Vital Farms, Inc. · NASDAQ:VITL
Vital Farms — Investor Day (September 2023)
73 slides from Vital Farms's investor day presentation, Sep 19, 2023
Slide 1: Vital Farms, Inc. 2023 Analyst Day
Vital Farms, Inc. 2023 Analyst Day Welcome to Austin!
Slide 2: Reporting Disclaimer
Reporting Disclaimer This presentation contains, in addition to historical information, certain forward-looking statements, as defined in Private Securities Litigation Reform Act of 1995, that are based on our current assumptions, expectations and projections about future performance and events and
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow are financial measures that are not required by or presented in accordance with generally accepted accounting principles in the United States (“GAAP”). We believe that Adjusted EBITDA, Adjusted EBITDA Margin and F
Slide 4: Russell Diez-Canseco
Russell Diez-Canseco President & Chief Executive Officer
Slide 5: Analyst Day 2023 Agenda
Analyst Day 2023 Agenda What we have built can grow and travel Consumer adoption is in early stages Significant distribution potential remains Resilient supply chain supports expansion Resulting in strong multi-year growth plan 5
Slide 6: We have built a strong brand
We have built a strong brand A PREMIUM TRUSTED BY DEMANDED BY BRAND CONSUMERS RETAILERS Over 10 Million ~24,000 Households Retailers A RESILIENT FARMER NETWORK A WORLD-CLASS PROCESSING FACILITY >300 Family Farms Egg Central Station 6 Source: Numerator, 52-week period ending 31-Dec-2023; SPINS, 36-we
Slide 7: We have delivered our growth commitment ahead of schedule
We have delivered our growth commitment ahead of schedule $465 Net Revenue (millions) $394 $362 $301 $261 $233 $199 $214 2020 2021 2022 2023E IPO Net Revenue Forecast Net Revenue Source: Vital Farms Company Filings, IPO forecasts from Investor Presentation June 17, 2020 7 2023E represents latest gui
Slide 8: Managed through inflationary pressure
Managed through inflationary pressure Gross Profit (millions) $135 $110 $99 $83 $75 $76 $66 2020 2021 2022 2023 IPO Gross Profit Forecast Gross Profit 8 Source: Vital Farms Company Filings, IPO forecasts from Investor Presentation June 17, 2020
Slide 9: Delivered profit despite macro noise
Delivered profit despite macro noise Adjusted EBITDA1 (millions) $39 $35 $19 $17 $16 $10 $8 $8 2020 2021 2022 2023E IPO Adj. EBITDA Forecast Adj. EBITDA Source: Vital Farms Company Filings, IPO forecasts from Investor Presentation June 17, 2020 9 1 Adjusted EBITDA is a non-GAAP financial measure and
Slide 10: Maintained strong balance sheet while self-funding growth
Maintained strong balance sheet while self- funding growth Cash Position & Capex (millions) Capex (M) $10.3 $16.7 $10.5 $4.3 10 Source: Vital Farms Company Filings, Q2 2023 is YTD Capital Expenditures
Slide 11: We plan to reach $1 Billion in Net Revenue by the end of 2027
We plan to reach $1 Billion in Net Revenue by the end of 2027 NEW ADDITIONAL MORE ITEMS WITH FINANCIAL HOUSEHOLDS RETAILERS CURRENT RETAILERS GOALS (2027) $1 Billion 20 Million New 8,000 New Increase Average Net Revenue Households Stores Number of Items 35% Gross Margin ADDITIONAL FARMS LARGER SUPPL
Slide 12: How we think about our next big thing
How we think about our next big thing Strategic assessment criteria It will be disruptive Bring meaningful change to a large, existing category It will be anchored in our mission Align with our company values and culture It will deliver quality at scale Consumer demand exists for a differentiated pr
