco

Thanks, Cody.

Operator

comes from of please Needham. next from McGinley The Matt the Matt, line ahead. go question

Matt McGinley

guidance, your it EBITDA X% shrink updated back in you. implies Thank EBITDA first in With to the your that XX% the half. half margin about from

like there profile But margin reasons in the into half, X% some that you EBITDA implied margin is a year, and meaning the next back built said conservatism rate noted that. run that's into new the You be upward growth. could

Are and kind of the the year back like weighted back the more high should look these average have year next towards half not unusually half of front dynamic low margin. year and expenses of half, just the for this margin,

Thilo Wrede

a so Matt, I would changed guidance, is What QX in which Yes, year. based how from bit it marketing moves depending quite margin, rate this we exit question. you're There's our on the when is our thanks the and is roll be really rate say the going on. that double margin to out seeing low around EBITDA quarter-to-quarter run spend we not next promotions on dollars EBITDA nothing for about digits. that for year

That's what for. we're aiming

this that We half year. have first accomplished

little our get second and how lower than as will growing on will with go. that But we a bit to And away look bit spending, to we that more half margin EBITDA that. is efficient The double-digit getting we basis. from consistent a want a take where that doesn't anything are

Matthew McGinley

on inventory. second My question Great. is the

inventory the Do and you expect decline volume the year last right impact to probably inventory through to year-end? up forward? from support any negate levels is AI. of support the going to growth the stock for inventory building business been You've Or the to level this potential

Thilo Wrede

inventory levels order our in slight supply the QX. in We've we come today, talking about expected where been for exactly year-to-date are it. has patterns the of So where dislocation

for. than we inventories be So have planned bit higher what a would may

the the But it to inventory the 'XX down draw year gives healthy of throughout balance us inventory and a position. start now opportunity with

that, so feel supply And growth that have position us for the right we the then our about that forward. the And need that comfortable gives going now. certainty we have we with we'll that

Russell Diez-Canseco

to would thing other this to call you've is sales. I is seasonality Yes. out as category there Matt, our and some own observed, that, the

annual and to we higher the in and winter eggs convince And when every so sales of the up in lay inventory lower, to some a back haven't because summer build actually chickens figured then planning. down the way baseline we draw are there is more that every it winter, summer than in a when out they're our

Matthew McGinley

sense. Great. makes you. Thank That

Operator

The from Goldman Adam next of question please Sachs. ahead. from go line the comes Adam, Samuelson

Unidentified Analyst

I or some morning, everyone. provide you you questions. taking stepping Thank if are if What of the expenditure lower program? Good This you walking the capital kind actually opportunities from? Guillermo is [ph] was color 'XX, could into 'XX away hold And for Adam. our on wondering on potential additional potentially for this capital are in that could the mean a putting guidance. deferral

Thilo Wrede

spending. guidance, updated really have of do the The Guillermo, joined place a I've that our execute in on. investments for since make focus to I've Part where thanks the sure last some pushing months capital it reflection assessment we're and about 'XX that four is right the what we question. it's done do that we money we to an the put into of resources

there's pushing is not we example, possible There's thing execute next we single are sure drives things are some several this make part the guidance. spending that for it. best that into year, that that really position of are technology Timing It's of that coming to reduction together. one to correctly. in So

Unidentified Analyst

potential And I helpful. of would you the super That's becoming for mentioned ask more conditions that a be start new the launch may follow-up active what on on necessary category a to previously. if had you

Russell Diez-Canseco

Russell. Guillermo, it's Well,

and the we've which that those have plan internal think operating an of in talked the confident we're cost in of in for way expectations we I own with whatever consistent detail part profitability in, that about capital. our have path we next do with terms with certainly to past -- risen rise calls, the

just considering us or category more new to back thing would think, speculative little help start-up one expansion as opportunities. it I kind would that would be of so a faster for certainly investments down, And anybody come see cost in move capital of

we if might to news rigor us, more will earnest. cost good continue we of when environment. it work that benefited a in brought even And for have and otherwise to capital is zero announce something, have in the it from So than we

Unidentified Analyst

That's super helpful.

Russell Diez-Canseco

Thanks, Guillermo.

