VITL

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 8:30 a.m. ET Executive Chairperson, President and Chief Executive Officer - Russell Diez-Canseco Chief Financial Officer - Thilo Wrede Vice President of Investor Relations - Brian Shipman Operator: Good day, and thank you for standing by. Welcome to Vital Farms' second quarter 2026 earnings conference call and webcast. [Operator Instructions] I would now like to hand your call over to Brian Shipman, Vice President of Investor Relations. Keep in mind, today's conference is being recorded. Brian, please go ahead. Brian Shipman: Good morning and welcome to Vital Farms' second quarter 2026 earnings conference call and webcast. Joining me today are Russell Diez-Canseco, Vital Farms' Executive Chairperson, President and Chief Executive Officer, and Thilo Wrede, the company's Chief Financial Officer. By now, everyone should have access to the company's second quarter 2026 earnings press release issued this morning. During today's 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. Such risks and uncertainties are described in today's press release and our SEC filings, including the Form 10-Q for the quarter ended June 28, 2026, that we filed earlier today. During today's call, management will also reference certain non-GAAP measures, including adjusted EBITDA and adjusted EBITDA margin. Please refer to today's press release and presentation, each available on the Investor Relations section of our website, for a reconciliation to the most directly comparable GAAP measures. The presentation of these non-GAAP measures is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. After our prepared remarks, we'll open the line up for questions. [Operator Instructions] Now, I'll turn the call over to Russell. Russell Diez-Canseco: Thank you, Brian, and good morning, everyone. I'd like to start as I always do by thanking our crew and farmers. I believe they're the best in the business, and it's my privilege to work alongside them in our effort to improve the lives of people, animals, and the planet through food. I want to emphasize 3 key messages on today's call. First, while 2026 presented supply dynamics we did not fully anticipate entering the year, we executed decisively to address them, and the early results give us confidence our operational calibration plan is taking hold. Last quarter, we outlined an aggressive plan to fix our price gaps, right-size our supply, and reduce structural costs. I'll walk through each of these work streams in more detail shortly, but the key point is each of them is progressing in the direction we intended. As a result, we delivered a more than 200 basis point year-over-year gain in retail dollar share of the shell egg category during the second quarter. Second, as we noted last quarter, we believe the second quarter was our financial trough. Our net sales declined 10.1%, but the revenue decline and margin compression we were reporting this quarter are consistent with what we told you to expect on our first quarter call, when we said the greatest impact of the industry's oversupply and our own price gap challenges would be concentrated in the second quarter. That impact was primarily driven by non-structural issues within the broader industry, the price gaps to branded competitors we discussed on last quarter's call, and the identified second quarter supply management and other discrete costs of managing our excess egg supply. Despite the decline in net revenue during the second quarter, the quarter's performance highlights the strength and resilience of our premium brand relative to the severe volatility impacting the broader commodity egg market. Third, we believe we have clear operational momentum as we enter the second half of 2026. Our farmer contract amendments are now live, and our corporate overhead is structurally lower following difficult but necessary cost realignment actions we took during the quarter. We took additional actions in mid-July to streamline our processes and strongly believe we're on a path to improved operating results in the second half of 2026. Distribution is expanding, and we believe our momentum should continue while velocity is also starting to show improvement sequentially as we're reducing price gaps to our branded competitors. To understand why we have such high conviction that the turnaround is working, despite the expected challenging second quarter, I'd like to share some of the direct operational evidence of our execution. First, we said we needed to narrow price gaps to branded competitors, and we've made strong progress. Since the last earnings call, our price gaps have come down from an average of approximately $2.51 to branded competitors in the first quarter, to an average of $2.36 in the second. As we mentioned last quarter, we believe the most effective gap range tends to be in the $1 to $2 gap to branded competitors. In the markets where these gaps narrowed, retail volume responded with improved velocity. Additionally, in those same markets where we successfully adjusted our price gaps, household acquisition ticked up as well. For example, we studied our price gap impact at one of our top 10 retailers, and where we got our price gaps down to an appropriate level, we saw both velocity and incremental new households improve 27% since mid-April. Efforts such as these led to a more than 200 basis point year-over-year gain in Vital Farms' retail dollar share of the shell egg category in MULO+ during the second quarter, according to Circana, even as category pricing fell sharply amid industry-wide oversupply. Additionally, and more broadly, by mid-July, shell egg units per store per week per item were up 12.5% since our first quarter call, and as of mid-July, reached their highest level since February of 2026, which we believe indicates that our strategy is working. We will continue to broaden these efforts to lower price gaps, which we expect will continue to drive improved results going forward. Second, as we told you last quarter, we have secured several significant distribution gains that should bolster our volume growth throughout the second half of the year and into 2027. As we highlighted on the first quarter earnings call, we anticipate average total distribution points, or TDPs, between 150 to 160 in 2026, up from 130 in 2025, which would represent our largest yearly gain since our IPO in 2020. We anticipate the majority of these gains will become visible in scanner data throughout the third quarter. In Circana data for MULO+, we were already at 148.7 TDPs year-to-date through the end of the second quarter. And we continue to believe we are on track to deliver an average of between 170 to 175 TDPs in the fourth quarter of 2026, given the visibility we already have to commitments for new placements. Third, we found ourselves in an oversupply situation earlier this year. We said we needed to amend our farmer contracts to give us flexibility to manage our supply. These contract amendments are now in place. And as we previewed last quarter, we believe the oversupply peaked in the second quarter. That means we're now managing the temporary supply-demand imbalance by reducing egg production instead of sending expensive eggs to the low-revenue breaker channel. To be clear, we may still see some excess breaker sales in the coming quarters, but at a much reduced level than what we experienced in the second quarter. A low level of excess breaker sales reflects our intentionally balanced strategy, executing the right number of farmer contract amendments to manage the current supply reduction while maintaining flexibility to meet future expected demand increases. Thilo will provide more details in a few minutes. Fourth, we told you in May, we would reduce our cost structure to support our price actions. Since last quarter, we've made significant progress, and we completed our planned operational staffing changes at Egg Central Station. In mid-July, we further optimized our organizational structure to improve decision-making speed and reduce overhead, aligning our headcount directly with our core operational priorities. The result is that we've reduced our annualized SG&A run rate by approximately $6 million to $7 million. Furthermore, we intend to pause construction on Vital Crossroads by the end of 2026, and we believe CapEx is tightly controlled. In short, we expect the second half of 2026 to look fundamentally different than the first half of the year. We believe our strategic actions provide a clear line of sight to improved operating results in the second half and heading into 2027. And Thilo will walk through the specific building blocks behind that view in a moment. The expected progression is straightforward. Our narrowed price gaps should continue to accelerate velocity over the coming months and quarters, and our TDPs are on track this year to expand at the fastest rate since our IPO in 2020. We expect to improve cost of goods sold as we are shifting our supply management strategy to farmer contract amendments and away from breaker sales, and we will benefit from the actions we've taken to lower SG&A. In conclusion, we believe our turnaround plan is working, and given our successful execution in navigating the challenges of the second quarter, we are reaffirming our full year guidance today. With that, I will turn the call over to Thilo to take you through the details of our second quarter results. Thilo Wrede: Thank you, Russell. Let me go through the financial results for the second quarter. Net revenue in the second quarter declined 10.1% to $166 million due to a volume-driven decline of $19.8 million in retail channel sales, that is excluding excess breaker and wholesale channel sales, partially offset by a price-mix benefit of $1.1 million. Excess sales to breaker and wholesale channels contributed only $0.1 million to net revenue growth, as a large volume increase was almost entirely offset by a price decline. Gross profit was $10.9 million, or 6.6% of net revenue. Gross profit includes a $19.5 million impact from excess breaker sales, $0.8 million from the amortization of farmer contract amendments, and $7.8 million in exit costs associated with our butter wind-down, for a total of $28.1 million of what we see as supply management and other discrete expenses. Excluding these items, the underlying gross margin is meaningfully more favorable. We expect the gross margin profile to improve as we move into the second half of the year, and we continue to anticipate exiting the fourth quarter at a gross margin run rate of approximately 30%. SG&A was $40.4 million. While up slightly year-over-year, this includes $3.3 million of restructuring and severance costs, and $3 million in one-time professional services costs related to our feed cost savings program, for a total of $6.3 million in discrete expenses. Going forward, the combination of our May and July efficiency gains will reduce our annualized SG&A run rate by approximately $6 million to $7 million. Shipping and distribution expenses increased to 6.4% of net revenue in the second quarter of 2026, up from 4.9% a year ago, reflecting the inclusion of $1.5 million of expenses for shipping excess eggs to breaker plants. Adjusted EBITDA was a loss of $26.6 million. This includes an add-back of $7.8 million for butter exit costs and $3.3 million for restructuring and severance costs. The loss for the quarter is a result of the peak intensity supply management costs in Q2, totaling $21.8 million for the quarter, and it also includes $3 million of professional fees incurred during the quarter related to our feed cost savings program, for a total of $24.8 million of discrete expenses that we are not adding back to adjusted EBITDA. Regarding butter exit costs, when we announced the wind-down of our butter business last quarter, we expected to convert our remaining bulk butter inventory into a retail product before fully exiting the category. Since then, we have concluded that operational constraints and meaningfully elevated costs make this approach uneconomical, so we will instead sell the remaining inventory to the melter. This is a change in how we're executing the exit, not in the decision itself. Looking ahead, full-year supply management costs are now modeled in the mid-$30 million range versus our initial $32 million estimate, representing a modest increase in breaker sales due to 2 primary factors. First, slightly lighter second quarter sales meant that we had more surplus volume that we routed to the breaker and wholesale channels. And second, we took a methodical approach to the farmer contract amendments to ensure we preserve upside potential if demand turns more quickly than anticipated. Relying slightly more on the breaker channel gives us the short-term flexibility to react to potentially higher retail demand as price gaps adjustments take hold. Importantly, I want to underscore that the contract amendments that are needed for the year are in place. Turning to capital allocation and our balance sheet, we have taken aggressive, proactive steps to ensure our liquidity profile remains strong as we emerge from this period of oversupply. We ended the quarter with $21.2 million in cash and had drawn $30 million against our previous revolving credit line. To strengthen our cash position, after quarter end, we put in place a new $125 million term loan and a new $60 million asset-based lending facility, replacing our previous revolving facility. Both new facilities have a 3-year tenor. We have drawn the entire $125 million term loan, repaying the previous revolver. We now have significant financial runway to fund the business for the foreseeable future. More details on these facilities can be found in the current report on Form 8-K that we filed this morning. At the very beginning of the second quarter, we executed $50 million of share repurchases at an average price of $13.29 per share. After the end of the quarter, our board of directors terminated the 2026 stock repurchase plan, consistent with the terms of the new lending facilities. And, as we told you last quarter, we are halting construction of Vital Crossroads as we prioritize liquidity. We are focused on enclosing the building, which we expect to be completed by the end of fiscal 2026, so that the facility is fully protected against the Indiana winter weather while the indoor build-out is halted. This approach is reflected in our reaffirmed full-year CapEx guidance of $70 million to $75 million. Looking ahead to the rest of the year, we are reaffirming our previous guidance, which calls for net revenue of $775 million to $800 million and adjusted EBITDA of $0 to $10 million. We expect the distribution gains we are making to contribute to improving revenue performance over the course of the second half of 2026 and into 2027. We would note that Q3 is lapping a strong third quarter in 2025, while Q4 is the easier year-over-year comparison from a net revenue perspective. Currently, we expect Q3 of this year to show a sequential improvement in absolute net revenue, while Q4 net revenue growth should reflect the full benefit of the distribution gains we have mentioned during the call today. And it is typically our largest quarter of the year due to the seasonality of the business. Additionally, as the majority of our supply management measures are now driven by the contract amendments, the high impact from breaker sales that we experienced in Q2 will be very significantly reduced in the second half. This will directly support our bottom line, and we believe it will position us to deliver improved adjusted EBITDA in the second half of the year. The improvement in adjusted EBITDA from the first half to the second half is driven by 3 building blocks. First, in the second quarter, we successfully right-sized our supply via the contract amendments, resulting in much lower supply management costs. Second, increased distribution should benefit retail volume as the second half progresses, resulting in scale benefits. And finally, the structural cost reductions from the organizational streamlining that we conducted in May and July have reduced our annualized SG&A run rate by approximately $6 million to $7 million. As for the phasing of the recovery, we expect the second half performance to build sequentially. Q3 should mark a sequential improvement in revenue and adjusted EBITDA as breaker volumes abate. And then we anticipate Q4 will reflect the full operational leverage of improved retail volumes running through our streamlined SG&A cost structure. With that, I will turn the call back over to the operator, and Russell and I are happy to take your questions. Operator: [Operator Instructions] Your first question comes from the line of Scott Marks with Jefferies. Scott Marks: First thing I wanted to ask about is this price gap journey you're on, let's say. Just curious if you can give us a sense of where you are in that journey, how far do you think you have to go? And how deep do you think you have to go? Russell Diez-Canseco: Yes, good morning. Thanks for that. So I think as we discussed in our Q1 call, this is a -- changing prices at retail is sometimes a little bit complicated, sometimes can take a little bit of time, and very much has to work for the retailer, as you can imagine, as well as for us. And so the other thing is that we want to be really judicious with how we deploy our capital. And so where we are right now is very much on track, we believe, to deliver our full year guidance based on the efforts we've got with specific retailers during specific time periods. And we continue to drive the gap between us and branded competitors on an average basis, closer and closer to that range we said we wanted to achieve. I don't know that on an overall basis for the entire market, we'll get exactly where we want to be this year, but it reflects the right balance of speed, cost, and seeing a return to positive volume growth as we head into the back half of the year. So I think we're in a good position again to return to growth with the right cost structure, especially investments in pricing. And we'll continue to look at what that right balance looks like as we head into 2027. Scott Marks: I appreciate the thoughts there. And then just as a follow-up, I'm wondering if you can give us a little more insight into some of these distribution wins that you've been speaking to. Where is it being realized? Is it in new doors? Is it more items on shelf? Is it kind of the core 4 SKUs that you're expanding, just any other color you can provide would be great. Russell Diez-Canseco: Yes, we have talked, I think for a few years now about the very clear opportunity to expand our core 4 items into largely existing doors. And while we've certainly had gains in other items. For example, we launched a new SKU, which is a 24 count at Whole Foods and in a few other retailers to come. And a 24 count is actually proving to be really welcomed by the marketplace. We've seen some really neat social media response to the 24 count. People are thrilled with that option, but we're also seeing early evidence of velocities that exceed our initial expectations. And so there are some new products hitting the shelves, that one in particular I would call out, but in general, it's the core 4 in existing doors and really running that same playbook, which to us demonstrates that we have lots of opportunity with our existing portfolio. It doesn't require new innovation. It simply requires, as we set out to do this year, having plenty of supply and the conviction to bring that to our retail partners. Operator: Our next question comes from the line of Matt Smith with Stifel. Matthew Smith: Just following up on the price gap evolution, as you think ahead and the exit rate of this year, could you give a little more color on what your expectation is in terms of volume growth versus the pricing headwind associated with the price gap management taking hold? Russell Diez-Canseco: Yes, so we have a healthy amount of volume growth in the back half of the year. Thilo may want to add some detail around the composition of our sales growth and sales expectations for the rest of the year. But it's really volume driven from my perspective. And so as we end the year, I believe we'll be in a much healthier place in terms of volume-driven growth. And we'll continue to both test and learn and experiment with where we want to lean in more in the portfolio with pricing versus less, where we're getting the best payback, and where we're seeing the best benefits for our retail partners. Thilo Wrede: As we get into the back end of the year, especially into the fourth quarter, and as price gaps come down into the target that we have, together with the distribution that we just talked about, volume, what should we pick up? So the headwinds that we're seeing year-to-date in terms of volume, but also in terms of retail sales pricing, those headwinds will become much easier to manage, and then in fourth quarter, we're dealing with much easier lapping than what we had experience in the third quarter. Matthew Smith: Thank you for that. And a question for you on the feed cost program that you had some professional fees for in the quarter. Can you give a little more detail regarding if you're looking at changing the way feed costs work through the supply chain and the evolution of potential more professional costs as we move through the second half of the year? Russell Diez-Canseco: Yes, so the primary mechanism will actually be around consolidating our -- the buying of feed across our network of family farms, across a smaller number of feed mills that have agreed to specific price frameworks for all of them. The savings opportunities don't lie in a change to how we actually procure feed. It'll continue to be the farmers themselves that buy the feed. It doesn't change, it doesn't rely on a change in the formula, the ingredients, that provide the right nutrition for the birds, it simply takes advantage of the scale we've achieved to get some better economics from the overall buy and to make sure that the feed formulas don't have anything in them that we haven't approved that aren't required by the birds. And it's just, I think it's a pretty straightforward exercise in just being better at procurement. Operator: Our next question comes from the line of Ben Mayhew with BMO Capital Markets. Benjamin Mayhew: Can you hear me okay? Russell Diez-Canseco: Yes, we can. Benjamin Mayhew: Great. So I just wanted to ask a question around the new credit facilities and just the space and the buffer that provides you, especially over the next year as you work to right-size your supply levels and reaccelerate profit. If you could just add a little more context about what that does for your model over the next year? Thilo Wrede: Yes, what the new credit facilities allow us to do is to make the right decisions for the business in the long term, managing through the current oversupply