Slide 13: Kathryn McKeon
Kathryn McKeon Chief Marketing Officer
Slide 14: Opportunity to gain more consumers
Opportunity to gain more consumers 1 We built a brand that resonates with consumers as they demand quality and transparency 2 We are focused on driving significant gains in awareness, which will lead to higher household penetration 3 We build brand equity through disruption and living our purpose 14
Slide 15: Consumer priorities are changing, creating a tailwind for our brand
Consumer priorities are changing, creating a tailwind for our brand Clear focus on nutrition Motivated by their health Want to buy organic products slide Focused on clean eating Deeply invested in animal welfare and the environment Want to understand where their food comes from 15 Source: Numerator
Slide 16: Changing priorities are reflected in legislative changes
Changing priorities are reflected in legislative changes, growing our playing field Passed Legislation to Remove Caged Eggs California, Massachusetts, Washington, Oregon, Nevada, Michigan, Utah, Colorado, Rhode Island, Arizona Legislation in Progress Hawaii, New York, New Mexico 16
Slide 17: Our target consumer base is growing meaningfully
Our target consumer base is growing meaningfully 72 MILLION These consumers: Seek organic and natural food U.S. HOUSEHOLDS Care about environmental sustainability ARE BUYING PREMIUM EGGS 34 MILLION 131 MILLION U.S. HOUSEHOLDS U.S. HOUSEHOLDS Our core consumers We call them Bridget & Ben 10.5 MILLION
Slide 18: Share growth is driven by household penetration
Share growth is driven by household penetration Total Households (millions) 18 Source: Numerator, 52 Weeks Ended 12-31-2022
Slide 19: Market share growth also benefits from a higher share of wallet
Market share growth also benefits from a higher share of wallet 14.6% 14.0% 11.9% 2020 2021 2022 Share of Wallet (Units) Increase in Households (M) ~2M ~1M ~3M Source: Numerator Panel, Households purchasing Vital Farms, latest 52-week period ending 12-31-22 19 Share of Wallet is the number of Vital
Slide 20: Many of our consumers do not accept substitutes
Many of our consumers do not accept substitutes Across our most recent research, 36% of Vital Farms shoppers will leave the store with NO EGGS if they don't find their Vital Farms product 20 Source: Past 3 Month Egg Purchasers (Total n=2000) | Various Brand Questions End Q2 2023
Slide 21: Growing our consumer base starts with raising awareness for the brand
Growing our consumer base starts with raising awareness for the brand Aware Gaining a Household begins with driving awareness at the consumer level Consider Once aware of the brand the focus shifts to 87% conversion receiving consideration to purchase among aware Purchase If one purchase occurs, tha
Slide 22: We are increasing our spending to drive awareness
We are increasing our spending to drive awareness We placed a greater emphasis on driving awareness in 2022 $13.3 $9.8 21% 17% 2020 2021 2022 Marketing Spend (Dollars) Aided Awareness 22 Source: Numerator, 52 Weeks Ended 12-31-2022, Vital Farms Company Filings
Slide 23: How do we build our brand equity?
How do we build our brand equity? We are disrupting the food 1 system (for good) 2 We live our purpose 3 We are actually bullsh*t-free 23 This comes to life in ways that are accessible and engaging for our growth consumers.
Slide 24: With accessible storytelling
With accessible storytelling HENS BEHIND THE LENS CAMPAIGN 24 Winner of a Cannes Silver Lion!