Operator

question of please Smith from Matt the go Stifel. comes next line ahead. The Matt, of

Matt Smith

environment. I heard offering choices the a morning. in to Good environment And attractive the in with prioritizing Hi. see wanted the seen retailers bit consumer inflationary We've retailer that little egg points. ask the aggressive the desire about fits conventional promotional more maybe price we've stance to and more in category.

But I egg wanted to the premium get you to your the on velocities perspective distribution on if the you category? shelf, for are any product higher the retailers pushback gains hearing and you're price Are benefits therefore, overall the Or benefits still your the points? that seeing bring seeing premium products? from

Peter Pappas

Yes, And healthy you're of to the own to executing retailers a exactly to are Matt. the we deliver your premium see Yes, I category they're we the counterbalance discounting question. them. value What think that answered priced, margin promotions Thanks, we currently. the you bring and a we're right. do fact do kind that good and that

both still that those a existing of have a from the in we number distribution, new stores meaning as standpoint, of runway as have of items stores. We points distribution lot in well increasing new

channel store. the the on compare shopping grocery items, conventional competitor that can more of a state. the egg number largest exists that six branded do you of that see when to Natural in in shelves the grocery times in we two SKUs largest over and is than you the opportunities we have number Our which of our almost has in than segment, And items

amount we So just that think a of upside. tremendous there's

we're Our are of partners lot to recognize the that that them. with and starting work upside doing a

quite half, second well. in think, bullish extremely I'm positions So us I the really

Matt Smith

for retailer seen it's in those you of And of conventional bringing seeing shelf getting that that? more Maybe to types as label them, coming other conventional. products some that the well? products accommodate a smaller to options private little where activity if gains Are gains shelf the we've as are those have a follow-up, various claims from? that shelves than some attributes premium whether Is so,

Peter Pappas

Yes.

flattery. I think greatest of imitation the is form

seek so And is we're than we're to that. recognize retailers others for and that very, and what the something brand But powerful brand fortunately, just more very stands a And flattered our shoppers price. doing. it replicate

in bit yes, think encroaching see encroaching that in a it's the space shelf. we as performance. you can retailers see, starting It's space. to we So in little on our have dabble But that opportunity are I not not

So to it's not I since the But something anticipate really and we us. continue almost the new that been dabble. trend battling they'll for experiment a entered we've category. It's time

Matt Smith

Pete, I'll it and on. pass it leave there

Peter Pappas

Thank you.

Operator

question Jefferies. from ahead. from Robert Dickerson Rob, the go of next The line comes please

Robert Dickerson

Great.

I Just guess, a -- questions. a few

an of just like question, I First kind half, incrementally but given that area the Or this promo is -- in as terms ad of sales, can maybe ticking weighted where back different. just for full view the think about, a spend. taken? you year, and that When back you all of probably maybe is the materially maybe higher you percent guess, 'XX, up pricing not through kind little of half bit the it's to

of kind need. get sense to a depth and of trying magnitude Just promotional of

Russell Diez-Canseco

Russell. it's Rob, Yes.

the the about And want where to a is one the talk and because the years marketing quarter do that probably we our swings think me I strong more QX we've first peak for the that is most. is over QX that's category. sales observed Let for spend QX what this is promoting.

plans a of how of beginning of that when time and our spend level gave the our And marketing sales guidance in we QX to the at regardless of the year, back out, activity. advantage of included half we sort QX higher take stronger of when so the played of specifically -- year,

trying about prices simply we may a promote promote. the less little when So want from we be and to that's of -- how and about not more seasonality a want a high that little to to recover

I maybe spend, promotional done. encourage see period or Thilo, even of historically spend we've speak and terms -- I than in a Pete I levels too, of certainly, promotional up, of say would different broadly to don't us entering

in. historically -- that's I dialed appropriately we've think that had

more of normal a a pattern returns I more resumption think market of this as is dynamic. normal bit simply to a a little the

