Q1 2024 Vital Farms Inc Earnings Call
Okay.
Operator: Good day, and thank you for standing by. Welcome to the Vital Farms first quarter 2024 earnings conference call.
Good day, and thank you for standing by.
Speaker Change: Welcome to the vital farms first quarter 2024 earnings conference call.
Operator: At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. You will then hear an automated message advising that your hand has been raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand it over to the first speaker today, Anthony Buccallo.
Speaker Change: At this time, all participants are in listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question during the session you will need to press star one one on your telephone.
Speaker Change: We'll then hear an automated message advising that your hand, it's been raised.
Speaker Change: I draw your question. Please press star one again.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand, it over to you.
Speaker Change: The first speaker today Anthony to Carlo.
Anthony Buccallo: Thank you. Good morning, and welcome to Vital Farms' first quarter 2024 earnings conference call and webcast. I'm pleased to speak with you all today on my first earnings call as Vice President of Investment Relations, joined on today's call by Russell Diaz-Conseco, President and Chief Executive Officer. Thilo Wrede, Chief Financial Officer, and Pete Pappas, Chief Sales. By now, everyone should have access to the company's first quarter 2024 earnings press release issued this morning.
Speaker Change: Thank you.
Speaker Change: And welcome to the vital farms first quarter 2024 earnings conference call and webcast I'm pleased to speak with you. All today on my first earnings call as Vice President of Investor Relations I'm joined on today's call by Russell <unk>, President and Chief Executive Officer, <unk>, Chief Financial Officer, and Pete <unk> Chief.
Speaker Change: Sales officer by now everyone should have access to the company's first quarter 2024 earnings press release issued this morning.
Anthony Buccallo: This is available on the investor relations section of Vital Farms' website at investors.vitalfarms.com. Throughout the course of this call, management may make forward-looking statements within the meaning of federal securities law. These statements are based on management's current expectations and beliefs and do involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release, the company's quarterly report on Form 10-Q for the fiscal quarter ended March 31st, 2024, filed with the SEC today, as well as our other filings with the SEC, for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.
Speaker Change: This is available on the Investor Relations section of vital farms website at investors <unk> Dot com.
Speaker Change: Throughout the course of this call management may make forward looking statements within the meaning of federal Securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements.
Speaker Change: Please refer to today's press release, the Companys quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2024 filed with the SEC today as well as our other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied.
Speaker Change: Any forward looking statements made today.
Anthony Buccallo: Please note that on today's call, management will refer to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to our earnings release for a reconciliation of adjusted EBITDA and adjusted EBITDA margin to their most comparable measures prepared in accordance with GAAP. Now, I would like to turn the call over to Russell Diaz-Canseco, President and Chief Executive Officer of Vital Farms.
Speaker Change: Please note that on today's call management will refer to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures. While the company believes these non-GAAP financial measures provide useful information for investors.
Speaker Change: Presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.
Speaker Change: Please refer to our earnings release for a reconciliation of adjusted EBITDA and adjusted EBITDA margin to the most comparable measures prepared in accordance with GAAP.
Speaker Change: Now I would like to turn the call over to Russell <unk>, President and Chief Executive Officer of vital parks.
Russell Diez: Good morning, and thanks for your time today. And Tony, welcome again to Vital Farms. For those who haven't met Tony Bacallo, Tony joined us in April and will be leading investor relations at Vital. He's got a background as an analyst at Credit Suisse, Santander, and HSBC, and he most recently led investor relations at Nomad. We're grateful you're here, Tony.
Russell: Good morning, and thanks for your time today and Tony welcome again to vital cars.
Russell: For those who haven't met Tony but Colo Tony joined US in April and will be leading that investor relations at Viropharma.
Russell: He's got a background as an analyst at credit Suisse, Santander and HSBC and he most recently led Investor relations at Nomad Foods.
Speaker Change: We're grateful you here Tony.
Russell Diez: I'll start today's call with the big headlines from the quarter. We have some great results to share. I'll then hand it over to our Chief Sales Officer, Pete Pappas, to discuss how the relationships we've built with our customers are contributing to continued strong demand. Thilo Wrede, our CFO, will then provide more in-depth information on our first quarter results, as well as updated guidance for fiscal year 2021.
Speaker Change: I'll start today's call with the big headlines from the quarter, we've had some great results to share.
Speaker Change: Then hand, it over to our Chief sales officer, Pete Pappas to cover how the relationships. We've built with our customers are contributing to continued strong demand.
Speaker Change: <unk>, our CFO will then provide more in depth information on our first quarter results as well as updated guidance for fiscal year 2024.
Russell Diez: So let's get to the first piece of big news today, which is that we had a record first quarter with $147.9 million in net revenue and 24% net revenue growth over the prior year period. We delivered $29.1 million of adjusted EBITDA, which is double, double the first quarter of 2023, as well as 400 basis points of gross margin expansion, which is a nearly 40% gross margin. Those numbers would be impressive in any quarter, but they're particularly impressive as we start this year.
Peter Pappas: So let's get to the first piece of Big news today, which is that we had a record first quarter with $147 9 million in net revenue and 24% net revenue growth over the prior year period.
CFO: We delivered $29 1 million of adjusted EBITDA, which is double double the first quarter of 2023 as well as 400 basis points of gross margin expansion, which is a nearly 40% gross margin.
Peter Pappas: Those numbers would be impressive in any quarter, but they are particularly impressive as we start this year.
Russell Diez: As you'll remember, we grew 55% in the first quarter of 2023, due in part to the category disruptions from avian influenza. In our fourth quarter call, we projected some headwinds as we lapped that result this quarter. Growing 24% over one of the strongest quarters in our history, year over year, reinforces our belief that momentum is building here at Vital Farms. I'm very encouraged by these results.
Peter Pappas: As Youll remember, we grew 55% in the first quarter of 2023 due in part to the category disruptions from avian influenza.
Peter Pappas: And our fourth quarter call, we projected some headwinds as we lap that result, this quarter drilling.
Peter Pappas: Drilling 24% over one of the strongest quarters in our history year over year reinforces our belief that momentum is building here at vital farms I'm very encouraged by these results.
Russell Diez: One of the biggest drivers of our growth and the remarkable results this quarter is our incredible team at Egg Central Station in Springfield, Missouri. Over the past year, the team at ECS has redoubled its efforts to recruit and retain a phenomenal workforce. And they've made operational improvements that enable us to more effectively meet customer demand. We're just flat out better at getting our high-quality eggs packed and shipped. And we were already pretty good to start with.
Peter Pappas: One of the biggest drivers of our growth and the remarkable results. This quarter is our incredible team at AG Central station in Springfield, Missouri.
Peter Pappas: Over the past year the team at ECS has redoubled its efforts to recruit and retain a phenomenal workforce and they've made operational improvements that enable us to more effectively meet customer demand.
Peter Pappas: We're just flat out better at getting our high quality eggs packaging shipped and we were already pretty good to start with.
Russell Diez: Our ECS crew just secured two big pieces of recognition that I want to call out. First, our Quality Assurance Manager, Robert Clark, on behalf of the entire ECS team, received the 2024 Excellence in SQF Practitioner Leadership Award from the Safe Quality Food Institute. This is one of the most prestigious awards in our industry and reflects our commitment to delivering safe, high-quality food. It recognizes Robert's role in promoting food safety and inspiring the next generation of food safety leaders. It was an honor to help celebrate Robert's leadership when this incredible news came.
Peter Pappas: Our ECS crew just secured two big pieces of recognition that I want to call out.
Peter Pappas: First our quality assurance manager Robert Clark on behalf of the entire ECS team received the 2020 for excellence in SQL practitioner leadership award from the Safe quality Food Institute.
Peter Pappas: This is one of the most prestigious awards in our industry and reflects our commitment to delivering safe high quality food.
Peter Pappas: It recognizes roberts role promoting food safety and inspiring the next generation of food safety leaders.
Peter Pappas: It was an honor to help celebrate Roberts' leadership when this incredible news came through.
Russell Diez: Our expansion at ECS also just became a LEED Gold certified operation, further validating the investments we've made there in sustainable design. ECS is a remarkable facility. It's visibly different from most of the other food processing facilities you'll see, with solar panels in the parking lot, natural grasslands surrounding the building, and thoughtful design choices that support crew member health and help us run ECS as a zero waste to landfill facility.
Peter Pappas: Our expansion at ECS also just became a LEED gold certified operation further validating the investments we've made there in sustainable design.
Peter Pappas: ECS is a remarkable facility.
Peter Pappas: Its visibly different than most of the other food processing facilities Youll see with solar panels in the parking lot natural grass land surrounding the building and thoughtful design choices that support crew member health and help us run ECS as a zero waste to landfill facility.
Russell Diez: So we've demonstrated expertise in building and running a state-of-the-art facility in Springfield. We have a strong cash position, and we have continued profitable growth along with rising demand for our products. As a result, we have the confidence to make the next major investment that will help propel us to $1 billion in net revenue and beyond. Which brings me to our second big piece of news.
Peter Pappas: So we've demonstrated expertise building and running a state of the art facility in Springfield, we have a strong cash position and we have continued profitable growth along with rising demand for our products.
Peter Pappas: As a result, we have the confidence to make the next major investment that will help propel us to $1 billion in net revenue and beyond.
Speaker Change: Which brings me to our second big piece of news today.
Russell Diez: 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. This new facility is planned to incorporate similar high-quality design principles as our AgCentral Station facility in Springfield, Missouri, and we anticipate that it will initially be able to support 165 new family farms and employ 150 additional crew members. We expect to break ground in 2025, begin hiring in the summer of 2026, and begin operations shortly thereafter.
Speaker Change: We've signed an agreement to purchase land for our next state of the art egg, Washington packing facility, which will be in southern Indiana.