Slide 25: Using a playful and transparent approach
Using a playful and transparent approach MEASURED PLAYFULNESS DIRECT TRANSPARENCY 25
Slide 26: Driving brand awareness by meeting consumers where they are
Driving brand awareness by meeting consumers where they are 26
Slide 27: By showing real care with best-in-class customer service
By showing real care from real humans with best-in-class customer service 27
Slide 28: Consumers are willing to spend for Vital Farms, irrespective of price gaps
Consumers are willing to spend for Vital Farms, irrespective of price gaps 28 Source: Price Gaps from SPINS latest 24 weeks ending 26-June-2023; Market Share from SPINS MULO and Natural, Whole Foods, latest 26 weeks ended 26-Jun-2023
Slide 29: Key takeaways
Key takeaways 1 We have built a premium brand by disrupting the food industry and living our purpose 2 Driving greater awareness can significantly increase the number of households that purchase our products 29
Slide 30: Pete Pappas
Pete Pappas Chief Sales Officer
Slide 31: Drivers of further Net Revenue growth
Drivers of further Net Revenue growth 1 Adding new retail partners still presents a compelling opportunity 2 Increasing average number of items carried at current retail partners provides the greatest potential impact 31
Slide 32: Retail distribution continues to climb
Retail distribution continues to climb Total stores selling (thousands) ~24,000 < 5,000 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD 32 Source: Vital Farms Company Filings
Slide 33: Still thousands of stores to gain
Still thousands of stores to gain Premium Eggs in ~32,000 Stores ~8,000 25% of Retailers currently carrying Premium Eggs still have not added our high-performing products ~24,000 33 Source: Vital Farms company filings. This includes Food, Natural, Whole Foods, and Mass, which we define as Target and
Slide 34: Our products have strong and growing velocity with minimal cannibalization
Our products have strong and growing velocity with minimal cannibalization Eggs Sold per Store per Week by SKU 1,176 New Food Retail Partner 930 Same 1,200 plus stores 5-year period 756 288 180 34 Source: SPINS latest 52 weeks ending 1-Jan-2023, with units equivalized
Slide 35: Unit velocity in mature stores is still growing
Unit velocity in mature stores is still growing Eggs Sold per Store per Week by SKU 8,262 Natural Retail Partner 7,236 Same 250 plus stores 4-year period 6,624 5,545 35 Source: SPINS latest 52 weeks ending 1-Jan-2023, with units equivalized
Slide 36: Adding incremental items is our largest opportunity
Adding incremental items is our largest opportunity 1 Increasing Total Distribution Points (TDP’s) in the Food Channel drives the most significant Net Revenue growth 2 We are gaining momentum in Mass Channel and remain under-penetrated relative to peers 3 We can still expand our TDP’s in the Natural
Slide 37: Expanding in the food channel is our biggest opportunity
Expanding in the food channel is our biggest opportunity Premium Egg Category Retail Vital Farms Retail Dollars Dollars by Channel in Eggs by Channel 37 Source: SPINS, 52-week period ending 1-Jan-2023, Natural includes Whole Foods, Mass defined as Target and Walmart
Slide 38: Food Channel opportunity still sizeable
Food Channel opportunity still sizeable TDP’s & Average # of Items Source: SPINS, 52-week period ending 1-Jan-2023, 26-week period ended 18-June-2023 38 Definition: Total Distribution Points are the sum of the ACV of each item carried.
Slide 39: Significant potential in Mass Channel
Significant potential in Mass Channel TDP’s Natural & Average Channel TDP’s# of Items We define Mass as Walmart and Target 39 Source: SPINS, 52-week period ending 1-Jan-2023, 36-week period ended 18-June-2023,
Slide 40: Natural Channel can further expand
Natural Channel can further expand TDP’s Natural & Average Channel TDP’s# of Items 40 Source: SPINS, 52-week period ending 1-Jan-2023, 36-week period ended 18-June-2023, Natural Channel does NOT include Whole Foods
Slide 41: Retail performance per TDP by channel
Retail performance per TDP by channel Retail dollars Natural / TDPTDP’s Channel (in thousands) 41 Source: SPINS, 52-week period ending 1-Jan-2023
