In an August 4th release, Vital Farms Inc. (VITL), a Certified B Corporation posted financial results for the second quarter of fiscal 2022. This specialty egg producer competes directly with producers and distributors of USDA Certified Organic and pasture-raised products including Pete and Gerry’s, Hidden Valley and Egg Innovations. The Company experiences the same pressures of increased cost of feed, contractor remuneration, labor and transport as competitors in a market environment subject to food inflation.
For the second quarter of FY 2022 ending June 26th 2022, net income was $199,000 on revenue of $82.9 million. Comparable figures for the second quarter of fiscal 2021 ending June 27th 2021 were net income of $3.9 million on revenue of $60.3 million. Diluted EPS fell from $0.08 for the second quarter of fiscal 2021 to zero for the most recent quarter. During the second quarter of 2021 the company received a tax benefit of $695,000.
Gross margin for the most recent quarter was 30.1 percent compared with 36.4 percent for the second quarter of 2021. Operating margin for the most recent quarter was 0.9 percent compared with 5.0 percent for the second quarter of 2021.
In commenting on results, Russell Diez-Canseco, President and CEO stated “We are pleased that our crew continues to surpass our expectations despite a tough operating climate” He added “Vital Farms remains the fastest-growing brand in dollars and gained more than double the amount of units relative to our next largest competitor in the egg category over the past 52 weeks. We continue to see gains in retail distribution and household penetration, which is up over 225 basis points from 3.5% in eggs around the time of our IPO. Our capacity build continues with a network that now exceeds 300 family farms and a fully operational expanded Egg Central Station, which puts us in position to double our current net revenue base to over $650 million.”
The Company retained guidance for FY 2022 with revenue of $340 million and an adjusted EBITDA of $13 million.
It is considered significant that in the statement of risks that included climatic factors, COVID and the war in Ukraine, management glossed over the possibility of HPAI infecting pasture-housed flocks that are more vulnerable compared to flocks confined to houses. There was no mention as to biosecurity and other preventive action and whether flocks were confined during the second quarter. If not this would have been imprudent. In the event that some or all of the flocks were confined as a preventive measure eggs should have been sold as “cage-free” and not “pasture maintained”
On June 26th 2022, Vital Farms posted assets of $200.2 million of which $6.4 million comprised intangibles against lease obligations of $1.5 million. The Company had an intraday market capitalization of $452 million on August 10. VITL trades with a forward P/E of 156 and has ranged over a 52-week period from $7.89 to $20.17 with a 50-day moving average of $9.92. Twelve-month trailing operating margin was -2.3 percent and profit margin -2.7 percent. Return on assets over the past twelve months was -2.4 percent and -4.1 percent on equity. Forty percent of Vital Farms equity is held by insiders with 68 percent by institutions. As of July 15th six percent of the float was short.