Speaker Change: This new facility is planned to incorporate similar high quality design principles as our AG Central station facility in Springfield, Missouri, and we anticipate that it will initially be able to support 165, new family farms and employ a 150 additional crew members.
Speaker Change: We expect to break ground in 2025 began hiring in the summer of 2026 and begin operations shortly thereafter.
Russell Diez: Our crew members from ECS are going to lead the way in bringing our new facility to life. They will create an important link to the rigorous standards, deep institutional knowledge, and executional excellence that we've established in Springfield. This will also help in our training and mentoring of our new workforce in Indiana.
Speaker Change: Our crew members from ECS are going to lead the way in bringing our new facility to life.
Speaker Change: It will create an important link to the rigorous standards deep institutional knowledge and execution excellence that we've established in Springfield.
Speaker Change: This will also help in our training and mentoring of our new workforce in Indiana.
Russell Diez: We expect to begin generating revenue from this facility in 2027, which will contribute meaningfully to our goal of achieving $1 billion in annual net revenue by 2020. We believe the land for this facility will not only provide significant capacity beginning in 2027. But we'll also allow for flexibility to add additional capacity in the future as we scale beyond our 2027 target. We're now working with local stakeholders in Indiana on a formal announcement, and we'll share the precise location of the new facility in the near future. One last note before I hand it over to you.
Speaker Change: We expect to begin generating revenue from this facility in 2027, which will contribute meaningfully to our goal of achieving $1 billion in annual net revenue by 2027.
Speaker Change: We believe the land for this facility will not only provide significant capacity beginning in 2027.
Speaker Change: But will also allow for flexibility to add additional capacity in the future as we scale beyond our 2027 targets.
Speaker Change: We're now working with local stakeholders in Indiana on a formal announcement and we'll share the precise location of the new facility in the near future.
Speaker Change: One last note before I hand, it over to Pete.
Russell Diez: As we talk about investments in our future, I want to call out the new line of butter products that we announced in April. Our team conducted a global search, and that's not an exaggeration, for the best butter supplier we could find. We're now working with Family Farms in Ireland to deliver a delicious, great-looking product that is 90% grass-fed. We have maintained our unwavering commitment to product quality, animal welfare, and support for
Peter Pappas: As we talk about investments in our future I want to call out the new line of butter products that we announced in April.
Speaker Change: Our team conducted a global search and Thats not an exaggeration.
Speaker Change: The best butter supplier, we could find.
Peter Pappas: We're now working with family farms in Ireland to deliver a delicious great looking product that is 90% grass fed.
Speaker Change: We've maintained our unwavering commitment to product quality animal welfare and support for family farms.
Russell Diez: We also introduced bold new packaging that reinforces our premium brand identity and really stands out on the show. We keep this butter stocked at our house, and my family loves it. I encourage everyone to give it a try.
Speaker Change: We also introduced bold new packaging that reinforces our premium brand identity and really stands out on the shelf.
Speaker Change: We keep this butter stocked at our house and my family loves It I encourage everyone to give it a try.
Russell Diez: There's a lot of good news here. We're off to a strong start. I remain confident in our ability to sustain this momentum and achieve our ambitious long-term financial targets. It's great to see this business hit on all cylinders, and we're making hay while the sun's shining. This allows us to make smart, long-term investments in our people, brand, and infrastructure, and it gives you a taste of what Vital Farms is capable of. I'll now hand this over to our Chief Sales Officer, Pete Pappas.
Speaker Change: There's a lot of good news here, we're off to a strong start.
Speaker Change: I remain confident in our ability to sustain this momentum and achieve our ambitious long term financial targets.
Speaker Change: It's great to see this business hit on all cylinders, and we're making hay, while the Sun's shining.
Speaker Change: This allows us to make smart long term investments in our people brand and infrastructure and it gives you a taste of what vital farms is capable of.
Speaker Change: I'll now hand, it over to our Chief sales Officer, Pete Pappas.
Peter Pappas: I appreciate the chance to represent our incredible sales team, share some of the success we've had in the marketplace, and talk about how we're building trusted relationships with Vital Farms customers. As Russell mentioned, we had a record first quarter.
Peter Pappas: Thanks Russell.
Peter Pappas: I appreciate the chance to represent our incredible sales team share some of the success we've had in the marketplace and talk about how we're building trusted relationships with vital farms customers.
Peter Pappas: As Russell mentioned, we had a record first quarter.
Peter Pappas: Last November, in our Q3 earnings call, I talked about our category-first approach, where we work with our retail customers to increase sales and margin performance across the entire ag category. We believe this is a real differentiator for Vital Farms. It reinforces our position as a thought leader and a premium brand. And importantly, it's contributing to strong results as we expand availability with new and existing customers. We expanded distribution, increased the number of SKUs at existing stores, and delivered growth with higher price point SKUs.
Peter Pappas: Last November and our Q3 earnings call I talked about our category first approach, where we work with our retail customers to increase sales and margin performance across the entire AG category.
Peter Pappas: We believe this is a real differentiator for vital farms.
Peter Pappas: It reinforces our position as a thought leader in premium brand.
Peter Pappas: And importantly, it's contributing to strong results as we expand availability with new and existing customers.
Peter Pappas: We expanded distribution increase the number of skus that existing stores and delivered growth with higher price point Skus.
Peter Pappas: This enabled us to grow sales and unit volume well above the rest of the category in the first quarter. I believe our role in this critical category is to be the driver of overall category performance for our retail customers. That means growing faster than the category and competition. Looking deeper at the data in the track channels during the 13 weeks ended March 24, 2024, I'm pleased to say we continue to deliver outsized performance. The egg category experienced a retail dollar decline of 19%, while Vital Farms grew retail dollar sales, in comparison, by 35% in the same period.
Peter Pappas: This enabled us to grow sales and unit volume well above the rest of the category in the first quarter.
Peter Pappas: I believe our role in this critical category is to be the driver of overall category performance for our retail customers that.
Peter Pappas: That means growing faster than the category and competition.
Peter Pappas: Additionally, the category saw unit volumes up 6% during the same 13-week period, while Vital Farms unit volume grew by about 27%. Our conventional 12 count in the black carton is the number one branded SKU in the food category based on dollar sales. As a reminder, due to the mixed shift to 18-count packs, our volume growth in track channels tends to be underreported.
Peter Pappas: Looking deeper at the data in the tracked channels. During the 13 weeks ended March 24th 2024, I am pleased to say, we continue to deliver outsized performance.
Peter Pappas: The AG category experienced a retail dollar decline of 19% while vital farms grew retail dollar sales in comparison by 35% in the same period.
Peter Pappas: Additionally, the category saw unit volumes up 6% during the same 13 week period, while vital farms unit volume grew by about 27%.
Peter Pappas: Our conventional 12 count in the Black Carton is the number one branded SKU in the food category based on dollar sales as a reminder, due to the mix shift to 18 count packs are volume growth in tracked channels tends to be underreported.
Peter Pappas: Much of our growth has come from wins that we locked in during Q3 and Q4 last year, particularly with many of our larger national customers, where we're now the number one or number two best selling branded egg by dollar. We're also expanding our footprint with a focus on independent grocers through collaboration with natural and conventional distributors. Many of these gains will be seen in Q2 as spring shelf resets are completed in the next few weeks.
Peter Pappas: Much of our growth has come from wins that we locked in during Q3 and Q4 last year, particularly through many of our larger national customers, where we're now the number one or number two best selling branded AG by dollars.
Peter Pappas: We're also expanding our footprint with a focus on independent grocers through collaboration with natural and conventional distributors.
Peter Pappas: Many of these gains will be seen in Q2 as spring shelf resets are completed in the next few weeks.
Peter Pappas: Last quarter, we said that we would have a more normalized promotional cadence in 2024 to drive trial and reach new consumers. The approach is working as it has helped us achieve the growth we've seen so far this year. We've built a disciplined strategy and cadence that maintains our premium brand position, supports our category-first approach, and provides our retail partners with the desired impact on their business. Our food service business had a strong quarter, and we're pleased with the progress we're making on that.
Peter Pappas: Last quarter, we said that we would have a more normalized promotional cadence in 2024 to drive trial and reach new consumers.
Peter Pappas: Approach is working as it has helped us achieve the growth we've seen so far this year.
Peter Pappas: We've built a disciplined strategy and cadence that maintains our premium brand position supports our category first approach and provides our retail partners with the desired impact to their business.
Peter Pappas: Our foodservice business had a strong quarter and we're pleased with the progress we're making on that front.
Peter Pappas: The strength of the Vital Farms brand is a key strategic advantage that lends itself to unique partnership opportunities with restaurants and operators. We'll continue to execute our strategy as we align with restaurant concepts that are committed to sourcing ethical, premium ingredients. I want to close with thanks to the Vital Farms sales team, the entire Vital Farms supply chain team, and our farmers for delivering an incredible product. My team has the privilege of representing Vital Farms in the conversations we have with customers, and we deeply appreciate all the work that goes into getting our premium eggs and butter onto shelves each and every day. With that, I'll pass it over to Thilo.
Peter Pappas: The strength of the vital farms brand is a key strategic advantage, which lends itself to a unique partnership opportunities with restaurants and operators.
Peter Pappas: We will continue to execute our strategy as we align with restaurant concepts that are committed to sourcing ethical premium ingredients.
Speaker Change: I wanted to close with thanks to the vital farm sales team the entire vital farm supply chain team and our farmers for delivering an incredible product.
Speaker Change: My team has the privilege of representing vital farms and the conversations we have with customers and we deeply appreciate all the work that goes into getting our premium eggs and butter onto shelves each and every week.
Speaker Change: With that I'll pass it over to <unk>.