Slide 42: Key takeaways
Key takeaways 1 TDP opportunity in the Food channel remains our largest driver of future Net Revenue growth 2 Consistently healthy velocity and same store sales performance are evidence of future brand capability 42
Slide 43: Jason Dale
Jason Dale Chief Operating Officer
Slide 44: Differentiated supply chain
Differentiated supply chain 1 Values-driven collaboration creates mutually beneficial relationships with our farmers and suppliers 2 Well positioned to support additional farms and future growth 44
Slide 45: Farmer network growing to meet robust demand
Farmer network growing to meet robust demand Number of egg farms in network > 300 ~50 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD 45 Source: Vital Farms Company Filings
Slide 46: How we work with our farmers
How we work with our farmers MEANINGFUL FARMER SELECTION FARM SUPPORT ECONOMICS Selection team Guaranteed payment Outsourced inspections Solicit referrals Reasonable Length Early detection of issues Peer vetting Exclusive, ThoroughRETAIL review of issues 3 Flock Initial Contract, Introduction to fin
Slide 47: Every new farmer attends Egg School
Every new farmer attends Egg School Immersive one-day course Traceability Egg Quality Feed & nutrition Health & biosecurity Pasture management Barn management Water management Compliance Accounting and financials 47 45
Slide 48: Farm support builds lasting relationships
Farm support builds lasting relationships Mission: Drive anticipated farm outcomes SUPPORT GATHERINGS COMMUNICATION Weekly contact Regional meetings monthly Quarterly newsletters Monthly visits Annual meeting each fall Annual calendar Incremental visits if needed Weekly production analysis Perform i
Slide 49: Onion Creek allows us to work alongside our farmers
Onion Creek allows us to work alongside our farmers Develop & share best practices to support the delivery of expected farm outcomes 49
Slide 50: Our focus for the next few years: adding more family farms
Our focus for the next few years Adding 250 more family farms 50
Slide 51: This is how we deliver quality at scale
This is how we deliver quality at scale FARM COLD STORAGE EGG CENTRAL STATION Supply eggs Store eggs Wash and pack eggs CUSTOMERS & DISTRIBUTORS RETAILERS & CONSUMERS Store eggs, distribute to retailers & RESTAURANTS restaurants Sell to consumers 51
Slide 52: Ample capacity at Egg Central Station
Ample capacity at Egg Central Station >$700 Million TOTAL FACILITY NET REVENUE POTENTIAL 6 Million TOTAL EGGS PER DAY 153,000 TOTAL FACILITY SQUARE FEET 52
Slide 53: How do we think about the next facility?
How do we think about the next facility? FOOD QUALITY IS PARAMOUNT EMPHASIS ON CREW SAFETY AND COLLABORATION CREATE A POSITIVE ENVIRONMENTAL IMPACT 53
Slide 54: Key takeaways
Key takeaways 1 Collaboration drives positive outcomes across all farms leading to better returns for all involved 2 Our network is built to scale and leverage to support future growth 54
Slide 55: Thilo Wrede
Thilo Wrede Chief Financial Officer
Slide 56: Our new long-term financial goals
Our new long-term financial goals ADJUSTED 2022 retailNET sales (in billions) GROSS REVENUE EBITDA MARGIN MARGIN $1B ~35% 12% to By 2027 By 2027 14% of Net Revenue By 2027 Note: These metrics are management goals only, are subject to a number of risks and uncertainties, including risks described in
Slide 57: Drivers of future financial performance
Drivers of future financial performance 1 Consumer adoption and distribution gains drive top-line growth 2 EBITDA margins expand, balancing scale benefits with disciplined reinvestment in the business 3 Focus on growing operating cash flow 57
Slide 58: Consistent, volume-driven Net Revenue growth
Consistent, volume-driven Net Revenue growth 30% CAGR 2020-2023E Net revenue (millions) 2015 – 2022 CAGR of ~35% 41% net revenue growth Volume 55% 44% 15% 44% 32% 52% 30% 22% 30% 16% growth 58 Source: Vital Farms Company Filings, Grey column represents 2023 Net Revenue Guidance given on 8/3/2023
Slide 59: Three main drivers of Net Revenue growth