across the industry and not constantly having to watch our cash balance. That's not to say that we're not watching costs right now, we're not watching cash right now, we very much are. But with $185 million in debt capacity compared to the $60 million that we had before, and being relatively free of financial covenants, it allows us to operate with the flexibility that we need right now to manage through this oversupply across the industry. We think the $185 million is more than what we need. And it gives us an insurance policy to make sure that we can operate and make the right decisions for the health of the brand and for managing long-term growth opportunities with short-term headwinds. Benjamin Mayhew: Thank you for that. And my follow-up question has to do with the voluntary farmer contract amendments. I was just wondering if you could add a little context and describe kind of the downstream impacts of how these are going to work. And what's the pace at which you expect these actions to right-size your internal supplies? I believe you mentioned that the eggs to the breaker market are going to accelerate quite materially starting in third quarter. So if you could just expand upon that and just, let us know how this is going to play out. Thilo Wrede: Yes, as we put in the press release and the earnings deck, total profit impact from the breaker market in the second quarter was over $20 million. We had a hit to gross profit, we had a hit -- an additional hit from actually paying for the distribution to the breaker plants. And as we said in the prepared remarks, we're going to manage the oversupply going forward, not by sending expensive eggs to the breaker where we get literally pennies on the dollar, but by reducing the supply of eggs coming to the cold storage facility in the first place. So we still anticipate having some breaker expenses in Q3, potentially in Q4. That is to ensure that we maintain a bit of flexibility, should demand pick up faster than what we're currently modeling. We certainly want to avoid a situation like we had at the beginning of '25 when we had sold out our nest run egg inventory and couldn't react to accelerations in the market. So there will still be breaker expenses in Q3, potentially Q4. But we're talking a much lower range than what we had in Q2, potentially a lower range than what we had in Q1. Operator: Our next question comes from the line of Eric Des Lauriers with Craig-Hallum Capital. Eric Des Lauriers: Nice job on the stabilization work thus far. One more question for me on price gap dynamics. Just wondering if you can sort of give us some color on what you're seeing from potential sort of retail pricing stabilization from your competitors in the category broadly, and then also, overall, it looks like a bounce in commodity egg prices on the wholesale level in recent weeks. Are you seeing any of that kind of extend to the pasture-raised category as well? Russell Diez-Canseco: So as we have mentioned on prior quarter calls, we look at specialty eggs in relation to our brand as those eggs with outdoor access for the birds. So that would be both pasture-raised and free-range, for example. And there we've seen overall a fair bit of stabilization for pricing for our competitors, especially the branded competitors over the last 4 to 13 weeks. You see occasional blips where prices may come up or down on average as certain brands come off of a really hot promotion or maybe implement one. Some of those are planned well in advance. Some of those may be reactions to more temporary supply-demand imbalances. The contrast I would draw to how we're managing through the oversupply we've seen this year is we shifted from sending most of those excess eggs to the breaker to now working with farmers to reduce our supply. I'm not sure how other producers are handling their oversupply situations, but one hypothesis is that when you see really variable promotional activity pricing on average coming up and then sometimes coming back down for a certain brand, it may indicate supply-demand imbalances that are occurring, that are being managed on the shelf instead of through the breaker channel. So I'm not seeing any particular brand showing a real change in trend other than stable at this point. And we are seeing signs of stabilization for commodity eggs as well. Eric Des Lauriers: That's really great color, I appreciate that. And then just a follow-up question, retailer order patterns, one of the things that were disrupted as this oversupply became evident. Could you just give a comment on sort of what you're seeing from retail order patterns, have those kind of stabilized or volatility come down along with the more stabilized pricing? Russell Diez-Canseco: Yes, that's actually been an area of extreme focus for us. Over the last few years, during an extended period of tight supply in the market, we haven't invested as much time as we might have in a more normalized environment of working closely with retailers on a week-by-week basis to examine their order quantities and to help ensure that they're not over or under ordering relative to the plans we've got with them to grow. And what we did see earlier this year when in some retailers, you saw velocities below maybe where we expected them to be, or perhaps where the retailer or distributor expected them to be. Sometimes there is a gap between when the sell-through at retail started to come down and the orders supporting those sales came down and you started to see some inventory expansion and then contraction, those a bullwhip effect in the supply chain as I think they called it in business school. And we're working much more closely and really focused on making sure that we don't see a resumption of those sort of disruptive patterns. And we're feeling much better about the right levels of inventories at our top customers and our ability to work with them to make sure that we don't see any big swings one way or the other. Operator: Our next question comes from the line of Glenn West with William Blair. Glenn West: Hi guys, this is Glenn West stepping in for Jon Andersen. Just one question. So last quarter, I think we're thinking or talking about 2Q, even though like negative mid to high teens, and it came in a little higher this quarter. And then I know you laid out kind of the 3 building blocks to get to the guide that you obviously reaffirmed. But maybe just some more color on what gives you confidence that swing is going to work and how much of that is kind of already locked in versus dependent on things playing out. Thilo Wrede: I think as it comes to relative to what expectations were, volume to retailers in Q2 was maybe a smidge lighter than what we expected. There was one retailer in particular where we're switching from shipping through distributor to going -- to selling directly to the retailer. That transition took a bit longer than we thought. And because of that, promotions got pushed back by a few weeks that certainly had an impact on the quarter. And given the oversupply situation that we are in, that is really a double whammy for us then, right, on one hand we are not getting the revenue from that promotion during the quarter that we expected and therefore not the gross profit that we expected, and then the eggs that we didn't sell to the retailer we now have to send to the breaker and incur additional costs for that. So that's a bit of the variation there. I think the other piece that probably wasn't in most models for second quarter was the one-time expense that we had for the professional service for the feed project. That's a $3 million expense that we all experienced in Q2. But that's not a repeating expense going forward. When I now think about what are the building blocks that we need to deliver the guidance, it really comes down to the things that we talked about in the prepared remarks, right? We keep bringing price gaps down, that will accelerate velocity. We are getting the distribution gains that they're sold in, we have the visibility to them, the TDPs of 170 to 175 points by Q4. That is something that we have clear line of sight to because the sell-in has already happened. And then we're taking costs out of the system. We talked about the $6 million to $7 million of SG&A reduction. That's 10% of our people-related costs in SG&A. That's 5.5% of last year's SG&A. That's not an insignificant reduction for us. And those are then the drivers to get to the guidance. It really comes down to, can we accelerate volume enough to make sure that we get the leverage in the P&L. And that is where we have confidence that with the price gap measures that we're taking and the distribution gains that we know are coming, that we will get that leverage to get margins back up again. Operator: Our next question comes from the line of Sarang Vora with TAG. Sarang Vora: Good to see stabilization in the back half of the year. My question is around price gaps. As you narrow this price gap to, $1 to $2 in general, and kind of keep it over there, given, how the competition has changed in the space. Do you think this has an impact on the structural gross margin level of the company? I know it's coming back to 30% exit towards the fourth quarter, but in the past, we have been talking mid-30s. I'm curious to know if the lowering of the prices or competitive landscape has an impact on the structural gross margin or are there any offsets like feed cost and stuff that can help it go even higher from north of 30? So curious to hear your thought on that. Thilo Wrede: Yes, thanks for the question. Let me be very clear. I don't think we expect anything north of 30 if you're implying that we should be planning for a 4 handle on our gross margin. What we said in the prepared remarks was that we think we'll have an exit rate in Q4, meaning at the end of Q4, gross margin that starts with a 3 again. Volume leverage across ECS and cost of goods sold certainly plays into that and that is assuming that we're bringing the price gaps down. What will then help us next year is the savings from the feed project that we've talked about. If you recall on the first quarter call, we said that last year feed costs were about $125 million. And we expect to save a decent enough amount of that, more than $1 million or $2 million in order to make it worth our while. Now, with increasing fertilizer costs, we expect that feed cost will increase for us as we go into the end of the year and then next year. So the feed cost savings that we're getting from this project are at a minimum offsetting these higher input costs because of fertilizer. But we think there is a structural cost reduction that we can accomplish with this project that ultimately will help us pay for the price gap reductions. Sarang Vora: And I had a quick follow-up on the TDP growth. Can you help us understand the TDP growth by channels? Where do you see -- it's a significant growth, so I'm just curious if you can share, there is an opportunity or volume expansion happening in grocery, mass, natural, just curious if you can share any more color on where you are seeing the TDP growth by channel. Thilo Wrede: Yes. So the distribution gains that we've been talking about that are coming, they're across the board. I think we have the biggest opportunity in the mass channel. There are certainly doors that we are not in today and our average items carried in the mass channel is lower than in the food channel or natural. But even in natural, where we already have