Thilo Wrede: Thank you, Pete. Hello, everyone, and thank you for joining us today. I will review our financial results for the first quarter ended March 31st, 2024, and then provide details on our updated guidance for fiscal year 2024. We kicked off the year with another record quarter. Our net revenue rose to $147.9 million, an increase of 24.1% compared to the prior year period. This was driven by strong volume growth of 18.4% and a price mix of 4.9%. Volume growth was driven by increases at both new and existing retail customers and is in line with our mostly volume-driven growth plans for the year.
Speaker Change: Thank you Pete Hello, everyone and thank you for joining us today.
Speaker Change: We view our financial results for the first quarter ended March 31, 2024, and then provide details on our updated guidance for fiscal year 2024.
Speaker Change: We kicked off the year with another record quarter.
Thilo Wrede: 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 for the first quarter of 2023. The increase in gross profit was primarily driven by a price-mix benefit, enhanced operational efficiencies, and benefits of scale. Conventional commodities and lower diesel costs contributed to the margin gain.
Speaker Change: Net revenue rose to $147 9 million, an increase of 24, 1% compared to the prior year period.
Speaker Change: Driven by strong volume growth of 18, 4% and price mix of four 9%. The volume growth was driven by increases at both new and existing retail customers and is in line with our mostly volume driven growth plans for the year.
Speaker Change: 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 for the first quarter of 2023.
Speaker Change: The increase in gross profit was primarily driven by price mix benefit and.
Speaker Change: Operational efficiencies and benefits of scale conventional commodities and lower vehicle costs contributor to the margin gains. The gross margin upside was partially offset by a return to a normal promotional rate as well as increased investment in our crew members at central station and higher overhead costs as we scale our world class.
Thilo Wrede: The gross margin upside was partially offset by a return to a normal promotional rate as well as increased investment in our crew members at Ex Central Station and higher overhead costs as we scale our world-class organization. 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 last year. The increase in SG&A was driven primarily by the increased investment in crew members as well as increased marketing investment as we scale.
Speaker Change: Jason.
Speaker Change: SG&A expenses for the first quarter of 2024 were $27 $1 million were 18, 3% of net revenue compared to $23 9 million or 21% of net revenue in the first quarter of last year.
Speaker Change: The increase in SG&A was driven primarily by the increased investment in crew members as well as increased marketing investment as we scale.
Thilo Wrede: Shipping and distribution expenses in the first quarter 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 expenses was driven by a decline in line haul rates, lower diesel costs, and internal operational efficiency.
Speaker Change: Shipping of distribution expenses from the first quarter were $7 6 million or five 1% of net revenue compared to $7 8 million or six 6% of net revenue in the first quarter of 2023 the.
Speaker Change: The decrease in shipping and distribution expense was driven by a decline in line haul rates lower diesel costs and internal operational efficiencies.
Thilo Wrede: Net income for the first quarter of 2024 was $19.0 million, or $0.43 per diluted share, compared to $7.2 million, or $0.16 per diluted share, for the first quarter of 2023. 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, for the first quarter of 2023. Finally, a quick update on our capital structure. As of March 31st, 2024, we had total cash, cash equivalents, and marketable securities of $137.5 million with no debt outstanding.
Speaker Change: Net income for the first quarter 2024 was $19 <unk> million or <unk> 43 per diluted share compared to $7 2 million or <unk> 16 per diluted share for the first quarter of 2023.
Speaker Change: Adjusted EBITDA for the first quarter of 2024 was $29 1 million or 19, 7% of net revenue.
Speaker Change: Third to $13 $9 million or 11, 6% of net revenue for the first quarter of 2023.
Speaker Change: Finally, a quick update on our capital structure as of March 31, 2024, we had total cash cash equivalents and marketable securities of 137 5 million with no debt outstanding.
Thilo Wrede: Now, looking ahead, for the full fiscal year 2024, we are now guiding to net revenue of at least $575 million, or at least 22% growth, compared to our previous expectation of at least $552 million, or at least 17% growth. And we're guiding to adjusted EBITDA of at least $70 million, or at least 45% growth, compared to our previous expectation of at least $57 million, or at least 18% growth. This updated guidance reflects a 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.
Speaker Change: Now looking ahead for the full fiscal year 2024, we are now guiding to net revenue of at least $575 million or at least 22% growth compared to our previous expectation of at least $552 million.
Speaker Change: Or at least 17% growth.
Speaker Change: And we're guiding to adjusted EBITDA of at least $70 million.
Speaker Change: Or at least 45% growth compared to our previous expectation of at least $57 million.
Speaker Change: Or at least 18% growth.
Speaker Change: This updated guidance reflects the stronger than expected first quarter increased confidence in our performance for the remainder of the year and higher conviction and a more favorable commodity outlook.
Thilo Wrede: We remain focused on reinvesting in marketing and expanding our retail presence in order to drive awareness, deepen loyalty with consumers, and ultimately drive household penetration on our path to 30 million households by 2027. We continue to expect higher adjusted EBITDA margin in the first half versus the second half of 2024. Given the better-than-expected growth in Q1, we now expect net revenue growth to be relatively evenly split between the first and the second half of the year.
Speaker Change: We remain focused on reinvesting in marketing and expanding our retail presence in order to drive awareness deepen loyalty with consumers and ultimately drive household penetration on our path to 30 million households by 2027.
Speaker Change: We continue to expect higher adjusted EBITDA margin in the first half versus the second half of 2024.
Speaker Change: Given the better than expected growth in Q1, we now expect net revenue growth to be relatively evenly split between the first and the second half of the year.
Thilo Wrede: Lastly, on guidance, we still expect fiscal year 2024 capital expenditures in the range of $35 to $45 million. Note that this includes the previously highlighted $11 million of timing shift from the CAPEX spend that was initially planned for 2023. We anticipate having elevated CAPEX spending over the next few years because of the new facility, with the majority of the spending occurring in 2025 and 2026. We believe we have the necessary funds to build the facility and project that every dollar of CapEx investment in this new facility will generate more than $5 of annual revenue capacity, which we consider a really strong return.
Speaker Change: Lastly on guidance, we still expect fiscal year 2020 for capital expenditures in the range of $35 million to $45 million.
Speaker Change: Note that this includes the previously highlighted $11 million of timing shift from the Capex spend that was initially planned for 2023.
Speaker Change: We anticipate having elevated capex spending over the next few years because of the new facility with a majority of the spending occurring in 2025 and 2026.
Speaker Change: We believe we have the necessary funds to both the facility and protect that every dollar of Capex investment in this new facility will generate more than $5 of annual revenue capacity, which we consider a really strong return we continue to evaluate our capital allocation priorities and if necessary, we'll provide updates on future earnings.
Thilo Wrede: We continue to evaluate our capital allocation priorities and, if necessary, will provide updates on future earnings calls. Overall, the first quarter was a very strong start to the year for Vital Farms, and we are very excited to build on this momentum, especially as we are building plans to break ground on our new facility next year. We remain focused on building greater retail penetration to raise brand awareness and deliver our eggs to more and more households.
Speaker Change: Paul.
Speaker Change: Overall, the first quarter was a very strong start to the year for BARDA farms and we are very excited to build on this momentum, especially as we are building plans to break ground on our new facility next year.
Paul: We remain focused on building greater retail penetration to raise brand awareness and deliver our X to more and more households.
Thilo Wrede: Before I close, let me also once again welcome Tony Buccalo to the Vital Farms team. I'm very much looking forward to working with him and benefiting from his experience as we continue to build out our investor relations function. Thank you for your time and interest in Vital Farms today and for the confidence that you have placed in us with your investment. With that, we will now be happy to take your questions.
Speaker Change: Before I close let me also once again welcome Tony Blue collar to the Viropharma team I'm very much looking forward to working with him and benefiting from his experience as we continue to build out to our investor relations function.
Speaker Change: Thank you for your time and interest in Biopharma today and for the confidence that you have placed in us with your investment with that we will now be happy to take your questions.
Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A.
Speaker Change: Thank you at this time, we will conduct a question and answer session.
Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to adjusted to your question.
Speaker Change: Please press star one again, please standby, while we compile the Q&A roster.
Operator: Our first question comes from Brian Holland of D.A. Davidson. Go ahead, Brian.
Speaker Change: Moscow on there too okay.
Speaker Change: Brian comes from Brian Holland of D. A Davidson go ahead, Brian.
Brian Patrick Holland: Yeah, thanks. Good morning, everyone. Maybe just to start, good morning.
Brian: Yes, thanks, good morning, everyone.
Brian: Just to start good morning.
Russell Diez: So, you know, to your point, Russell, first quarter growth was really strong in the context of lapping the previous avian influenza cycle. I think what also continues to be impressive is the balance of distribution and velocity growth in the business. If I just focus on the velocity side, can you frame all the benefits of increased skew placements in stores? I know you've moved off a base of closer to two. So, you know, thinking about the out of stock issues that can happen when you're that lightly represented on shelves. And so actually adding skews, rather than cannibalizing your business, it's actually driving greater productivity. So it may be just a comment on that and what you're seeing there.
Brian: So.
Brian Patrick Holland: To your point Russell first quarter growth really strong in the context of lapping the previous avian influenza cycle.
Brian Patrick Holland: I think what also continues to be impressive as the balance of distribution and velocity growth in the business.
Brian Patrick Holland: Just focus on the velocity side can you frame at all.
Brian: The benefits of increased SKU placements at stores I know you've moved off a base of closer to two so thinking about the out of stock issues that can happen when when youre that lightly represented on shelves and so actually adding skus rather than cannibalizing your business, it's actually driving greater productivity.
Speaker Change: So maybe just a comment on that and what Youre seeing there.
Russell Diez: Thanks, Brian. I appreciate the question. I think it's an important one for us at this point in our growth, and it's a really interesting phenomenon. So first of all, what we saw in the early days when we got our first SKU on the shelf with a new retail partner was that sometimes it was a little hard to stand out on a shelf. There are an awful lot of SKUs in the egg set, and the egg set is pretty tight as it is, and it's crammed with all this variety. And so it's really hard to get anybody's attention with one look at our little carton of eggs. Even if you knew where to look for us, it might be hard to find us.