Three main drivers of Net Revenue growth NEW ADDITIONAL MORE ITEMS WITH HOUSEHOLDS RETAILERS CURRENT RETAILERS 20 Million New 8,000 New Increase Average Households Stores Number of Items 59 Source: Numerator, 52-week period ending 31-Dec-2023; SPINS, 36-week period ended 18-June-2023
Slide 60: Steady Gross Profit improvement despite macro noise
Steady Gross Profit improvement despite macro noise Gross profit (millions) & Gross margin % Gross 19.3% 9.2% 24.9% 32.7% 30.5% 35.0% 28.2% 31.9% 29.1% 35.7% margin 60 Source: Vital Farms Company Filings
Slide 61: Strategic advantages deliver Gross Margin
Strategic advantages deliver Gross Margin Premium brand with pricing discipline and dedicated, growing consumer base GROSS Price protection for key farmer inputs provides MARGIN downside limitation and predictability Investments in revenue management capabilities to drive return on promotions Contro
Slide 62: Generating higher Adjusted EBITDA with increased scale
Generating higher Adjusted EBITDA with increased scale Adjusted EBITDA (millions) EBITDA 10.7% -1.4% -0.2% 7.4% 4.6% 7.8% 3.1% 4.5% 2.6% 11.2% margin 62 Source: Vital Farms Company Filings, Grey column represents 2023 Adjusted EBITDA Guidance given on 8/3/2023. See appendix for reconciliation of Adj
Slide 63: Rate of expense spend will slow
Rate of expense spend will slow ADJUSTED SG&A expenses to grow slower, on average, EBITDA than Net Revenue MARGIN Further increase in marketing spend to support awareness and brand growth 12% to Partially reinvest scale benefits in spending on capability building and organizational growth 14% of Net
Slide 64: Focus on improving Free Cash Flow
Focus on improving Free Cash Flow Free Cash Flow1 (millions) $4 ($0) ($9) ($9) ($9) ($12) ($15) ($19) Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Trailing Twelve Month Free Cash Flow Source: Vital Farms Company Filings 64 1 Free Cash Flow is a non-GAAP financial measure and is re
Slide 65: Reiterating our 2023 guidance
Reiterating our 2023 guidance NET REVENUE ADJUSTED CAPITAL NET REVENUE GROWTH EBITDA1 EXPENDITURES ~28% More than More than $16 to $465 $35 $21 Million Million Million 1See appendix for reconciliation of Adjusted EBITDA. Note: We cannot provide a reconciliation between our forecasted Adjusted EBITDA
Slide 66: Key takeaways
Key takeaways 1 Gaining new households and distribution gains continue to drive top-line 2 We will continue to invest in the business as EBITDA margins improve gradually 3 Free Cash Flow generation improves over time 66
Slide 67: Question & Answer Session
QUESTION & ANSWER SESSION
Slide 68: Appendix
APPENDIX
Slide 69: Definitions
Definitions TDP (Total Distribution Points) is the combination of breadth and depth of distribution as it sums the % ACVEgg TDP’s of the & Average individual items inItems Carried a product group Example: What is the TDP for my brand? % ACV Total Brand 100.0 The maximum TDP BRAND BRTH MINTS IC SNGL
Slide 70: Definitions
Definitions ACV (All Commodity Volume) is the total dollar sales across an entire store Egg TDP’s & Average Items Carried TOTAL MARKET Store A $25m Store B $15m Store C $10m $50M If given the opportunity to sell your product in stores A, B, or C you would select store A… The product is selling in st
Slide 71: Definitions
Definitions AIC (Average Items Carried) The average number of items scanning in stores of a particular brand in Egg any one TDP’s & Average Items Carried time-period Example: What is Average Items Carried for my brand? % ACV Total Brand 100.0 BRAND BRTH MINTS IC SNGL TN NS PKG 1.76 OZ 100.0 Total Br
Slide 72: Historical Adjusted EBITDA Reconciliation
Historical Adjusted EBITDA Reconciliation 52-Weeks Ended 26-Weeks Ended ($ thousands) 31-Dec-15 31-Dec-16 31-Dec-17 30-Dec-18 29-Dec-19 27-Dec-20 26-Dec-21 25-Dec-22 26-Jun-22 25-Jun-23 Net income $ 1,425 $ (2,098) $ (2,145) $ 5,629 $ 3,312 $ 8,884 $ 2,382 $ 1,230 $ (1,346) $ 13,833 Depreciation and
Slide 73: Historical Free Cash Flow Reconciliation
Historical Free Cash Flow Reconciliation 13-Weeks Ended (Amounts in thousands) 27-Sep-20 27-Dec-20 28-Mar-21 27-Jun-21 26-Sep-21 26-Dec-21 27-Mar-22 26-Jun-22 25-Sep-22 25-Dec-22 26-Mar-23 25-Jun-23 Net Cash provided by Operating Activities $ (2,685) $ (3,341) $ 8,035 $ 6,979 $ (2,747) $ 4,058 $ (4,