very healthy distribution with a 24 count that Russell had mentioned earlier, there's another opportunity for us to get another SKU on the shelf. And so we expect to get TDP gains across all channels that we're in today, maybe with a bit more focus on mass, because that's where we still have the lowest distribution today. Operator: Our next question comes from the line of Jack Siedow with Needham & Company. Jack Siedow: This is Jack on for Gerald. I guess, how are you thinking about long-term CapEx post '26? Not looking for guidance or anything, but just trying to understand how flexible you are with growth spend versus maintenance once the foundation of VXR is completed and insulated. Thilo Wrede: Yes, so VXR, as we said first quarter call and then repeated again today, VXR, the plan is to halt construction once the outside of the building is basically completed. We will then need about 12 months -- 9 to 12 months lead time between deciding that we need the capacity from VXR and actually getting eggs out of the new facility. And so we're modeling potential demand for the coming years very, very frequently to make sure that we find the right time to restart construction of VXR. Based on how we've talked about CapEx guidance before, how we talk about it today, you can do the math that there's about $80 million or $90 more million dollars that we need to spend on VXR once we restart construction. But we will only do that once we have a very clear signal that we will actually need the capacity. Once VXR construction is done, then we'll go back to a time of just maintenance CapEx. In the past, we've spent, let's call it, $10 million, $15 million a year on CapEx. That was a combination of maintenance and some smaller projects that we have been doing at ECS. So once we are through this intense CapEx phase with VXR, expect that CapEx spending will fall back down to somewhere of that range, what we have seen prior to starting spending on VXR. Jack Siedow: Okay, that's helpful. And then as a result of the new deal, can you kind of talk about any updated capital allocation priorities? You obviously announced the termination of the repurchase program, but any more color there would be great. Thanks. Thilo Wrede: Yes, the capital allocation priorities really haven't changed from how we've talked about in the past, right? First one is keeping lights on. Second one is making sure the brand can grow and we have the capacity. Third one is that we gain efficiencies. And then the fourth one would be to return monies to shareholders. Right now, given the new loans that we have, the ability to return money to shareholders is constrained. That's simply part of the loan agreements that we signed. That doesn't take it away for us into perpetuity, but for the time being, that is simply not something that we can focus on. And so that then makes us focus on the first 3 priorities for capital allocation and ensuring that the brand can continue to grow, that we have the capacity in place, that we have the support for the brand in place. That's probably the biggest priority that we have right now. Operator: Our next question comes from the line of Robert Moskow with TD Cowen. Robert Moskow: You said that it's taking some time to get the price gaps back to where you think they should be with retailers and I was wondering what's more difficult? Is it getting them to adjust unit pricing or is it getting -- keeping track of what the competition is doing? Russell Diez-Canseco: Hey, Rob. Thanks for the question. The competition shows up just as we do in the scan data every week. So it's relatively straightforward to keep an eye on that and make some fact-based decisions based on that kind of information. I think, we've got, again, we feel confident that the work we're doing and have already done both on narrowing price gaps and expanding distribution this year should deliver the guidance that we've outlined and reaffirmed today. The pace at which we continue to invest in price and how far we go has a lot to do with balancing, making sure that we are at a relevant price gap for consumers, especially those who might be trying us for the first time, and also continuing to invest in and protect a really premium brand we've built. That's why, for example, we have favored the breaker channel in the short run to manage through oversupply as opposed to kind of race to the bottom hot promotions as one example. We have a brand that we need to invest in for the long haul as well. So it's really a balancing act across a period of time in working with the retailers, but also making sure that we're sending the right signals to consumers about the fundamentally different value proposition we offer and making sure we get credit for that. Operator: We have reached the end of the Q&A session. I will now turn the call back to Brian Shipman for closing remarks. Brian Shipman: Thank you everyone for joining us today. Feel free to reach out directly if you have follow-up questions and we'll talk to you next quarter. Have a great day. Operator: This concludes today's call. Thank you for joining. You may now disconnect. 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Interested in Vital Farms, Inc.? Here are five stocks we like better. Q2 results weakened significantly: Net revenue fell 10.1% year over year to $166 million, while adjusted EBITDA was a $26.6 million loss, pressured by egg oversupply, excess breaker-channel sales and one-time restructuring and business-exit costs. Turnaround efforts are showing early progress: Vital Farms narrowed its retail price gap, increased shell-egg market share and improved store-level velocity, while expanded distribution is expected to support volume-driven growth in the second half of 2026. Management reaffirmed its outlook and strengthened liquidity: The company expects lower supply-management costs, $6 million–$7 million in annualized overhead savings and sequential improvement in the second half, maintaining its $775 million–$800 million revenue and $0–$10 million adjusted EBITDA forecasts. Egg Prices Surge: 3 Stocks Set to Benefit from Rising PPI Trends Vital Farms (NASDAQ:VITL) reported second-quarter 2026 net revenue of $166 million, down 10.1% from a year earlier, as the company worked through an industry oversupply of eggs, pricing gaps with branded competitors and elevated costs tied to managing excess supply. Chief Executive Officer Russell Diez-Canseco said the second quarter represented the company’s expected financial low point for the year. He said management’s operational plan—focused on narrowing retail price gaps, adjusting supply through farmer contract amendments and reducing overhead—was progressing as intended. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Vital Farms Rides the Pasture-Raised Egg Trend to the Bank “We believe our turnaround plan is working,” Diez-Canseco said, adding that the company expects the second half of 2026 to look “fundamentally different” from the first half. Chief Financial Officer Thilo Wrede said the revenue decline was primarily driven by a $19.8 million volume-driven decline in retail-channel sales, excluding excess breaker and wholesale sales. That decline was partly offset by a $1.1 million price-mix benefit. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Vital Farm’s Earnings: More than Sunny Side Up Excess sales to breaker and wholesale channels contributed only $0.1 million to net revenue growth, as higher volumes in those channels were almost entirely offset by lower prices. Breaker sales refer to eggs sent for processing rather than sold through the company’s retail channels. Gross profit totaled $10.9 million, or 6.6% of net revenue. The result included: $19.5 million impact from excess breaker sales; $800,000 from amortization of farmer contract amendments; and $7.8 million in costs associated with winding down the company’s butter business. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling Wrede said these supply-management and other discrete expenses totaled $28.1 million. Shipping and distribution costs rose to 6.4% of revenue from 4.9% a year earlier, including $1.5 million for shipping excess eggs to breaker plants. Adjusted EBITDA was a loss of $26.6 million for the quarter. Wrede said the result reflected $21.8 million in peak supply-management costs as well as $3 million in one-time professional-services costs tied to a cost-savings program. SG&A expense was $40.4 million and included $3.3 million in restructuring and severance costs and $3 million in one-time professional-services costs. Management said it has been reducing the company’s retail price gap versus branded competitors. The average gap narrowed to approximately $2.36 in the second quarter from $2.51 in the first quarter. Diez-Canseco said Vital Farms views a gap of roughly $1 to $2 as the most effective range. In markets where price gaps narrowed, the company saw improved velocity and household acquisition, according to Diez-Canseco. At one of its top 10 retailers, he said velocity and incremental new households improved 27% since mid-April where price gaps were adjusted to an appropriate level. Vital Farms also recorded a more than 200-basis-point year-over-year gain in retail dollar share of the shell egg category in MULO+ during the quarter, according to Circana data cited by management. By mid-July, shell-egg units per store per week per item had increased 12.5% since the company’s first-quarter call and reached their highest level since February. Diez-Canseco said the company expects the recovery to be volume-driven in the second half as pricing actions and new distribution placements take effect. He noted that most distribution gains involve placing the company’s “core four” products in existing retail doors, though Vital Farms has also introduced a 24-count package at Whole Foods and additional retailers. The company expects average total distribution points of 150 to 160 during 2026, compared with 130 in 2025. It reported 148.7 year-to-date total distribution points in MULO+ through the end of the second quarter and expects to reach 170 to 175 points in the fourth quarter, supported by commitments for new placements. Wrede said distribution gains are expected across channels, with the largest opportunity in mass retail. Vital Farms said its farmer contract amendments are now in place, giving it greater flexibility to reduce egg production amid the temporary supply-demand imbalance. Management said it believes oversupply peaked in the second quarter. Rather than relying primarily on sales to the lower-revenue breaker channel, the company expects to manage supply by reducing the number of eggs entering its cold-storage facilities. Wrede said breaker expenses may continue in the third quarter and potentially the fourth quarter, but at much lower levels than in the second quarter and potentially below the first-quarter level. The company now models full-year supply-management costs in the mid-$30 million range, compared with an initial estimate of $32 million. Wrede attributed the increase to somewhat lighter second-quarter sales, which resulted in more surplus eggs, and a deliberate decision to retain supply flexibility should retail demand recover faster than expected. Vital Farms also changed the planned execution of its butter exit. Instead of converting its remaining bulk butter inventory into retail product, the company plans to sell the inventory to a melter after determining that the conversion approach would