Robert Dickerson

there where in just And there Super. of think as to guess it I kind add? feed terms are. of are guess And that costs through have still farmers. been of Okay. kind contracts costs fickle, core I little deflationary. with of dynamics kind anything Is but like of have mean, the been pass-through some your markets commodity then a I you just you looks generally,

of end about the some sound promotional net pass-through might kind talking doesn't wondering, of spend? of on product kind dynamic it kind but just you're So there of on like the dynamics be contracts, the pass-through

Russell Diez-Canseco

The I'd that is call compare in substantially in we've plus. don't corn even years it's a some I short-term years it four latest thing Yes. higher ago. you than funny. it's Yes, three still few have just if and but Rob, the data, there, out it that But to up, cases, it's ago, XX% soy. maybe decline was seen or

that so ago. our with Station, hourly years And was combined hourly for crew Central is a higher -- at labor it from than everything just much Egg which few

We that things lot pay the we've do taken Certainly, we've in farmer up kind don't help would increases of above to outside of of those part in are reversing. what a feed. described, mechanisms see costs as contractual accommodate

the seen. this is probably those pricing hope to sense normal that pressures accommodate we've enough And so new terms the inflationary And pricing. that that in of of our is is our sort we've taken

Robert Dickerson

there the I some and in was then And terms just side cetera. et understand in volumes, the flocks normalizing, right, kind guess lastly, super. of order All I choppiness of

normalized. in called there that I you mid-single-digit kind one-off for think delta guess of kind have out that were I would it more demand. been of

you half the if X% in of like volumes on taking given I'm challenging. we're of double-digit back still like more I of putting and year, top mid-single-digit sort it potential. last to kind mean, Then maybe just and comps talking your volume strong seems necessarily low shipments thinking are of QX that in volume kind

I to trajectory. provide but of of volume So you know that sense level get if a just don't trying detail, health that

Thilo Wrede

the products I a not about in can months. volume we over last have we're mean, that we talked we giving that should some That is have get through. volume think second that about XX gained us the I Rob, Yes, help coming -- half, that resets X,XXX now shelf We the shelf do additional about on volume. sell But the new with fall will we help doors as guidance.

we And public, then a a have XXrd December. week and week this we in between year, first Christmas Year. New for since gone time It's the have

a So for drive, they'll it's us, how having territory, year. week bit what this an that of uncharted will is volume much but benefit of in upside the there terms mean extra of

the year. comfortable these come for volume pieces So are of you together we growth taking why balance all that get about we out pieces those reason And of as think feel the part will the the guidance.

Robert Dickerson

everyone. could distribution And the have All that right. for been board there is rate across than Is quick of maybe a run just through for down think half anything then normalized come of year? at the of a -- last the Or one shipping kind one, kind it has Clearly, general historically. rates QX, you attractive bit housekeeping. more kind as last of little kind that change? back you least -- of

Thilo Wrede

doing And different Yes. and to down would benefits a crystal right? there is a will fuel we haul at now, better be are really us, rates. down. But for rates that for If come distribution probably are assuming job. we have from ball, the come continue have costs year-over-year two just pieces work have line I that have One I

So that benefits certainly us.

And the truck, is with The you trucks. pay put efficient that right? shipping per with is We're on for part able more pallet. coming pallet don't more scale. cost is down. other the to that, per pay And our getting You pallets

us with growth are it efficient benefits more the some we through so for that margin distribution. delivering, drives And

Russell Diez-Canseco

seasonal Rob, internal uptick our sop expectations as bunch a own just QX, QX, well. own internal -- in the up our and us some for with assume capacity have to there's hurricane of volumes season But always seem potential

Robert Dickerson

Super. Fair enough. Fair enough.

Russell Diez-Canseco

Rob. Thanks,

Operator

Street Ben The next Markets. line comes from question the of of Klieve Lake Capital

Ben Klieve

Congratulations on a me. great quarter. from Two quick ones

in all of kind you outlook that this as various provide and is here that of you've First, suppliers volume about bringing are with next expectations over talking couple expected? about continuing in slowing quarters. choppiness informing next 'XX? and inventory these down? your in year additional for supply Can farmer Or into new to throughout year Are the dynamics talk you the on dynamics how that been

Russell Diez-Canseco

Yes. Thanks, Ben.

