In a November 3rd release, Vital Farms Inc. (VITL), a Certified B Corporation posted financial results for the third 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 has experienced the same pressures including increased cost of feed, contractor remuneration, labor and transport as competitors in a market environment subject to food inflation. Vital Farms has however benefitted from the increase in wholesale prices for eggs in common with all egg producers.
For the third quarter of FY 2022 ending September 25th 2022, net income was $723,000 on revenue of $92.0 million. Comparable figures for the third quarter of fiscal 2021 ending September 26th 2021 were a net loss of $1.32 million on revenue of $64.6 million. Diluted EPS rose from $(0.03) for the third quarter of fiscal 2021 to $0.02 for the most recent quarter.
Gross margin for the most recent quarter was 32.0 percent compared with 30.7 percent for the third quarter of 2021. Operating margin for the most recent quarter was 2.2 percent compared with (2.8) percent for the third quarter of 2021.
In commenting on results, Russell Diez-Canseco, President and CEO stated “Vital Farms continues to challenge food system norms and deliver strong results,” Vital Farms’ President and He added “Our brand has maintained its positive momentum, as exemplified by 28% year-over-year volume growth during our third quarter, outpacing the category, which declined 0.5%. Our company produced both sequential and year-over-year gross margin improvement, and adjusted EBITDA improved by $5 million relative to the same period last year. This performance occurred during the most inflationary grocery environment in over 40 years” He concluded “Vital Farms added further retail distribution this quarter, and our household penetration was up over 40 percent compared to the same period last year to nearly 8 million homes.”
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 did allude to the possibility of HPAI infection. Flocks allowed outside access on pasture are more vulnerable compared to flocks confined to houses. The report did not mention biosecurity procedures and other preventive action. There was no reference as to whether flocks were confined during the third 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 labeled as “cage-free” and not “pasture” held.
On September 25th 2022, Vital Farms posted assets of $206.6 million of which $6.1 million comprised intangibles against long-term lease obligations of $1.0 million. The Company had an intraday market capitalization of $546 million on November 9th. VITL trades with a forward P/E of 53 and has ranged over a 52-week period from $7.89 to $20.17 with a 50-day moving average of $12.49. VITL traded at $14.35 at noon on November 9th. Twelve-month trailing operating margin was -1.1 percent and profit margin -1.3 percent. Return on assets over the past twelve months was -1.1 percent with -2.8 percent on equity. Thirty six percent of the equity of Vital Farms is held by insiders with 64 percent by institutions. As of October 13th 4.8 percent of the float was short.
For purposes of comparison the Cal-Maine Foods report for the 1st quarter of FY 2023 ending August 27th documented a gross margin of 33.0 percent, an operating margin of 24.9 percent and a profit margin of 19.0 percent. The Cal Maine Foods report covers essentially the same cost and price environment as the third quarter of Vital Foods. The complete Cal Maine Foods report can be retrieved by entering Cal Maine in the SEARCH block.