be uneconomical because of operational constraints and elevated costs. The company completed planned staffing changes at Egg Central Station and conducted further organizational streamlining in mid-July. Management expects those actions to reduce its annualized SG&A run rate by approximately $6 million to $7 million. Vital Farms is also pausing construction on its Vital Crossroads facility by the end of 2026, while completing the exterior to protect the building from winter weather. Wrede said the company expects another $80 million to $90 million of spending would be needed after construction resumes, and that it will restart the project only when demand signals indicate the capacity is necessary. Once the facility is completed, management expects capital expenditures to return to a historical range of roughly $10 million to $15 million annually. At quarter-end, Vital Farms had $21.2 million in cash and had drawn $30 million on its prior revolving credit line. After the quarter closed, the company entered into a new $125 million term loan and a $60 million asset-based lending facility, both with three-year terms, replacing the prior revolver. The company drew the full term loan and repaid the previous revolving facility. Wrede said the new financing provides $185 million of debt capacity and greater flexibility to manage through the oversupply period. The company also disclosed that its board terminated the 2026 share-repurchase plan after quarter-end, consistent with the terms of the new lending facilities. Vital Farms had repurchased $50 million of shares at an average price of $13.29 per share at the beginning of the second quarter. Management reaffirmed its full-year outlook for net revenue of $775 million to $800 million and adjusted EBITDA of $0 to $10 million. Vital Farms expects sequential improvement in net revenue and adjusted EBITDA in the third quarter, followed by greater operational leverage in the fourth quarter as distribution gains, lower breaker volumes and reduced overhead flow through results. Vital Farms, traded on the NASDAQ under the symbol VITL, is a U.S.-based food company specializing in pasture-raised egg and dairy products. The company partners with a network of family farms across the United States to produce eggs, butter and related items under a certified humane, pasture-centric farming model. Vital Farms' supply chain emphasizes animal welfare, environmental stewardship and transparent sourcing, appealing to consumers seeking ethically produced, high-quality ingredients. Founded in 2007 and headquartered in Austin, Texas, Vital Farms began by marketing pasture-raised eggs to health- and ethically minded shoppers. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Vital Farms Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Second Quarter Net Revenue of $166.0 Million Announces Successful Execution of Previously Disclosed Supply Control and Targeted Cost Savings Initiatives Grew Retail Dollar Share of the Shell Egg Category by More Than 200 Basis Points Year-Over-Year, Even as Category Pricing Fell Sharply Amid Industry-Wide Oversupply Announces New Aggregate $185 Million Credit Facilities, Fortifying Financial Flexibility Announces Termination of Stock Repurchase Program Reiterates Fiscal Year 2026 Net Revenue Outlook of $775 Million to $800 Million and Adjusted EBITDA Outlook of $0 Million to $10 Million AUSTIN, Texas, August 06, 2026--(BUSINESS WIRE)--Vital Farms (Nasdaq: VITL), a Certified B Corporation that offers a range of ethically produced foods nationwide, today reported financial results for its second quarter ended June 28, 2026. Financial highlights for the second quarter ended June 28, 2026, compared to the second quarter ended June 29, 2025, where applicable, include: Net Revenue decreased 10.1% to $166.0 million, compared to $184.8 million Gross Margin of 6.6%, compared to 38.9% Net Loss of $31.1 million, compared to Net Income of $16.6 million Net Loss per Diluted Share of $0.72, compared to Net Income per Diluted Share of $0.36 Adjusted EBITDA loss of $26.6 million and Adjusted Net Loss of $20.0 million, including $24.8 million in certain pre-tax expenses not added back to Adjusted EBITDA or Adjusted Net Loss: $19.5 million from excess breaker sales, $1.5 million of related shipping and distribution costs, $0.8 million of farmer contract amendment amortization, and $3.0 million of consulting fees associated with our feed cost savings program1 Adjusted Net Loss per Diluted Share of $0.47, compared to Adjusted Net Income per Diluted Share of $0.361 "Our second quarter results reflect the industry-wide oversupply and price gap pressure we described on our first quarter call, and these results are not what we aspire to deliver. At the same time, our team has been executing the recovery plan we described to you last quarter, and we are seeing real evidence it is working. We have moved with urgency and discipline, and the results are showing up where they matter most: in the marketplace," said Russell Diez-Canseco, Vital Farms’ Executive Chairperson, President, and CEO. "We narrowed our retail price gaps on a targeted, geography-by-geography basis, executed voluntary contract amendments with our farmer partners to right-size supply, and structurally reduced our overhead. Even as retail egg prices across the total shell egg category fell more than 35% year-over-year amid historic industry-wide oversupply, we grew our dollar share of the category by more than 200 basis points, further extending our position as the nation's leading pasture-raised egg brand. We believe that is a powerful signal of the strength of our brand and the loyalty of our consumers, even in the most difficult pricing environment our category has seen in years. Just as importantly, we have significantly strengthened our balance sheet with two new credit facilities that are already available, giving us the flexibility to pursue our future pricing and growth strategy. With our supply and demand projections now in balance as we head into Q3, our sales mix shifting decisively back toward retail channels, meaningful distribution gains building as the year progresses, and critical cost and capital allocation changes in place, we remain confident in our full-year outlook and in our ability to build lasting shareholder value while fulfilling our mission to bring ethically produced food to the table." For the 13 Weeks Ended June 28, 2026 Net revenue decreased 10.1% to $166.0 million in the second quarter of 2026, compared to $184.8 million in the second quarter of 2025. The decrease compared to the prior-year period was driven by a volume-driven decline of $19.8 million, excluding excess breaker and wholesale channel sales, partially offset by a price/mix benefit of $1.1 million. Excess sales to breaker and wholesale channels contributed only $0.1 million to net revenue growth, as a large volume increase was almost entirely offset by a price decline. Net revenue from sales through our retail channel was $158.0 million and $176.1 million for the 13-week periods ended June 28, 2026 and June 29, 2025, respectively. Gross profit was $10.9 million, or 6.6% of net revenue, in the second quarter of 2026, compared to $71.8 million, or 38.9% of net revenue, in the second quarter of 2025. Gross profit and margin decreases reflected higher input and production costs and unfavorable sales mix. The unfavorable sales mix was driven by an oversupply of egg inventory, which resulted in increased sales to breaker and wholesale channels at lower prices, reducing gross profit by $19.5 million. Together with $0.8 million of farmer contract amendment amortization and $7.8 million of costs related to the exit of our butter business, gross profit in the quarter reflects $28.1 million of supply-management and other discrete expenses; excluding these items, underlying gross margin was meaningfully more favorable. Loss from operations was $40.1 million in the second quarter of 2026, compared to income from operations of $23.8 million in the second quarter of 2025. The decrease was driven by higher input and production costs, as well as higher SG&A expenses to support the growth of the business and an unfavorable sales mix. Net loss was $31.1 million in the second quarter of 2026, compared to net income of $16.6 million in the prior-year quarter. The decrease was driven by higher input and production costs and unfavorable sales mix. Net loss per diluted share was $0.72 for the second quarter of 2026, compared to net income per diluted share of $0.36 in the prior-year quarter. Adjusted EBITDA was a loss of $26.6 million in the second quarter of 2026, compared to Adjusted EBITDA of $29.9 million in the second quarter of 2025. The decrease was driven by higher input and production costs as well as higher SG&A to support the growth of the business and an unfavorable sales mix. Adjusted EBITDA includes addbacks of $3.3 million of restructuring and severance costs and $7.8 million of exit costs associated with the previously announced wind-down of our butter business. Adjusted net loss was $20.0 million for the second quarter of 2026, compared to adjusted net income of $16.6 million in the prior-year quarter. Adjusted net loss per diluted share was $0.47 in the second quarter of 2026, compared to adjusted net income per diluted share of $0.36 in the second quarter of 2025. Adjusted EBITDA, Adjusted net income (loss) and Adjusted net income (loss) per diluted share exclude certain non-cash and other items. Adjusted EBITDA, Adjusted net income (loss) and Adjusted net income (loss) per diluted share are non-GAAP financial measures defined in the section titled "Non-GAAP Financial Measures" below and each are reconciled to net income (loss), their closest comparable GAAP measure, at the end of this release. Balance Sheet and Cash Flow Highlights Cash, cash equivalents and marketable securities were $21.2 million as of June 28, 2026, and we had $30.0 million of outstanding debt. Net cash used in operating activities was $45.9 million for the 26-week period ended June 28, 2026, compared to net cash provided by operating activities of $4.5 million for the 26-week period ended June 29, 2025. Capital expenditures totaled $37.5 million in the 26-week period ended June 28, 2026, compared to $10.0 million in the 26-week period ended June 29, 2025. Stock repurchased early in the quarter under the company’s previously announced stock repurchase program totaled 1,129,104 shares of common stock at an average price per share of $13.29, for an aggregate cost of $15.0 million in the second quarter of 2026. On August 3, 2026, the company’s Board of Directors terminated the stock repurchase program, consistent with the terms of the company’s new lending facilities. The Board of Directors and management remain committed to a disciplined capital allocation strategy and, as always, will continue to evaluate capital allocation opportunities to drive long-term stockholder value. Financing Update The company today announced the closing of a new $125 million 3-year term loan facility and a new $60 million 3-year asset-based lending facility, replacing the company's previous revolving credit facility. These new agreements significantly strengthen Vital Farms’ liquidity profile and provide financial flexibility and runway to execute its strategic plan. Fiscal 2026 Outlook Thilo Wrede, Vital Farms’ Chief Financial Officer, commented: "As we indicated on our first-quarter call, we expected the impact of this year’s