to sort on that years through-cycle do. itself long-term plan that we mentality working plans use everything that advance, those of kind and So of in start lends about we when we two we

call year a make a to the have about final We demand. in advance of

the vague we is answer from purposely now. So need a we're for planning now supply the year

the that. next to much you signal we not the is But and of what quite throughout company. is be reality adding throughout ready we're to we our our to is do year, year -- add we're how growth tell we're And going farms life the to adding think and

Ben Klieve

you that your elaborate most Okay. Fair products, is bit below for I'm Pete, here SKU expansion. was have your that how discussed on of one counterparts informing for other your of prepared your lot which your enough. that if SKUs some wondering product that are -- a volatility the the categories future in And peers on that a are tracked. and that can on certainly of comments, of one. you strategy then -- of you kind excess your

Peter Pappas

I'm the understand quite question. I sure sorry. Ben, I'm not

Ben Klieve

prepared relative So counterparts underperforming. -- said the most were are SKUs are velocity that on outperforming to that your which a in SKUs your and in that were remarks, basis that shelf, some of implies -- some you there

would what And a can to you dynamics velocity so of are be below expecting. curious I'm that having certain you kind elaborate if on leading bit SKUs the probably

if strategies sense, that on doesn't then okay. that's different the growth still in If make that's you behind that be future dynamics and great. product how any that can categories, elaborate And would informing

Russell Diez-Canseco

thing any our It's Russell. eggs. portfolio any which dozen we, about retailers to list. have got things show We've it's just The in in SKUs. our a heavy like top like is, company our carton hitters, X, black say our core are up I'd of not pasture-raised high-volume conventional SKUs, Ben, going if category, top one

XX-count dozen those. of Our we've pasture-raised carton of got organic both versions eggs. And then brown

four our SKUs. those top are most probably think popular I

any like items things. have, that also more We other CPG slowly than company, a of tail those longer move

or sell they'd a because in sometimes for pack not retailers, some us eggs strategic reasons, for see perhaps For media example, may in eat a week. eggs, jumbo eggs example, what in Manhattan, have size, example, household some smaller we off-sized to like for X-count single asked or apartment to XX a for them, eggs, dwellers a call, retailers,

Those we They top geographies, wonderful. items retailers perform the the need by of That's they're country. in that in be to retailer retailer, But items X. the specific specific but not be that. take may we meant they all may across for any our not

blue some egg, top winners matter should stores. got where these all some, items items, jumbo, a medium, We've belong in got that X-count, We've set. clear no more long not but be go, that specialty we four regenerative eggs, of your in perhaps tail

Ben Klieve

it. again quarter, I'll Got on and Got get it. That's Congratulations good in really a helpful. back line.

Russell Diez-Canseco

Ben. you, Thank

Operator

question Cowen. of TD comes Robert last from Moskow The

Robert Moskow

Congratulations, Thilo.

Thilo Wrede

Thanks, Rob.

Robert Moskow

welcome. You're

delayed. that be So price. and these a even the think Thilo, and balance I you cope guess been I to you you a on of I my probably question a But some million about $XX disappointing stock projects lot cash the contingencies found sheet And of is review said should year, you've know of there's It's now. that with. did got

are thought there Board to back the imagine about inherently are the structure? category using between of stock some any and possible which cash projects, expansion risky. given it capital Is Or those environment? you this buy not in is I and of management that some just

Thilo Wrede

where management, would now. we moment, say to things can between all never, plenty stock growth rather put our cash would the there agree we is are say, I But now. opportunities Rob, I I that current -- my Yes. at right the of after also Obviously, myself, that want would right go think think I the undervalued Board, never change.

has horizon. to entries with over powder many that make the I kind category that not But the list. we that come mindset, however next still we the we on months right as that, want keep say, to with can priority an our new would we're sure needed And capacity opportunity. I act so now, dry But have with when share the of on buybacks. expansion

Robert Moskow

the certainty. Appreciate Okay.

Russell Diez-Canseco

Thanks, to hear Rob. from Good you.

Operator

it I you. remarks. over closing to like Siler to turn Matt Thank now back would for

Matthew Siler

for and time, everybody. great Thanks your day. Have interest a

Vital Farms (VITL) 3 Aug 232023 Q2 Earnings call transcript