Vital Farms, Inc. (NASDAQ:VITL), a leading producer of ethically sourced and pasture-raised food products, has reported stellar financial results for the first quarter of fiscal year 2024, surpassing expectations and prompting the company to raise its full-year guidance.

Financials

In the first quarter of 2024, Vital Farms delivered net revenue of $147.9 million, a 24.1% increase compared to the prior-year period. This strong performance was driven by a combination of volume growth of 18.4% and price/mix improvements of 4.9%. The company's net income for the quarter reached $19.0 million, while its annual net income for fiscal year 2023 was $25.6 million. Vital Farms' annual revenue for fiscal year 2023 was $471.9 million, and its annual operating cash flow and free cash flow were $50.9 million and $39.4 million, respectively.

"We kicked off the year with another record quarter," said Thilo Wrede, Chief Financial Officer of Vital Farms. "Our net revenue rose to $147.9 million, an increase of 24.1% compared to the prior year period, driven by strong volume growth and favorable price/mix."

Gross profit for the first quarter of 2024 was $58.9 million, or 39.8% of net revenue, compared to $42.7 million, or 35.8% of net revenue, in the first quarter of 2023. The significant improvement in gross margin was primarily driven by a favorable price/mix, enhanced operational efficiencies, and benefits of scale. Conventional commodity costs and lower diesel expenses also contributed to the margin expansion, partially offset by increased promotional activity and higher overhead costs as the company scales its operations.

Selling, general, and administrative (SG&A) expenses for the first quarter of 2024 were $27.1 million, or 18.3% of net revenue, compared to $23.9 million, or 20.1% of net revenue, in the first quarter of 2023. The increase in SG&A was primarily driven by higher investments in the company's crew members and increased marketing expenditures to support Vital Farms' growth initiatives.

Shipping and distribution expenses in the first quarter of 2024 were $7.6 million, or 5.1% of net revenue, compared to $7.8 million, or 6.6% of net revenue, in the first quarter of 2023. The decrease in shipping and distribution costs was attributable to a decline in line-haul rates, lower diesel prices, and internal operational efficiencies.

Vital Farms' adjusted EBITDA for the first quarter of 2024 was $29.1 million, or 19.7% of net revenue, compared to $13.9 million, or 11.6% of net revenue, in the first quarter of 2023. This significant improvement in adjusted EBITDA margin was driven by the strong top-line growth and operational leverage.

"We are very excited to build on this momentum, especially as we are making plans to break ground on our new facility next year," added Wrede. "We remain focused on building greater retail penetration to raise brand awareness and deliver our eggs to more and more households."

Outlook

Looking ahead, Vital Farms has raised its full-year 2024 guidance. The company now expects net revenue of at least $575 million, representing growth of at least 22% compared to the previous expectation of at least $552 million, or 17% growth. Additionally, the company has increased its adjusted EBITDA guidance to at least $70 million, or at least 45% growth, compared to the previous expectation of at least $57 million, or 18% growth.

"The updated guidance reflects the stronger than expected first quarter, increased confidence in our performance for the remainder of the year, and higher conviction in a more favorable commodity outlook," explained Wrede.

Vital Farms' capital expenditure guidance for fiscal year 2024 remains in the range of $35 million to $45 million, including a $11 million timing shift from the CapEx spend that was initially planned for 2023. The company anticipates elevated CapEx spending over the next few years due to the construction of its new egg washing and packing facility in Southern Indiana, with the majority of the spending occurring in 2025 and 2026.

Recent Developments

In addition to the strong financial performance, Vital Farms also announced plans to build a new state-of-the-art egg washing and packing facility in Southern Indiana. This new facility is expected to initially support 165 new family farms and employ 150 additional crew members, and is anticipated to begin generating revenue in 2027, contributing meaningfully to the company's goal of achieving $1 billion in annual net revenue by 2027.

"We've signed an agreement to purchase land for our next state-of-the-art egg washing and packing facility, which will be in Southern Indiana," said Russell Diez-Canseco, President and Chief Executive Officer of Vital Farms. "This new facility is planned to incorporate similar high-quality design principles as our Egg Central Station facility in Springfield, Missouri, and will create an important link to the rigorous standards, deep institutional knowledge, and executional excellence that we've established in Springfield."

Conclusion

Vital Farms' strong performance in the first quarter of 2024 and its raised full-year guidance demonstrate the company's ability to execute on its growth strategy and capitalize on the increasing consumer demand for ethically sourced and premium food products. With the planned expansion of its production capacity and continued focus on operational excellence, Vital Farms appears well-positioned to achieve its long-term financial targets and solidify its position as a leading player in the natural and organic food industry.