Speaker Change: Thanks, Brian I. Appreciate the question I think it's an important one for for US at this point in our growth and it's a really interesting phenomenon. So first of all what.
Russell Diez: The second facing, even if our velocities justified the second facing of that first SKU, typically would be another item. And what we often found was there was zero cannibalization of the first with the second. In fact, in many cases, we saw an interesting pattern, which was that our maybe daily or even sometimes weekly revenue from that slot was about exactly one case worth of product, meaning we basically sold out and then waited for replenishment.
Speaker Change: What we've seen in early days when we got our first SKU on the shelf with a new retail partner was that sometimes it was a little hard to to stand out on a shelf there an awful lot of skus in the AG and the egg set.
Speaker Change: It is pretty tight as it is and its cramped with all this variety and so it's really hard to get anybody's attention with one facing of our little carton of eggs.
Speaker Change: Even if you knew to look for us it might be hard to find us the second facing even if our velocities justify the second facing of that first SKU typically would be another item and.
Speaker Change: And what we often found was there was zero cannibalization.
Speaker Change: The first with the second in fact in many cases, we saw an interesting pattern, which was that our.
Speaker Change: Maybe daily.
Speaker Change: Or even sometimes weekly revenue from that slot was about exactly one case worth of product meaning with.
Speaker Change: We basically sold out and then waited for replenishment.
Russell Diez: And so, as we supported this brand, we were very strong in terms of conveying value to consumers and building brand loyalty. There was demand for it, and the question is, can we support it on the shelf? So, often the additional SKUs have two impacts. One is potentially addressing a different household need, whether it's with a larger pack size, for example, or an organic versus a non-organic product. But it's also simply more holding power on the shelf and visibility on the shelf for our brand.
Speaker Change: And so as we were supporting this brand were very strong in terms of conveying the value to consumers and building brand loyalty. The demands there and the question is can we supported on the shelf. So often the additional skus have two impacts one is potentially addressing a different.
Russell Diez: And we see that when we add the second, the third, and the fourth. So there's both a leaning toward growing consumer demand but also a leaning toward satisfying existing demand that happens when we add SKUs to the shelf. And it's a powerful force.
Brian Patrick Holland: Appreciate all that, Colin, Russell. And then... Maybe just focusing below the top line now, you know. You guys have targeted a 12 to 14% EBITDA margin long-term, and 35% gross margin. Obviously, we're looking at a 40% gross margin this morning and closer to a 20% EBITDA margin. I understand there are moving parts, commodity, tailwinds, and such, but you've also highlighted operational efficiency, scale benefits, etc. So, I just wonder as we look forward, you know, is it too early or to what extent the first quarter results here sort of lead to thinking about maybe a higher margin profile on this business longer term. Yeah, thanks, Brian. I appreciate where you're going.
Speaker Change: This business longer term.
Russell Diez: Yeah, thanks, Brian. I appreciate where you're going. And I think we all like to dream a little. But I, you know, I caution against thinking about a fundamentally different business profile here. I think we've been very intentional with that long-term guidance for some important reasons. You know, you could imagine a couple of things that are helping us, you know, supporting our profitability, our profit profile right now that may or may not be true in the future.
Speaker Change: Yeah, Thanks, Brian I I, I, appreciate where you're going in and I think we all like to dream, a little I, you know I'd I'd caution against thinking about a fundamentally different business profile here I think we've been very intentional would that longterm guidance.
Speaker Change: For some important reasons.
Speaker Change: You can imagine a couple of things that.
Speaker Change: Are helping us supporting our profitability profit profile right now that.
Speaker Change: That may or may not be true in the future one is as.
Russell Diez: One is, as you know, I think many of you are seeing, we have had some nice, sort of temporary, potentially transitory benefits from some changes in commodity costs, for example. And, you know, we're not immune to changes in commodity costs, although we've done, I think, an admirable job of making sure we're insulated from really big swings. And that's a little bit of a tailwind right now, to be very frank. Another is that we, you know, we're at a moment in time when I think we've got, we've built a lot of great distribution in the last year and added a lot of high-quality households that are having a nice conversion to more loyal households.
Speaker Change: I think many of you are seeing we have had some nice.
Speaker Change: Sort of.
Speaker Change: Temporary potentially transitory benefits from some changes in commodity costs for example, and that.
Speaker Change: That we're not immune to changes in commodity costs, although we've done I think an admirable job of making sure. We're insulated from really big swings and that's a little bit of a tailwind right now to be very Frank.
Speaker Change: Another is that.
Speaker Change: We.
Speaker Change: We're at a moment in time when I think we've got.
Speaker Change: We built a lot of great distribution and last year and added a lot of high quality households that are having a nice conversion to more loyal household and that's been a wonderful tailwind. We've we've got a lot of what we've been saying around here is we're really firing on all cylinders. He got a lot of things going right N as in and you know I'm I'm someone who.
Russell Diez: And that's been a wonderful tailwind. We've got a lot of, what we've been saying around here is that we're really firing on all cylinders. We've got a lot of things going right. And as, and, you know, I'm someone who likes to hope for the best but plan for the worst. And so I love the results we're seeing, and I don't have a reason to say we won't have similarly strong results throughout the year. I think the guidance we've given for our long-term targets is an appropriate place to be.
Speaker Change: Likes to hope for the best plan for the worst and so I love. The results were seeing and I don't have a reason to say we won't have similarly strong results throughout the year.
Speaker Change: I think the guidance, we have given for our long term targets isn't appropriate place to be angry.
Speaker Change: Okay. Thank you.
Operator: Okay, thank you. Thank you. Please stand by for our next question. And our next question comes from Matt Smith with Stifel. Matt, go ahead.
Speaker Change: Thank you please stand by for our next question.
Speaker Change: And our next question comes from Matt Smith was stifle Matt go ahead.
Matthew Edward Smith: Hi, good morning. I wanted to ask a question about the phasing of revenue growth. You mentioned a more equal phasing between the first and second half. You started the first quarter very strongly, which suggests a bit of a slowdown in the second quarter before a re-acceleration in the second half. Just wanted to make sure I understood that correctly, and if you could talk about some of the dynamics in the second quarter, I believe you have a bit of a tailwind coming off of AI benefits where on-shelf availability returned very healthily for the rest of the category.
Matthew Edward Smith: Hi, good morning.
Matthew Edward Smith: Wanted to ask a question about the phasing of revenue growth you mentioned, a more equal facing between the first and second have you started the first quarter very strongly which suggests a bit of a slowdown in the second quarter before Ah reacceleration in the second half just wanted to make sure I was understanding that correctly and if you could.
Matthew Edward Smith: Talk about some of the dynamics in the second quarter I believe you have a bit of a tailwind coming off of AI benefits. We're <unk>. We're on shelf availability returned very helps me for the rest of the category.
Thilo Wrede: Yeah, that's a good question, Matt. I think when we started the year, we didn't expect Q1 to be this strong. So with that, we thought growth in the second half would be bigger than in the first half. Given how the first quarter came in, we were now thinking growth was going to be much more evenly split between the first and second half. You're right to point out that last year we had a probably weaker than expected second quarter after the first quarter tailwinds from AI.
Speaker Change: Yeah, Chris Murphy.
Chris Murphy: I think when we started the year, we didn't expect Q wrong to read the strong so without sauce.
Speaker Change: And the second half would be bigger than the first half.
Speaker Change: How the first quarter came in.
Speaker Change: I was thinking Grove is going to be much more easily.
Speaker Change: Between the first and second half you are right to point out that last year.
Speaker Change: We had a probably a week of unexpected second quarter. After the first quarter Tailwinds from a I.
Thilo Wrede: The order patterns by retailers took a bit to catch up to new demand patterns, and so orders last year, in the second quarter, were a bit slower than we had expected. So now we need to lap that to create the headwind for us this year in the second quarter. And so that is, Matt, where our thinking now comes out that the first and second half of the year will be relatively similar in overall growth, second quarter, I would assume growth being better than first quarter, despite the setbacks that I just talked about simply given that we had this massive lapping from the first quarter last year.
Speaker Change: The order patterns by retailers say.
Speaker Change: Took a bit to catch up to demand.
Speaker Change: Patterns and so.
Speaker Change: Orders last you a second quarter were.
Speaker Change: Slower than what we have expected so now we need to laugh that creates.
Speaker Change: Creates a headwind for us this year on the second floor and so that is Matt where our thinking now comes out that first and second half of the year will be relatively similar in Oklahoma growth.
Speaker Change: Uhm.
Speaker Change: Second quarter, I would assume grocery and better than first quantity et cetera, et cetera, just talked about simply given that where you have this massive laughing from the first quarter last year. So there's a lot of play, but what we're seeing so far.
Thilo Wrede: So there's a lot of play. But what we're seeing so far is that the orders keep coming in at a very healthy clip. I think when you look at scanner data, you see this all through. And so the business is in very good shape right now.
Speaker Change: The orders.
Speaker Change: Keep coming in.
Speaker Change: Pretty healthy clip I think when you look at the counter data as you see this all through.
Speaker Change: The businesses Rosenberg whichever on that.
Matthew Edward Smith: Thank you. And just one follow-up question for me.
Speaker Change: Thank you and just one follow up for me can you talk about your ability to continue to meet the volume demand.
Russell Diez: Can you talk about your ability to continue to meet the volume demand? Volume demand obviously started the year very strongly, above your expectations. Have you been able to keep pace with new farm additions and confident in your ability to service the demand if it stays at this elevated level through the year?
Speaker Change: The volume demand, obviously started the year very strongly above your expectations have you been able to keep pace with.
Speaker Change: Nufarm additions and confident in your ability to to service the demand if it stays at the celebrated levels and through the year.