industry-wide oversupply and our own price-gap headwinds to be concentrated in the second quarter, and that is what we saw. The disciplined execution of our plan since then gives us confidence in reaffirming our full-year 2026 guidance. By lowering our fixed overhead and right-sizing supply, we believe we are well positioned for a margin recovery in the second half of the year. We have also decisively strengthened our liquidity profile with our new $125 million term loan facility and $60 million asset-based lending facility, which we believe create the necessary flexibility to execute our future pricing and growth plans." For fiscal year 2026, we continue to expect: Net revenue of $775 million to $800 million, which represents at least 5% growth versus fiscal year 2025. This assumes that investments in price and distribution gains lead to a return to positive shell egg volume growth in the second half of 2026. It also assumes that competitive activity does not intensify further. Adjusted EBITDA of $0 to $10 million, reflecting higher promotional spending and price investments and the negative impact in the mid-$30 million range from costs to manage the current oversupply of eggs. Capital expenditures are expected to be in the range of $70 million to $75 million, reflecting the company’s decision earlier in 2026 to slow the pace of capital spending, particularly at Vital Crossroads (VXR) and new accelerator farms, to better align the timing of capacity additions with demand realization. Vital Farms’ guidance assumes that there are no further material disruptions to the supply chain or its customers or consumers, including any material changes to the current macroeconomic environment. Vital Farms cannot provide a reconciliation between its forecasted Adjusted EBITDA and net (loss) income, its most directly comparable GAAP measure, without unreasonable effort due to the unavailability of reliable estimates for income taxes and stock-based compensation, among other items. These items are not within our control and may vary greatly between periods and could significantly impact future financial results. Conference Call and Webcast Details Vital Farms will host a conference call and webcast at 8:30 a.m. ET today to discuss the results. To participate in the conference call via phone, participants may register for the call here to receive dial-in details and a unique PIN. Alternatively, participants may access the live webcast on the Vital Farms Investor Relations website at https://investors.vitalfarms.com under "Events & Presentations." The webcast will be archived for 30 days. In addition, Vital Farms will publish its August 2026 Corporate Presentation as supporting materials to the webcast on the Vital Farms Investor Relations website at https://investors.vitalfarms.com under "Events & Presentations." About Vital Farms Vital Farms (Nasdaq: VITL) is a Certified B Corporation that offers a range of ethically produced foods nationwide. Started on a single farm in Austin, Texas, in 2007, Vital Farms is now a national consumer brand that works with more than 625 small farms and is the leading U.S. brand of pasture-raised eggs by retail dollar sales. Vital Farms’ ethics are exemplified by its focus on the humane treatment of farm animals and sustainable farming practices. In addition, as a Delaware public benefit corporation, Vital Farms prioritizes the long-term benefits of each of its stakeholders, including farmers and suppliers, customers and consumers, communities and the environment, and crew members and stockholders. Vital Farms’ products, including shell eggs, hard-boiled eggs, and liquid whole eggs, are sold in more than 24,000 stores nationwide. Vital Farms pasture-raised eggs can also be found on menus at hundreds of foodservice operators across the country. For more information, visit https://vitalfarms.com/. Forward-Looking Statements This press release and the earnings call referencing this press release contain "forward-looking" statements, as that term is defined under the federal securities laws, including but not limited to statements regarding Vital Farms’ market opportunity, brand strength, anticipated growth and distribution gains, corporate and commercial strategy, the effect of the new term loan facility and asset-based lending facility on the availability of credit to meet Vital Farms’ liquidity needs and ability to execute its strategic plan, the impact and expected benefits of changes in Vital Farms’ cost structure and capital expenditures, and future financial performance, including management’s outlook for fiscal year 2026 and management’s long-term outlook. These forward-looking statements are based on Vital Farms’ current assumptions, expectations, and beliefs and are subject to substantial risks, uncertainties, assumptions, and changes in circumstances that may cause Vital Farms’ actual results, performance, or achievements to differ materially from those expressed or implied in any forward-looking statement. The risks and uncertainties referred to above include, but are not limited to: Vital Farms’ expectations regarding its revenue, expenses, and other operating results; Vital Farms’ ability to attract new consumers and customers, to successfully retain existing consumers and customers, to attract and retain its suppliers, distributors, and co-manufacturers, and to maintain its relationships with the farmers in its network and further expand its farm network, and plans for operation of accelerator farms and the impact of its decision to pause development of future accelerator farms; Vital Farms’ ability to sustain or increase its profitability; Vital Farms’ expectations regarding its future growth in the foodservice channel; Vital Farms’ ability to procure sufficient high-quality eggs and other raw materials; Vital Farms’ ability to effectively manage its supply of eggs and the impact of its current and planned supply control initiatives; real or perceived quality or food safety issues with Vital Farms’ products or other issues that adversely affect Vital Farms’ brand and reputation; Vital Farms’ ability to manage changes in the tastes and preferences of consumers; the financial condition of, and Vital Farms’ relationships with, its farmers, pullet vendors, suppliers, co-manufacturers, distributors, retailers, and foodservice customers, as well as the health of the foodservice industry generally; the effects of outbreaks of agricultural diseases, including avian influenza and egg drop syndrome, the perception that outbreaks may occur or regulatory or market responses to such outbreaks generally; the ability of Vital Farms, its farmers, pullet vendors, suppliers, and its co-manufacturers to comply with its standards and food safety, environmental or other laws or regulations; the potential outcome and impact of pending or future litigation, and the costs, expenses, and uncertainties associated therewith; specifications and timing of the expansion of Vital Farms’ processing capacity, and the impacts of prior or future expansions of such facilities on Vital Farms’ future revenue and farm network; future investments in its business, anticipated capital expenditures and estimates regarding capital requirements; anticipated changes in Vital Farms’ product offerings, including specifications, timing and financial impacts of the planned discontinuation of its butter products, and Vital Farms’ ability to innovate to offer new products or enter into new product categories; the costs and success of marketing efforts and ability to promote its brand; Vital Farms’ reliance on key personnel and its ability to identify, recruit and retain personnel; Vital Farms’ ability to effectively manage its growth; the potential influence of Vital Farms’ focus on a specific public benefit purpose and producing a positive effect for society; Vital Farms’ stated impact goals, opportunities and initiatives, as well as the standards and expectations of third parties regarding these matters; Vital Farms’ ability to maintain effective internal controls over financial reporting and to remediate and prevent material weaknesses in its internal controls; Vital Farms’ ability to compete effectively with existing competitors and new market entrants; the impact of adverse economic conditions, including as a result of unfavorable global economic and political conditions, elevated interest rates, and inflation; Vital Farms’ estimates of future capital expenditures and the sufficiency of Vital Farms’ cash, cash equivalents, any marketable securities and availability of credit under its credit facilities to meet liquidity needs; seasonality; and the growth rates of the markets in which Vital Farms competes. These risks and uncertainties are more fully described in Vital Farms’ filings with the Securities and Exchange Commission (SEC), including in the sections entitled "Risk Factors" in its Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 2026, which Vital Farms anticipates filing on August 6, 2026, and other filings and reports that Vital Farms may file from time to time with the SEC. Moreover, Vital Farms operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for management to predict all risks, nor can Vital Farms assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements Vital Farms may make. In light of these risks, uncertainties, and assumptions, Vital Farms cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Forward-looking statements represent management’s beliefs and assumptions only as of the date of this press release. Vital Farms disclaims any obligation to update forward-looking statements except as required by law. Non-GAAP Financial Measures We report our financial results in accordance with GAAP. However, management believes that non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net (Loss) Income and Adjusted Net (Loss) Income per Share, provide investors with additional useful information in evaluating our performance. Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net (Loss) Income and Adjusted Net (Loss) Income per Share are financial measures that are not required by or presented in accordance with GAAP. We believe that these non-GAAP financial measures, when taken together with our financial results presented in accordance with GAAP, provide meaningful supplemental information regarding our operating performance and facilitate internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA and Adjusted EBITDA Margin is helpful to our investors as they are measures used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes. We calculate Adjusted EBITDA as net (loss) income, adjusted to exclude: (1) depreciation and amortization; (2) stock-based compensation expense; (3) (benefit) or provision for income taxes as applicable; (4) interest expense; (5) interest income; (6) amortization of cloud computing arrangements; (7) restructuring and severance costs; and (8) costs related to our exit of our butter business. