Vital Farms Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rob Dickerson - Jefferies - Analyst : I guess just a couple of questions about the cadence for the year because clearly, that's topical. I think you said in the prepared remarks that some of the farms that you had added in '24, I assume back in kind of Q2 '24 are now producing some eggs for sale for you. While at the same time, I'm hearing and realize that you have capacity constraints and the Q1 volumes will be a little bit lighter. I think you said a modest step down in growth relative to what you normally do. So two parts to the question. One is just like how many new farms, let's just say are now up and running already, right out of the ones you added last year selling eggs? And then when you speak to that modest step down in growth in Q1, relative to like the 22% for the year, is that like really modest? Or is that just a little bit modest because it also seems like there's some price mix coming through? So a lot in there, but I want to be comprehensive. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, VITL.OQ - Q4 2024 Vital Farms Inc Earnings Call

Question: Rob Dickerson - Jefferies - Analyst : And then it does sound like the actual volume number in Q1 year over year would still be positive. And the second piece would sound like there should still be some price mix benefit that comes through (technical difficulty).

Question: Robert Moskow - TD Cowen - Analyst : Your price/mix is up like 14% in fourth quarter. Is that a good proxy for how you think the year might play out for 2025? And the consumer is really getting hammered by these high egg prices. And I'm sure that creates some difficult decision-making for you all. Have you made any decisions internally on what to do with your pricing? And just from a list standpoint? And then a quick follow-up.

Question: Robert Moskow - TD Cowen - Analyst : And I'll follow up on the math later. I think we must be treating the 53rd week differently, and that's how we got our number for price/mix. My follow-up is eggs are in the headlines of news like every day, you go to the shelves, you can't find anything, you can't even find Vital Farms. In your like connections with consumers that you get, like how is that impacting the Vital Farms brand at all positively or negatively?

Question: Ben Klieve - Lake Street Capital Markets - Analyst : Congratulations on a good end of the year here. A couple of questions on the '25 outlook. First of all, regarding the introduction of the grading machinery that you talked about in ECS. Do you expect that, that will be a pretty seamless construction and integration? Or do you think there's going to be any time where capacity comes offline for a matter of days or weeks as you are introducing that?

Question: Ben Klieve - Lake Street Capital Markets - Analyst : And then the current outbreak of avian influenza here this winter, Russell, you noted in your prepared remarks that on a TTM basis, you've only had one outbreak on your several hundred farm network. It doesn't look like any of the recent outbreaks in the last few months could have possibly been from one of your farms. Did that outbreak happen prior to the kind of start of this winter? Or is that an event from the last several months? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, VITL.OQ - Q4 2024 Vital Farms Inc Earnings Call

Question: Jon Andersen - William Blair - Analyst : Congrats on a strong year. One for Russell and one for Thilo. Russell, just sticking with the AI line of questioning. I understand that you work with this close network of many family farms that mitigates risk in your supply chain in and of itself, but it seems like the metrics suggest that your farms are doing a better job of staying away from this. Is there anything that you can use to help explain that? It's a question I get a lot, like why isn't Vital

Question: Jon Andersen - William Blair - Analyst : And for Thilo, just to follow up on the 2025 outlook. You've stepped and stepping up marketing both in dollars and the rate relative to sales. At this kind of mid-five level, do you see that as a good sustainable level or opportunity to continue to take that up over time? And then a second part to that, I know you incurred some maintenance costs throughout 2024 in order to continue to push capacity bounds on ECS. Do you anticipate a similar level of maintenance costs in 2025, lower, higher, just kind of a general trend around that?

Question: Sarang Vora - Telsey Advisory Group - Analyst : Congrats on a great quarter and guidance. I have two questions. First is on the guidance. Can you help us on the factors that impact like your gross margin profile for '25? Any call-outs that you had last year? It seems like commodity is staying relatively stable. Pricing may be favorable with less promotions. So just any puts and takes on the gross margin outlook for '25 would be helpful.

Question: Sarang Vora - Telsey Advisory Group - Analyst : And I have a question on Accelerator Farms. It seems like the first farm is going to be up and running this year. Can you help us a little bit on what is the expectation there? How big is the farm? Anything different you are doing with the farm than your typical farm, any lab testing facility? Any color you can give on that upcoming opening of the first farm. And then you almost have over 1,000 acres of farmland over there. So just curious on the thought process on how the build-out happens over the next couple of quarters.

Question: Matt Smith - Stifel, Nicolaus & Company, Incorporated - Analyst : Russell, just a follow-up question around the pricing environment. You talked about some retailers taking pricing across the category, including on your products. Where that's occurring? Are you seeing retailers take prices higher kind of across the category for brands, including Vital that have been less sensitive to more regular price increases? And how do you think that plays out from here? It would seem like, on one hand, you could argue Vital is leaving some pricing on the table for retailers capturing it. But on the other hand, it may be more near term related to the supply-demand imbalance and retailers trying to balance how much eggs are being sold through.

Question: Matt Smith - Stifel, Nicolaus & Company, Incorporated - Analyst : And a follow-up on the -- we've talked a lot about avian influenza on supply/demand, but I wanted to ask if you're seeing an avian influenza impact on the time line or cost for farms coming online, if there's been any disruption to pullet placement or anything along those lines? It seems like that's not the case given you're still seeing a nine-month time line for those new farms coming on board. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 27, 2025 / 1:30PM, VITL.OQ - Q4 2024 Vital Farms Inc Earnings Call

Question: Eric Des Lauriers - Craig-Hallum Capital Group - Analyst : Congrats on the strong results. My question relates to the new production line coming online in Q4. Should we expect that to deliver a step function impact to revenues? Or will that be more gradual as you sort of methodically ramp production? Of course, that coincides with many of these family farms coming online. So I understood Q4 will see growth acceleration either way. Just wondering about plans for utilization on day one, so to speak.

Question: Eric Des Lauriers - Craig-Hallum Capital Group - Analyst : My follow-up is on the pace of family farm additions for 2025, nice growth with 125 family farms last year. How should we think about that pace for 2025? And then just in terms of the accelerator farms, understanding that will remain a very small percentage of overall production, but how might that impact gross margins or OpEx this year?