Russell Diez: Yeah, I think it's another terrific question. It's the other side of the supply and demand question. The short answer is yes.
Speaker Change: Yeah, I think it said another terrific question as to the other side of the supply and demand question. The short answer is yes.
Russell Diez: We absolutely have, you know, the supply of eggs and capacity to deliver on our plan and our guidance this year and then some. And that's generally how we operate. We always have, we try to have some cushion, some additional capacity in order to meet maybe unexpectedly high demand or, frankly, to meet the growing demand that we're seeing from consumers and retailers. So that, you know, that continues to be a source of strength, I think, in this industry for us.
Speaker Change: We absolutely have.
Speaker Change: The supply of eggs and capacity to deliver on our plan and our guidance. This year and then some and that's generally how we operate we always have we try to have some some cushions. Some additional capacity in order to meet that may be unexpectedly high demand or frankly to meet meet the growing demand that we're seeing.
Speaker Change: From consumers and retailers.
Russell Diez: Great farm relations and a wonderful ability to build a pipeline of excited new growers. I think it's a reminder, I think it's an important reminder, of how we are very intentional in our planning and we try to make sure that we're eliminating any bottlenecks to our growth proactively. It's why part of our news today is choosing a site and buying land for our next egg packing plant, even though we won't actually start packing eggs there for a few years, because we want to make sure that when we need it, it's there reliably.
Speaker Change: So that that continues to be a source of strength I think in this industry for us.
Speaker Change: Great Foreign relations and a wonderful ability I think to to build a pipeline of excited new new growers I think it's a reminder, I think it's an important reminder of.
Speaker Change: Of how we are very intentional in our planning and we try to make sure that we're eliminating any bottlenecks to our growth proactively it's Y part of our news today is.
Speaker Change: Choosing a site and buying land for our next.
Speaker Change: Egg packing plant, even though we won't actually start packing X there for a few years, because we want to make sure that when we need it it's there reliably.
Thilo Wrede: And Matt, let me just add one point from the, basically just reiterating from the prepared remarks. We have the supply of eggs, we have the pipeline of farms to come online over time, but we have also, in the last 12 months, I think, made a lot of changes at ECS to make sure that we have the supply of eggs; we can process them, we can put them in cartons, we can get the cartons out the door. So these operational improvements that we have seen at ECS are a big part of why we are able to grow volumes as well.
Speaker Change: Madeleine from images from the Brazil, just reiterating from the prepared remarks see we also supply of eggs. We have a pipeline of farm. So come online all the time, but we also have the last 12 months I think there's a lot of changes said ECS to make sure that the supply of X. We can process them, we can put them in gardens.
Speaker Change: The carbons out the door.
Speaker Change: So the cities operational improvements that we have seen a D. C. S. A big part of why we were able to to grow volume that's right.
Matthew Edward Smith: Thank you, Thilo and Russell. I'll pass it on.
Speaker Change: Thank you to human Russell personal.
Operator: Thank you. One moment for our next question, and our next question comes from Ben with Lake Street Capital Markets. Go ahead, Ben.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from Ben with Lake Street Capital Markets Go ahead then.
Ben: All right, thanks for taking my question. Just kind of one high-level strategic question from me here, given the success that you guys have seen here, especially in the last few quarters. And that's, to what extent does your kind of recent success impact your growth strategy? Does it make you less inclined to pursue, you know, new, you know, new adjacent markets? Does it make you want to expand the scope of your new facility? Or is your kind of long-term vision really unchanged in the context of your recent results?
Ben: Alright, Thanks for taking my question I, just kind of one high level strategic question for me here given the success that you guys have seen.
Ben: Seeing here specialty tolerating over the last few quarters.
Ben: And that's to what extent is your kind of recent success impact your growth strategy does it make you kind of less inclined to pursue you know new new adjacent market does it make you want to expand the side the scope of your new facility or is your kind of long.
Ben: Term vision really unchanged in the context of your recent results.
Russell Diez: Thanks, Ben. It's Russell.
Ben: <unk>. Thanks, Ben It's Russell I'll take I'll take that and see if tayloe finds anything to add.
Russell Diez: I'll take that and see if Thilo finds anything to add. But you know, the short answer is it doesn't affect our confidence in this brand and its ability to grow to be, you know, the most trusted food brand in this country. And that, you know, could mean being in more categories beyond the ones we're already in. The reality is that I think the risk that companies face, perhaps at this phase in their growth, is that they can get distracted.
Russell: The short answer is it doesn't affect our confidence in the in this this brand and its ability to grow to be the.
Russell: Most trusted food brand in this country and that.
Speaker Change: Could mean being in more categories beyond the ones, we're already in will likely.
Russell: The reality is that I think the risks that companies face perhaps at this phase in their growth often is that they can get distracted.
Russell Diez: And I think a lot of what has helped us get to this place and have such momentum here, instead of maybe starting to see cracks in the foundation of this place, is our intense focus and intentionality on scaling a world-class organization, scaling systems and capabilities to support the incredible growth that we're driving. And so, job number one is to not take our eyes off the ball as we explore the incredible interest and demand from consumers and retailers and, frankly, even from our farmers, enter new categories, and bring even more solutions to households in this country and to retailers in this country.
Russell: And I think a lot of what has helped us get to this place and have such momentum at this place instead of may be starting to see cracks in the foundation of this place is our intense focus and intentionality on scaling a world class organization scaling systems and capabilities to support the incredible growth that we're dry.
Russell: Living and so job number one is to not take our eyes off the ball.
Russell: As we explore the incredible interest and demand from consumers and retailers and frankly, even from our farmers.
Russell: Enter new categories and to bring even more solutions to households in this country and to retailers in this country and so it's not an either or it's and and and you know my focus is on making sure that as we do both of those things we do them, both really well so that's a little bit of a win the answer to the question of does it affect our timing does it affect our.
Russell Diez: And so it's not an either-or, it's an, and, you know, my focus is on making sure that as we do both of those things, we do them both really well. So that's a little bit of a vague answer to the question of whether it affects our timing or affects our focus.
Russell Diez: Not at all. The real answer is that I believe there's a future for Vital Farms that expands beyond primarily eggs, and we will get there when we are confident that we can do that well and really take this egg business to its full potential, which we haven't quite found a limit to.
Russell: Focus not at all the real answer is I believe there's a future for vital farms that expands beyond primarily eggs and we will get there when.
Russell: We are confident that we can do that well and really take this egg business to it's full potential which we haven't quite found a limit to at this point.
Ben: Got it. Very, very helpful. Lots more to talk about, but I'll leave it there. Congratulations on a great, great quarter, and I'll jump back in queue. Thank you.
Speaker Change: Got it very very helpful.
Speaker Change: Plenty more to talk about but I'll leave it there congratulations on a great great quarter, and I'll jump back and kill.
Speaker Change: Thank you.
Operator: One moment for our next question. Our next question comes from Robert Dickerson of Jefferies. Go ahead, Robert.
Speaker Change: One moment for our next question.
Speaker Change: Okay.
Speaker Change: Our next question comes from Robert Dickinson of Geoffrey's go ahead Robert.
Robert Frederick Dickerson: Great. Thanks, so much.
Robert Frederick Dickerson: Great, thanks so much. Hey, guys. Order up. Good morning.
Robert Frederick Dickerson:
Robert Frederick Dickerson: Hey, guys.
Robert Frederick Dickerson: I just had a couple of questions, or maybe just one core question on gross margin. Apologies; I jumped on the call a little late. Clearly, gross margin was very impressive in Q1. It seems like what's kind of implied is that margin steps down maybe as we get through the year, just given how you got it to EBITDA. So, I guess one, maybe just kind of speak to why that might not be sustainable, but also in the context of the longer-term kind of outlook and goal to get to a mid-30s gross margin, because it seems like we're there, right? So, maybe, Russell, too, if you could just spend a minute speaking to maybe what the new potential could be, because I feel like you kind of hit the target. Thanks.
Robert Frederick Dickerson: Right.
Robert Frederick Dickerson: Good morning, just had a couple of questions or maybe just one core question on gross margin apologies I jumped on the call it'll wait clearly gross margin very impressive.
Robert Frederick Dickerson: In Q1, it seems like what's kind of implied is that margin steps down maybe as we get through the year just given how you guys to EBITDA. So I guess, one maybe just speak to.
Robert Frederick Dickerson: Like why that might not be sustainable, but also in the context of like the longer term.
Robert Frederick Dickerson: You know kind of outlook and goal to get to like a mid thirties gross margin.
Robert Frederick Dickerson: Because I mean, it seems like we're there right. So maybe Russell too if you could just spend a minute speaking to.
Robert Frederick Dickerson: Maybe what the new potential creepy, because I feel like it kind of hit the target. Thanks.
Thilo Wrede: Yeah, well, let me take this one, Thilo. Gross margin, clearly, we were ahead of our long-term target this quarter. I think we had a few benefits that we don't necessarily expect to repeat quarter after quarter after quarter. This was a quarter where everything went right, we had no disruptions, there were no weather events, there were, you know, crew did an incredible job at ECS. We had a benefit from commodities. We put the pricing on the organic portfolio at the beginning of the quarter, and we didn't see any price elasticity impact on that one. That wasn't expected.
Russell: Let me take those on those too low.
Russell: Gross margin clearly, but we were ahead of our long term target. This quarter I think we we had a few benefits that we don't necessarily expect to repeat for a quarter of decor.
Robert Frederick Dickerson: This was a corner, where where everything went right. We have no disruptions. There were there were no weather events there were.
Robert Frederick Dickerson: True did an incredible job or to ucs.
Robert Frederick Dickerson: We had a trend.
Robert Frederick Dickerson: Newsweek crossing on the organic portfolio at the beginning of the corner, we didn't see any any tries to elicit disagreed impact on that one that was unexpected.