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. We believe that the use of Adjusted Net (Loss) Income and Adjusted Net (Loss) Income per Share is helpful to our investors, as these measures are used by management in assessing the ongoing operating performance and underlying earnings potential of our business, as well as for internal planning and forecasting purposes. Unlike Adjusted EBITDA, these measures retain the impact of depreciation, amortization, interest, taxes, and non-cash charges. We calculate Adjusted Net (Loss) Income as net (loss) income, adjusted to exclude: (1) restructuring and severance costs; and (2) costs related to our exit of our butter business. We calculate Adjusted Net (Loss) Income per Share as Adjusted Net (Loss) Income divided by weighted average common shares outstanding, basic and diluted. These non-GAAP financial measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of the limitations of Adjusted EBITDA and Adjusted EBITDA Margin include that (1) they do not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect these capital expenditures, (3) they do not consider the impact of stock-based compensation expense, (4) they do not reflect other non-operating expenses, including interest expense; and (5) they do not reflect tax payments that may represent a reduction in cash available to us. In addition, some of the limitations of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net (Loss) Income and Adjusted Net (Loss) Income per Share include that (1) certain excluded items represent actual cash expenditures that reduced our liquidity; and (2) they involve management’s judgment as to what items to exclude. Our use of non-GAAP financial measures may not be comparable to similarly titled measures of other companies because they may not calculate such non-GAAP financial measures in the same manner, limiting the usefulness as comparative measures. Because of these limitations, when evaluating our performance, you should consider non-GAAP financial measures alongside other financial measures, including our net (loss) income, net (loss) income margin, net (loss) income per share and other results stated in accordance with GAAP. View source version on businesswire.com: https://www.businesswire.com/news/home/20260806022358/en/ Contacts Media: Rob [email protected] Investors: Brian S. Shipman, [email protected]

Vital Farms (VITL) is expected to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended June 2026. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on August 6. On the other hand, if they miss, the stock may move lower. While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise. This company is expected to post quarterly loss of $0.45 per share in its upcoming report, which represents a year-over-year change of -225%. Revenues are expected to be $171.13 million, down 7.4% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 2.27% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction). The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Vital Farms, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects. This has resulted in an Earnings ESP of -2.57%. On the other hand, the stock currently carries a Zacks Rank of #5. So, this combination makes it difficult to conclusively predict that Vital Farms will beat the consensus EPS estimate. While calculating estimates for a company's future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Vital Farms would post earnings of $0.09 per share when it actually produced a loss of -$0.03, delivering a surprise of -133.33%. Over the last four quarters, the company has beaten consensus EPS estimates two times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Vital Farms doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Another stock from the Zacks Food - Miscellaneous industry, Vital Farms (VITL), is soon expected to post loss of $0.45 per share for the quarter ended June 2026. This estimate indicates a year-over-year change of -225%. Revenues for the quarter are expected to be $171.13 million, down 7.4% from the year-ago quarter. Over the last 30 days, the consensus EPS estimate for Vital Farms has been revised 2.3% down to the current level. Nevertheless, the company now has an Earnings ESP of -2.57%, reflecting a lower Most Accurate Estimate. This Earnings ESP, combined with its Zacks Rank #5 (Strong Sell), makes it difficult to conclusively predict that Vital Farms will beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates two times. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Vital Farms, Inc. (VITL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Thursday, May 7, 2026 at 8:30 a.m. ET Executive Chairperson, President, and Chief Executive Officer — Russell Diez-Canseco Chief Financial Officer — Thilo Wrede Senior Vice President, Investor Relations — Brian S. Shipman Russell Diez-Canseco, Vital Farms' Executive Chairperson, President and Chief Executive Officer; and Thilo Wrede, the company's Chief Financial Officer. By now, everyone should have access to the company's first quarter 2026 earnings press release issued this morning. During today's call, management may make forward-looking statements within the meaning of the federal securities laws. 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 29, 2026, that was filed with the SEC today, as well as the company's other SEC filings 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. Please refer to today's press release and presentation, each available on the Investor Relations section of our website for a reconciliation of the non-GAAP measures referenced in today's call, including adjusted EBITDA and adjusted EBITDA margin to their most directly comparable GAAP 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. After our prepared remarks, we'll open the line for questions. As a reminder, please limit yourself to 1 question plus 1 follow-up so that we can hear from as many participants as possible. Now I'll turn the call over to Russell. Russell Diez-Canseco: Thank you, Brian, and good morning, everyone. I'd like to start, as I always do, by thanking our crew and farmers. I believe they're the best in the business, and it is my privilege to work alongside them in our effort to improve the lives of people, animals and the planet through food. I want you to take 3 key messages away today. The results we saw in the first quarter and scanner data so far in the second quarter fall short of our expectations, because price gaps reached levels that our brand could not sustain. We believe we're adapting quickly to this new more pressured environment by reducing price gaps, addressing our cost structure and managing cash. To be clear, we believe our brand will support a price premium, just not as much as we've seen over the past few months. Finally, we see this as a reset of our expectations for 2026, but not a reset of our ambitions. The underlying opportunities that have driven our growth for over 15 years and the strengths that Vital Farms brings to the marketplace remain. We believe we can fulfill our purpose and drive profitable growth in both good and bad markets. Let me start with setting the stage a bit and remind you how we thought about this year going into it. We entered this year armed with the benefits of our work from 2024 and 2025, expanded consumer awareness and the playbook to convert that awareness into profitable growth through household trial and expanded distribution. That work was enabled by our expanded farm network, processing capacity investments at Egg Central Station and the improved workflows and data accessibility from our ERP implementation. We expected commodity egg prices to fall as the industry experienced a much milder avian influenza season and flocks were rebuilt. With that context in place, our strategy going into the first quarter was to increase investments in promotions back to levels appropriate for a market that is well supplied. So what changed? The outdoor access subcategory in which we compete has continued to command a strong price premium at retail. However, it moved down directionally with the broader market. Against this backdrop, our first quarter promotions proved insufficient, because pricing across the category declined much more than fundamentals would have suggested, price gaps reached levels we hadn't seen in the past, and we found the limits of what our brand could sustain. We believe this increase in price gaps has driven the sharp reduction in velocities we have seen in many markets. It's important to note that despite these price gaps, our existing base of consumers have remained loyal. However, the rate at which new households are trying us for the first time dropped significantly. In 2024 and 2025, more than 55% of our consumers were households that had not bought us previously. That dropped to just 50% in the first quarter of 2026. This demonstrates our reduced ability to convert growing brand awareness into trial at these price gap levels. In contrast, our consumer data also shows that our existing consumers continue to be loyal and have generally resisted trading down to lower priced alternatives. Buy rates are holding up very well with units per retained household 2% higher in the first quarter than the average for the prior 8 quarters. In other words, the larger-than-expected price gaps have led to a slowdown in new consumer acquisition, which shows up in market data as a slowdown in velocity. Therefore, our focus now is to reduce price gaps, and our data indicates that this will make a difference. Our data shows that in geographies where price gaps to outdoor access competitors have widened the most, volume growth is negative. And where price gaps have remained more moderate, we continue to see healthy growth without needing to race to the bottom on promotions. That means we need to narrow these price gaps in the marketplace in a targeted way, geography by geography and retailer by retailer. That work is underway, and we believe initial efforts show positive results. For example, we recently addressed price gaps at a top 10 customer, bringing them from about 35% above a group of competing premium branded outdoor access eggs to about 25% and volumes increased by 18% after just 2 weeks compared to the prior 4 weeks. Even with price reductions, we believe we still command a meaningful premium to our most direct competitors and can earn an attractive margin. It will take time to fully align the cost structure with these price levels, but we believe that we can generate the gross margins and EBITDA margins necessary to deliver strong shareholder value. The other aspect of our strategy going into the year, converting a more adequate supply into distribution gains is playing out as we expected. We're seeing strong distribution momentum with additional placements and resets expected to take effect as we move through the middle and back half of the year. Retailers are highly interested in our brand and the productive conversations with our retail partners that we mentioned on the fourth quarter call a few months ago are bearing fruit. We've secured an at least 50% TDP increase with a top 3 customer, negotiated direct distribution instead of going through a distributor with a top 10 customer and have been assigned the category captain role for eggs with a banner of another top 3 customer. This is in addition to several distribution wins with customers across all geographies. All-in, we anticipate that we will add 20 to 30 TDPs or 15% to 25% over the course of 2026, and we expect to produce our single best yearly gain in TDP since going public as measured in Circana MULO+ for Shell eggs. Additionally, looking at the quarterly average, we've already ended the first quarter at 149.8 PDPs compared to a fourth quarter 2025 average of 144.8 and 115.8 in the first quarter of 2025 and expect the quarterly average could be between 170 to 175 in the fourth quarter of 2026, given the visibility we already have to commitments for new placements later in the year. We're