Thilo Wrede: And so on, right? And so with that, the margin was a bit better than we expected. We don't necessarily foresee that happening every quarter from here on out. Nor do we expect that to be the case when we get to 2027. So the mid-30s targets that we laid out for 2027, that is still what we're aiming for. What this quarter now allows us to do is to do a bit of reinvestment in the business, putting a bit more money into marketing than we had previously planned, maybe accelerating some of the hiring to build capabilities and, to Russell's earlier answer, to scale this world-class organization that's been part of the growth algorithm for us
Robert Frederick Dickerson: And saw right and so with that the margin most was a bit better than what we expected.
Robert Frederick Dickerson: Necessarily foresee that happening every corner from here on out.
Robert Frederick Dickerson: Expect that to be the case, when we get to 2000 2000 settlement. So the myths service targets that we laid out for 2027 that is so what we're aiming for.
Thilo Wrede: And so that is why the EBITDA margin that's pretty much implied in the guidance, it. We don't expect the EBITDA margin from the first quarter to carry through for the rest of the year because of these reinvestments.
Robert Frederick Dickerson: What's this form an hour allows us to do is to do a bit of reinvestment in the business, putting a bit more money into marketing.
Robert Frederick Dickerson: Previously planned mainly accelerating.
Robert Frederick Dickerson: Some of the hiring to build capabilities. So Russell's earlier answer both those were the scale of this world class organization that that's why I'm proud of that.
Robert Frederick Dickerson: Growth algorithm for us and.
Robert Frederick Dickerson: So that is why the B EBITDAR margin notes.
Robert Frederick Dickerson: Pretty much implied in the gardens.
Robert Frederick Dickerson: We don't expect EBITDA margin from the first floor to <unk> for the rest of the year.
Thilo Wrede: But these reinvestments are very much in line with how we think about the business, right? We plan it for the long term. We invest for the long term. We make the investments before we need them. And so hiring staff maybe a bit earlier than necessary so that we can get up to speed and, you know, allow us to ultimately grow faster. Investing in marketing when we can so that we ensure that we get to that household penetration number that we need for the billion dollars in revenue by 2027. That is what this quarter now allows us to do, and that is why we expect the EBITDA margin for the year to come in where the government implies it. OK.
Robert Frederick Dickerson: Abuse Reinvestments, but these reinvestments are very much in line with what is how we think about the business wise we've done it for the long term, we invest for the long term, we make the investments before we need them.
Robert Frederick Dickerson: So hiring through maybe a bit earlier than necessary for them and we got up to speeds and.
Robert Frederick Dickerson: Allow us to ultimate as we grow faster investing in marketing when we can so that we ensure that we get to that household penetration number that we need for the $1 billion in revenue by 202007 that is what this quote an hour allows us to do and and that is why we expect the download some sort of you to come in.
Robert Frederick Dickerson: Where where are the gardens and plaza.
Robert Frederick Dickerson: Okay, well said. Thank you.
Speaker Change: Okay I'm all.
Speaker Change: All set thank you.
Robert Frederick Dickerson: And then, you know, I guess maybe just kind of a broader question around demand, you know, well, if you clearly continue to, you know, grow volumes very nicely, you know, if we listen to a lot of different food companies or, you know, read the news, what have you, right, there's, you know, ongoing pressure, especially on the low-end consumer. Some people would say, wow, those eggs are expensive But at the same time, you know, eggs, on a kind of per-serving basis, aren't that expensive as, you know, an alternative form of grain protein.
Speaker Change: And then you know I guess, maybe it's kind of a broader question around demand you know.
Speaker Change: Look you clearly continue to grow volumes very nicely.
Speaker Change: Uhm.
Robert Frederick Dickerson: We listened to a lot of different food companies or read the news what have you right. There is ongoing pressure, especially on the low end consumer some people would say wow those eggs are expensive.
Robert Frederick Dickerson: But at the same time, you know eggs.
Robert Frederick Dickerson: Per serving basis.
Robert Frederick Dickerson: That expensive as.
Robert Frederick Dickerson: An alternative form of scraped protein. So I I'm, just curious kind of like what's your feel is around kind of your own given you know demand kind of demographic.
Robert Frederick Dickerson: So, I'm just curious, kind of like, what your feel is around kind of your own given, you know, demand and kind of demographic focus, you know, vis-a-vis kind of, you know, the broader consumer landscape and kind of how eggs fit into that. So, a lot in there, but an important question. Thank you.
Robert Frederick Dickerson: Demographic focus <unk>.
Robert Frederick Dickerson: These are the kind of the broader consumer landscape and kind of how exit into that so what in there but important questions. Thank you.
Robert Frederick Dickerson: Mmm.
Peter Pappas: Yeah, I think you're right. We continue to see that bifurcation within our category. As consumers migrate to value as well as to premium, we're obviously very well positioned. We're pleased because we've been able to maintain our discipline from a promotional standpoint. We see a very strong performance in our base, which I'm really proud of. And I don't anticipate that changing at all throughout the balance of this year.
Speaker Change: Yeah, I think you're right [noise], we continue to see that bifurcation.
Speaker Change: Within our category.
Speaker Change: As consumers migrate to value as well as to premium.
Speaker Change: We're obviously very well positioned we're pleased because.
Robert Frederick Dickerson: We've been able to maintain our discipline from a promotional standpoint, we see a very strong.
Robert Frederick Dickerson: Performance in our base.
Robert Frederick Dickerson: Volume, so we're not getting a disproportionate amount of our growth and promotion.
Robert Frederick Dickerson: We're seeing <unk>.
Robert Frederick Dickerson: Extremely strong performance in our base velocity.
Speaker Change: Which I'm really proud of.
Speaker Change: And I don't anticipate that changing it all throughout the balance of this year. So we we've been very disciplined as we've talked about in the past.
Peter Pappas: So we've been very disciplined, as we've talked about in the past. We will continue to be very disciplined about that. Fortunately, the brand stands for something, and I think consumers recognize that.
Speaker Change: Continue to be very disciplined about that unfortunately, the brand stands for for something and I think consumers recognize that.
Speaker Change: The.
Thilo Wrede: Despite what we're seeing within the market, we continue to grow households. We continue to expand our distribution. We continue to expand our presence on the shelf, and we continue to have a significant amount of opportunity to continue to grow in those respective areas. So I think despite our gains, we have a significant amount of opportunity that still sits in front of us, which I'm really excited about, to be quite honest with you.
Speaker Change: Despite what we're seeing within the market, we continue to grow households.
Speaker Change: We continue to expand our distribution we continue to expand.
Speaker Change: Our presence on shelf and we continue to have a significant amount of opportunity to continue to grow in those respective areas. So I think despite our gains we have a we have a significant amount of of opportunity that still sits in front of us, which I'm really excited about to be quite honest with you.
Robert Frederick Dickerson: Rob, let me just add one thing to that. I think for me, what's interesting about this quarter is the fact that we previously talked about that we took pricing on the organic portfolio to low double digits at the beginning of the quarter. We haven't really seen any impact on demand or on orders. So the consumers that we're selling to, I think they're still very much willing to pay for the quality and for the trust that we stand for.
Speaker Change: Rob let let me just add one thing to that thing for me what stood out this quarter's the fact that the.
Rob: Previously talked about that we took pricing on the organic portfolio low double digits of getting off a quarter.
Rob: We haven't really seen any impact on demand.
Rob: So the consumer that we're selling too.
Rob: I think there is still very much willing to pay for the quality and for the trust that we stand for.
Rob:
Rob: I truly believe there is a proud of the consumer segment is getting weaker but they're just not the consumer that we're talking to enter it is not our core consumer.
Robert Frederick Dickerson: I truly believe there is a part of the consumer segment that's getting weaker, but that is not the consumer that we're selling to, and that is not our core consumer. And so with that, I think we're still very confident in our ability to continue to show strong demand.
Rob: So with that I.
Rob: I think.
Rob: We're still very confident in our consumer continued to be to show strong I'm at.
Robert Frederick Dickerson: Fabulous. Thank you.
Speaker Change: Fabulous Thank you.
Speaker Change: Okay.
Rob: Excellent.
Operator: Thank you. One moment for our next question. Our next question comes from Adam with Goldman Sachs. Go ahead, Adam.
Speaker Change: Thank you one moment for our next question.
Rob: Next question comes from Adam with Goldman Sachs Go ahead data.
Adam: Thank you. Good morning, everyone. Good morning.
Adam: Hi, Thank you good morning, everyone.
Adam: So I guess the first question is, obviously, very strong growth over the period, and you can see that in the scanner data. But wondering if you were seeing a more meaningful divergence in performance in the natural channel versus mass. I would think that higher commodity egg prices and some of the potential supply issues associated with that would become more evident on the mass side, and that might have unlocked new placements or items and distribution opportunities for you. But was that actually part of the story this quarter, or was the growth and the sales acceleration more broad-based across channels?
Adam: Good morning.
Adam: So I guess the first question is obviously very strong growth in the period and then you can see that in the scanner data wondering if you were seeing a more meaningful.
Adam: Diversions in performance in the natural channel versus versus math, I would think that more elevated commodity prices.
Adam: And some of the potential supply issues associated with that would.
Adam: Become more evident on the bass side of that have might've unlocked new.
Adam: Placings or.
Adam: And.
Adam: And distribution opportunities for you, but is that actually how part of the story of this corner or was the the growth in the south acceleration more broad based across channels. Thanks.
Peter Pappas: No, thanks for the question. I think we're seeing very balanced growth, and I'm pleased with that. The AI impact thus far has really been restricted to organic eggs.
Speaker Change: No. Thanks for the question I think we're seeing very balanced growth I'm pleased with that.
Speaker Change: The impact thus far really has been restricted to organic eggs and that's really been driven most recently.
Peter Pappas: And that's really been driven most recently, and we haven't seen a significant impact in that regard. Some of the impact that you're talking about has really been isolated to the West Coast.
Speaker Change: And we haven't seen a significant impact in that regard.
Speaker Change: Some of the impact that you were talking about it has really been isolated to the west coast again. Our performance. There has has been very very strong and isolated to a handful of of of retailers and and those retailers or performance has been.
Peter Pappas: Again, our performance there has been very, very strong and isolated to a handful of retailers. And in those retailers, our performance has been quite strong. We have really, I would say we've reinforced our position. I don't think it has been disproportionate in that regard. It has not been outsized as a result of what you're talking about. Our performance in natural has been very consistent. Our share performance continues to be quite strong.
Speaker Change: Quite strong.
Speaker Change:
Speaker Change: We have really.
Speaker Change: I would say, we reinforced our position I don't think it has been disproportionate.
Speaker Change: In that regard it has not.
Speaker Change: Been outsized as a result of what you're talking about.
Speaker Change:
Speaker Change: Our performance and natural has been very consistent our share performance continues to be quite strong where foreign weighed leader in natural and our performance within food in mass.
Peter Pappas: We're far and away the leader in natural, and our performance within food and mass continues to grow disproportionately, as we've talked about in our opening statement. So I'm really pleased. I don't think, as Russell said at the outset, this first quarter, we really hit on all cylinders, and I'm really excited about that. I think what you're seeing is, for us, a little bit of how high the bar is high, and without any outside influence because we did not have any of the interference that we've experienced in some past quarters.
Speaker Change: Continues to grow disproportionately as we've talked about in our opening statements. So I'm really pleased you know I don't think is Russell said in the outset. This first quarter.
Speaker Change: We really hit on all cylinders and I'm really excited about that I think what you're seeing is for us a little bit of how high is high and.
Speaker Change: Without any outside influence because.
Speaker Change: We've we've we did not have any of the interference that we've experienced in some past quarters.
Peter Pappas: And you're starting to see what we're capable of when we can really execute without some of those outside forces. So, given the opportunities that we have in front of us and the partnerships that we're establishing with some of these world-class retailers, I'm really excited about what the future holds.
Speaker Change: And you're starting to see what we're capable of when we can really execute.
Speaker Change: Without some of those outside sources so.
Speaker Change: Given the opportunities that we have in front of us and the partnerships that we're establishing with with some of these world class retailers.
Speaker Change: Barely really excited about what the future holds.
Adam: Okay, that's, that's very helpful. And then a clarification question just going through the queue, and you disclose your revenue from retail from the retail channel, which, if you compare that to the total revenues, it looks like your sales and the non-retail channel were actually down year on year. And so it's one of the clearest signs that some of the egg products and non-non kind of core items or is that the actual decline in food service?
Speaker Change: Okay. That's that's very helpful. And then a clarification question just going through the queue and you just close your revenue from from retail from the retail channel, which if you compare that to the total revenues. It looks like your sales in the non retail channel were actually down year on year and so I was wondering.
Speaker Change: Clears that some of the egg products and non.
Speaker Change: Non kind of core items or is that a ah.
Speaker Change: The actual decline in food service, and maybe bridge that a little bit.
Adam: Maybe you could bridge that a little bit. Thanks.
Thilo Wrede: Yeah, it's a great observation, Adam. It really is a function of the first quarter last year, right? So when AI hit, there were no eggs available. At times, we were the least expensive offering on the food service channel. And so we had a bit of outsized demand in the food service channel last year, but that came back down to earth once this really big impact from AI had passed. And so with that, on a year over year basis, food service sales for us were down.
Speaker Change: Yeah.
Speaker Change: Great observation out of it.
Speaker Change: It's a function of first quarter last year right.
Speaker Change: I heard there were nowhere X available.
Speaker Change: At times, we were the least expensive offering for the foodservice channel and so we have.
Speaker Change: The amount of the food service channel last year that came back down to Earth.
Speaker Change: This really big impact from past.
Speaker Change: So with that on a on a year over year basis.
Speaker Change: Foodservice sales for us we're down.
Thilo Wrede: They're still an overall growing part of the business. It's just that last year, in the first quarter, business went up by multiples rather than by percentages. And now we're falling back to a more normal pattern that's really behind that.
Speaker Change: They are still overall growing part of the business is just the.
Speaker Change: Last year first quarter the business.
Speaker Change: Bye bye.
Speaker Change: Multiples, while them by percentages and were followed by two more normal pattern, that's really behind that there's one other piece of the Nonretail sales, Adam which we've discussed in quarters past, which is that small percentage low single digit percentage of our eggs that don't make it into a carton and ended up going into the whole <unk>.
Adam: And there's one other piece of the non-retail sales atom, which we've discussed in previous quarters, which is that small percentage, low single-digit percentage of our eggs that don't make it into a carton and end up going into the wholesale processing channel. And we don't price to take advantage of short-term disruptions in the market. However, the price we get for those wholesale eggs is based on market prices. And so a year ago, those prices spiked just as they were spiking on the shelf, and we're just a taker of those prices. So there was a temporary increase in the price we got for our non-branded kind of wholesale eggs. That makes total sense.
Speaker Change: Mail processing channel and.
Speaker Change: We don't price to take advantage of short term disruptions in the market.
Speaker Change: However, the the price we get for those wholesale bags are based on market prices and so a year ago. Those prices spiked just as they were spiking on the shelf and and we're just to take care of those prices. So there was a temporary increase in the price we got for our Nonbranded kind of wholesale eggs as well that.
Adam: That makes total sense. Very helpful. I'll pass it on. Thank you.
Speaker Change: That makes sense that makes total sense very helpful. I'll I'll pass it on thank you.
Speaker Change: Thanks, Adam.
Operator: you. One moment for our next question. Our next question comes from John Anderson with William Blair. Go ahead, John.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from John Anderson with William Blair Go ahead John.
John Anderson: Thanks. Good morning, everybody.
John Anderson: Thanks, Good morning, everybody Hey, John.
John Anderson: Two quick ones. I was wondering if you could talk a little bit about what you're seeing demand-wise, kind of across the portfolio. And what I'm getting at here is the kind of growth that you're seeing for the kind of conventional 12 count relative to maybe some of the higher price point SKUs, 18 count organics and blues, just to get a sense for your ability to kind of continue to attract that consumer at higher price points.
John Anderson: Two quick ones.
John Anderson: I was wondering if you could talk a little bit about what you're seeing demand wise.
John Anderson: Across the portfolio.
John Anderson: What I'm getting at here is the kind of growth that you're seeing.
John Anderson: For the kind of conventional 12 count relative to maybe some of the higher price point skews 18, count organic some blues just to get a sense for.
John Anderson: Your ability to kind of continue to attract the consumer.
John Anderson: And then the second question just around resets and distribution gains in 2024, if there's any way to kind of characterize where you kind of are in that spring reset process, what percent perhaps is complete, what's what's still to come, and where that distribution is coming from. Thank you.
John Anderson: Price points and then.
Speaker Change: Second question, just around reset and distribution gains in 2024, if there's if there's any way to kind of characterize.
John Anderson: Where.
John Anderson: Where you kind of are in that in that spring reset process, what what percent, perhaps is complete what's what's delta com and and and and where that distribution is coming from thank you.
Peter Pappas: Sure. Thanks for the question. This is Pete.
Speaker Change: Sure. Thanks for the question this.
Peter Pappas: And we're seeing very, very healthy growth in our core portfolio across both segments of natural and food business. So while we are seeing migration into 18 count, the value proposition in large pack size, as you can see probably across the entire food segment, it does exist in the egg category and within our portfolio. We are still seeing solid growth within our portfolio on the core black box item.
Peter Pappas: This is Pete.
Peter Pappas: We're seeing we're seeing very very healthy growth and our core portfolio.
Peter Pappas: Across both segments of natural and and our food business. So while we are seeing migration into 18 count the value proposition in in large pack size as you can see probably across the entire food segment.
Peter Pappas: It does exist in the category and within our portfolio.
Peter Pappas: We are still seeing solid growth.
Peter Pappas: Within within our portfolio on the core black box item.
Peter Pappas: And both across the food segment and probably less so within the natural food segment, primarily within the natural food segment because we have such a disproportionate mix within organic. The organic 12 count product is a larger selling item in the natural segment of business. And then to your second question around the percentage of retailers that are in the midst of resets, probably a little bit more of a difficult answer for you. I would say we're just right in the middle of that.
Peter Pappas:
Peter Pappas: And both across across the food segment, and and probably lesser within natural primarily within natural because we have such a disproportionate mixed with an organic.
Peter Pappas: The organic 12 count product as a as a larger selling item in the natural segment of business.
Peter Pappas: And then to your second question around percentages.
Peter Pappas: Who is.
Peter Pappas: Of of retailers that are in the midst of of research.
Speaker Change: Probably a little bit more of a difficult to answer for you.
Speaker Change: I would say.
Peter Pappas: Typically, these decisions are made in March. So we're probably, I would say we're probably 50, 60% complete. Those resets are being done, and actively completed now, and we'll start to see some of those benefits flow through in the next, probably the next two reporting cycles is when we should see some of that bump. But very optimistic that we're going to see some nice results as a result of the efforts of the sales group.
Speaker Change: Right in the heart of that typically these decisions are made.
Speaker Change: In.
Speaker Change: In March so we're probably.
Peter Pappas: I would say, we're probably 50, 60% complete.
Peter Pappas: Those those resets are being done and.
Peter Pappas: Actively completed now and you'll start to see some of those benefits flow through.
Peter Pappas: And the next probably next too.
Peter Pappas: Reporting cycles is when we should see some of that bump.
Peter Pappas: But very very optimistic that we're going to see some nice results as a result of the efforts of of the sales group.
John Anderson: That's super helpful. If I can squeeze one more in, Yeah, I know your 2027 algo calls for, you know, household penetration gains. And I'm wondering if there's another part to the story here that you're seeing today and will also contribute to growth, which is, you know, growing your share of requirements with existing households. So buy rate. And if you can comment on kind of the loyalty, the repeat activity you're seeing, you know, for the brand and how that stacks up relative to the kind of food overall, any color around that would be helpful. Thank you. John, so the, the
Speaker Change: That's super helpful. If I can squeeze one more and yeah I know, you're you're 2027 algo calls for household.
Speaker Change: Household penetration games.
Speaker Change: I'm wondering if.
Peter Pappas: There's another part to the story here that that you're seeing today and will also contribute to growth which is.
Peter Pappas: Growing your share of requirements with existing household so so by right.
Peter Pappas: And if you can comment on kind of the loyalty the repeat activity you're seeing.
Peter Pappas:
Peter Pappas: For the brand and how that stacks up relative to kind of food overall any color around that would be helpful. Thank you.
Thilo Wrede: John, so hitting the 27 targets, as you pointed out, depends on household penetration. It also depends on us increasing our buy rate. I think at our annual stay back in September on the fourth quarter call, we had pages in our decks that showed buy rate growth, right? In 2023, the buy rate went from $28 to $34 per household. However, households are buying a whole lot more than $34 of groceries over the course of the year.
Peter Pappas: Just the the the.
Peter Pappas: The ton hitting the 2007 targets.
Peter Pappas: It depends on household penetration it also depends on.
Peter Pappas: Increasing by right.
Peter Pappas: I think at our analysts there back in September on the fourth quarter call we had.
Peter Pappas: Pages and our text that showed by regular growth in 2023 by.
Peter Pappas: By right Glenn from 28 to $34 per household.
Peter Pappas: However households are buying a whole lot more on us that is one of our topics over the course of the year. So we are still only a fraction of of household purchases.
Thilo Wrede: So we are still only a fraction of household purchases for X. And so, getting that loyalty from consumers up, that is certainly part of our math to get to that $1,100,000 by 2020. I think we're on a great path there. The loyalty that we get from consumers, I think the growth of 18-count is part of that expression of loyalty. It's not just that consumers are looking for a lower cost per egg, but when they buy an 18-count, we take away half the purchase occasion that they normally have. We're already locked in with them.
Peter Pappas: And.
Peter Pappas: And so.
Peter Pappas: Thing that loyalty from consumers up.
Peter Pappas: Certainly part of our.
Peter Pappas: After yesterday.
Peter Pappas: Find yourself.
Peter Pappas: I think we're on a on a great pass their the loyalty that we get from consumers I think the the growth of 18 count as part of that expression of loyalty.
Peter Pappas: Just the consumers are looking for a.
Peter Pappas: Lower cost per egg.
Peter Pappas: But when they buy and 18 count we take away at Harvard purchase occasion that they normally have find we're already locked in with them.
John Anderson: And consumers are willing to pay the premium that we deserve because they're willing to lock us in if you want. And so consumer loyalty, I think, is a really big part of what we're going after. And that means that we keep telling our marketing message, we keep focusing on quality, and we keep focusing on being able to suck the shelves of retailers. So all these intent practices that we make, they're all aiming at increasing household penetration and increasing buy rates make sense. Thanks.
Peter Pappas: Consumers are willing to to pay the <unk>.
Peter Pappas: Premium that we.
Peter Pappas: We deserve.
Peter Pappas: Because they're they're willing to lock us in a few lines.
Peter Pappas: So consumer loyalty I think is really redefining corporate or going offer.
Peter Pappas: And.
Peter Pappas: That means.
Peter Pappas: We keep <unk>.
Peter Pappas: Selling our marketing methods, we keep focusing on quality.
Peter Pappas: Focusing on being able to stop the cell phone retailers. So all these.
Peter Pappas: All these contempt.
Peter Pappas: Okay.
Peter Pappas:
Peter Pappas: All.
Peter Pappas: Aiming to increasing household penetration increasing by right.
Speaker Change: Makes sense. Thank you.
Peter Pappas: Thank you.
Peter Pappas: One moment for our next question.
Peter Pappas: Okay.
Operator: One moment for our next question. Our next question comes from Robert Moskow with T.D. Cohen. Go ahead, Robert.
Peter Pappas: Our next question comes from Robert Moscow with T. D. Cohen go ahead Robert.
Robert Moskow: Hi, thanks and congratulations on some great results. Thanks, Rob.
Robert Moskow: Hi, Thanks, and congratulations on some great results. Thanks, Rob.
Robert Moskow: I maybe you do this annually, but do you have any update on just overall awareness, consumer awareness of the vital brand name, like top of mind awareness, and if that if that continues to move in the right direction, I'm sure it will. And is there any kind of like, have you done any thinking around like tipping points where you get to a certain amount of awareness, a certain presence on the shelf?
Robert Moskow: Alright, and maybe you do this annually, but do you have any update on just overall.
Robert Moskow: Awareness, a consumer awareness of the of the vital brand name like top of mind awareness and if that if that continues to boo.
Peter Pappas: In the in the right direction I'm sure it does.
Peter Pappas: And is there any kind of like have you done any thinking around like ticking points, where you get to a certain amount of awareness of certain presence on shell.
Robert Moskow: And, you know, some brands, I remember Fresh Fat used to talk about some kind of parabolic effect where you hit this tipping point, and the growth accelerates because of that, probably because of the pickup in awareness. So maybe that's jumping ahead too far, but wanted to...
Peter Pappas: Yeah.
Peter Pappas: <unk> some brands I remember fresh that you should talk about some kind of parabolic effect.
Peter Pappas: Hit the sticking point in the growth accelerates because.
Peter Pappas: Because of that.
Peter Pappas: Probably because of the pick up an awareness so.
Speaker Change: Maybe that's jumping ahead too far I wanted to ask.
Thilo Wrede: So Rob, the awareness metric. We're tracking it. It's not a metric that we talk about every quarter, but we're making progress on awareness. We're on track to where we want to be this year.
Speaker Change: So roughly.
Speaker Change: Awareness, we're attracting it's not a metric that we talk about.
Speaker Change: Every quarter, but we're making progress on awareness, where we are on track to where we want to be this year.
Thilo Wrede: I don't think I can talk about us having a kind of parabolic effect, and I wouldn't want to copy from FreshPet, but I think what we have seen is that increased distribution begets more distribution and begets awareness. I think Russell talked about it in one of the first questions. When we have one facing on the shelf with a black heart, and we kind of get lost in the sea of our friends in the access.
Speaker Change:
Speaker Change: I don't think I can talk to us, having a parabolic effect and I wouldn't want a copy from from freshman it but I think.
Speaker Change: What we have seen is that increased distribution could get more distribution and begets awareness.
Speaker Change: Talked about it and one of the first questions.
Speaker Change: When we have one facing on the shelf with a black heart and we kind of get lost in the sea of offerings and the accent.
Thilo Wrede: When we have three or four SKUs on the shelf, with maybe one or two facings per SKU, all of a sudden, we have a brand block, right, and the consumer realizes, so there's a significant portion of the shelf here that's Vital Farms, even if the consumer had never heard of us before. When you have this kind of brand block in the fridge or on the refrigerated shelf at the retailer, the consumer picks up on that.
Speaker Change: When we have three or four skews on the shelf with maybe one or two facing square skew all of a sudden wave of Brian block Verizon consumer realizes so there is a significant portion of the <unk> farms, even though for consumer I had never heard of us before.
Speaker Change: When you have this kind of grand block in the fridge or refrigerated itself at the retailer the consumer picks up on that and so to US then that is the indication that.
Thilo Wrede: And so, to us, then that is the indication that increasing awareness should accelerate over time. I'm not going to call it a parabolic effect because we haven't done the math, and I don't want to promise you something that I don't know if we can stick with.
Speaker Change: Increasing awareness should accelerate overtime.
Speaker Change: I'm not going to call him parabolic effects, because we haven't done the math and I don't want to promise you something that I don't know if we can stick with that.
Russell Diez: The fact that as we grow, our growth becomes more self-reinforcing, if you want, and kicks off this flywheel, that effect is certain. I think it's important, Rob; it's a great question. The only thing I would add to that is, even with a brand like ours, with a wonderful community of really loyal, repeat consumers, a big percentage of the purchase choice is still happening at the shelf. And we still have to get their attention.
Speaker Change: But the.
Speaker Change: And the fact that as we grow our growth becomes more.
Speaker Change: Self reinforcing if you want and kicks off this flywheel that effect is certainly there.
Speaker Change: Great I think it's important Rob it's a great question. The only thing I would add to that is.
Speaker Change: Even with a brand like hours with with a wonderful community of really loyal repeat consumers.
Speaker Change: A big percentage of the purchase choices still happen to get the shelf.
Russell Diez: We can't take for granted that simply being on the shelf is enough. We've got to be on the shelf and compelling on the shelf. And so that's a street fight every day. And I think we've got the right people in that fight.
Speaker Change: And we still have to get their attention we can't take for granted that simply being on the shelf is enough. We've got a b on the shelf and compelling at the shelf and so that's a that's a street fight everyday and I think we've got the right the right people in that fight.
Speaker Change: Thank you.
Operator: This concludes the question and answer session. I would now like to turn it back over to Anthony Bucho.
Speaker Change: Thank you.
Speaker Change: This concludes the question and answer session I would know.
Speaker Change: Now like to turn it back over to Anthony Bucco.
Anthony Buccallo: Thank you again, everyone, for your support of Vital Farms. Have a great day!
Unknown Executive: Thank you again, everyone for your support of vital farms have a great day.
Operator: Thank you for your participation in today's conference call. This does conclude the program. You may disconnect.
Unknown Executive: Thank you for your participation in today's conference call.
Speaker Change: <unk> now does conclude the program you may disconnect.
Speaker Change: Mmm.
Unknown Executive: [music].
Unknown Executive: Mmm.
Unknown Executive: [music].