also adapting quickly to this new more pressured environment by addressing our cost structure and managing cash expenditures. Narrowing price gaps requires a higher level of investment than we anticipated entering the year, reflecting the lower prices we're seeing in the marketplace. This will compress margins more than we initially forecast at least through the remainder of this year. There is work to do to adapt our cost structure to this environment, and we're pursuing it with rigor. Much of that work across both COGS and SG&A is already underway, but we expect much of the impact will be realized in 2027 and beyond. As a result, we view 2026 as a low watermark for margins in this cycle with our primary focus this year on returning the top line to volume-driven growth. We view 2027 as the year we will bring the underlying economics of the business back to a level that appropriately reflects the value we create through our brand and differentiated supply chain. Actions we're taking to adapt our cost structure and underlying economics include the following: First, we're right-sizing supply. A big impact on our short-term margins is the cost of oversupply relative to our current rate of retail sales. Because we buy eggs from our farmer partners regardless of the retail sales environment, temporary imbalances between supply and demand can create a costly supply overhang. In the short run, this results in expanded inventories and then increased low revenue sales to the breaker channel. Since we expect the supply-demand mismatch to persist over the coming months, we're working with some of our farmer partners to manage supply through voluntary amendments to their contracts to cease production from existing blocks or delay placement of future blocks. In return, we make payments to the farmers to compensate them for the foregone profits, but that still represents meaningful savings versus the full cost of buying eggs we don't need. You will see the impacts of this in our results this year. We expect that these actions taken throughout 2026 will bring supply in line with our projections for the rest of the year. Second, we're reducing COGS. The first action we're taking to reduce COGS is addressing staffing at ECS. We have adjusted our staffing plan at ECS to better match labor costs with processing volume and anticipate this to eliminate approximately $4 million of costs for the year. We're also working on COGS more broadly with feed costs being a promising target. Last year, feed accounted for roughly $125 million in COGS. Work is underway to lower our expenses, and we expect improvements to flow through our P&L in 2027. Third, we are managing SG&A. This week, we eliminated roles representing approximately 10% of our remote or non-ECS head count. While these actions are never taken lightly, they are appropriate given the business reality and reflect an ability to capture savings from our ERP implementation and other innovations in our ways of working. Fourth, we're controlling CapEx. We have slowed our rate of investment in certain growth-related projects to better align them with our current environment. Most critically, we will meaningfully slow the construction of our planned Vital Crossroads facility in Seymour, Indiana, and will reaccelerate only when we have more clarity on the exact timing of the need for incremental capacity. As a reminder, we have over $1 billion in revenue capacity from exit ECS. We've also paused the construction of our accelerator farms. We will continue to operate the 6 farms already built and maximize learnings from them. These 2 actions allow us to reduce projected 2026 CapEx by approximately $75 million, while also maintaining optionality to add back that additional capacity as early as the second half of 2027. Fifth, we are exiting butter. We have made the decision to exit our butter business, ending shipments toward the end of the year. We expect that this will free up $25 million in cash this year, reduce sales by an estimated $14 million in 2026 and improve gross margin by 150 to 200 basis points starting in 2027. This was not an easy decision, but we believe it's the right one, both for its near-term impact on our economics and because it refocuses human and financial capital to pursue more productive growth opportunities. The complexity of an international supply chain in a very uncertain global trade backdrop contributed to our conclusion that this was no longer an appealing business for us. All of this means that we need to update our guidance for the year. Our focus now is on restoring strong volume growth. With the need to address pricing in a very strategic fashion in the market, our revenue outlook and our margin expectations have changed. In addition, because especially in the first half of the year, our supply is meaningfully higher than our demand, we are incurring extra costs to reduce our supply. With that, we are reducing our net sales guidance to a range of $775 million to $800 million for 2026 and adjusted EBITDA to $0 to $10 million. This EBITDA guidance includes the negative impact from an estimated $32 million of supply management costs for this year. The slowdown of the work on Seymour and the pause in the build-out of Accelerator Farms allows us to reduce CapEx guidance to a range of $70 million to $75 million. We assume that we will have to maintain the current level of pricing investments through the balance of the year. Even at these levels, we anticipate underlying gross margin to return to 30% by late Q4 and adjusted EBITDA margin to get back to double digits in 2027. I also want to be very clear that the underlying opportunities that have driven our growth for over 15 years haven't diminished. We continue to have strong confidence in the opportunities presented by the premium outdoor access egg category and our ability to win over the long term, even in a challenged category and macro environment. There is a continuing secular shift in consumer preferences for clean label whole foods. Consumers continue to vote with their wallet for both premium branded and private label alternatives to the status quo. In fact, adoption is accelerating. Outdoor access eggs have grown from 8% of category volume in 2023 to 15% so far in 2026, even with commodity eggs at their cheapest in years. In fact, year-to-date alone, outdoor access eggs have grown 32% versus prior year in volume compared to mainstream eggs growing only 4% despite the lowest price in years. I would like to end by reiterating some of the key strengths by which I believe Vital Farms will continue to win even in a more competitive environment. We have built a brand on transparency and trust, which are rare and increasingly important to consumers. Our network of farmers and differentiated supply chain, including our own packing plant, have demonstrated real resiliency and neither is easy to replicate. We have a winning track record with our retail partners. We're demonstrating the value of that partnership by expanding our distribution and leaning further into joint business planning to drive long-term growth. And underpinning all of this is our crew. We view their capability and commitment to our purpose and values as a genuine competitive advantage. In summary, the results we saw in the first quarter and that we have seen so far in scanner data in the second quarter fall short of our expectations because price gaps reached levels that our brand could not sustain. We believe we're adapting quickly to this new more pressured environment by reducing price gaps, addressing our cost structure and managing cash. We see this as a reset of our expectations for 2026, but not a reset of our ambitions. The underlying opportunities that have driven our growth for over 15 years and the strength Vital Farms brings to the marketplace remain. Now let me turn it over to Thilo to walk you through more detail behind what we've shared today. Thilo Wrede: Thanks, Russell, and hello, everyone. Let me walk you through our first quarter financial performance, and then I will provide details on our updated outlook for the full year. Net revenue for the first quarter of 2026 was $187.2 million, an increase of 15.4% compared to the prior year period. Revenue growth was driven by volume-related increases of $34.7 million and partially offset by a price/mix decline of $9.7 million. The price/mix decline was primarily driven by a higher-than-anticipated volume contribution from the breaker channel to manage an oversupply of eggs. With breaker prices being as low as $0.10 per dozen during the quarter, price/mix turned negative. Gross profit was $53 million or 28.3% of net revenue compared to $62.5 million or 38.5% of net revenue last year. The year-over-year decline in gross margin was mainly due to the unfavorable volume mix shift to breaker sales and elevated costs associated with supply management actions, together with the impact of increased promotional activity. Excessive breaker sales reduced gross profit by approximately $4.9 million. We consider excessive breaker sales to manage our oversupply of eggs any volume above the 2024 and 2025 average contribution of breaker volume to overall egg volume, which was 4.9%. SG&A increased to $44.2 million or 23.6% of net revenue compared with $31.9 million or 19.7% of net revenue last year. The year-over-year growth in SG&A was mainly due to the execution of our planned doubling from a very low base of marketing expenses and the year-over-year increase in head count and employee-related expenses. Shipping and distribution expenses increased to $11 million or 5.9% of net revenue compared to $8.8 million or 5.4% of net revenue last year. Net loss for the first quarter of 2026 was $1.5 million compared to net income of $16.9 million in the prior year period. Net loss per diluted share was $0.03 for the first quarter of 2026 compared to net income per diluted share of $0.37 in the prior year period. Adjusted EBITDA for the first quarter of 2026 was $5 million or 2.7% of net revenue compared to $27.5 million or 16.9% of net revenue for the first quarter of 2025. The decrease in adjusted EBITDA was primarily driven by lower gross profit margins and higher operating expenses. Turning now to our balance sheet. As of March 29, 2026, we had total cash, cash equivalents and marketable securities of $51.4 million with no debt outstanding. The sequential decline in cash, cash equivalents and marketable securities reflects primarily negative cash flow due to an inventory building, the cost of supply management initiatives and continued CapEx investments for the construction of our planned VXR egg washing and packing facility in Seymour, Indiana and accelerator farms. Furthermore, we repurchased over 1 million shares for $20 million under our share repurchase program. And as of March 29, 2026, $80 million remained authorized under the program. As Russell already mentioned, we are updating our full year 2026 guidance. We now expect net revenue of $775 million to $800 million and adjusted EBITDA of $0 million to $10 million. The EBITDA outlook reflects a negative impact of approximately $32 million from cost to manage the current oversupply of eggs via breaker sales and other low or no revenue channels and the voluntary amendment to farmer contracts to cease production from existing flocks or delay placement of future flocks that Russell had already mentioned. The updated guidance also assumes the following: First, that outdoor access egg retail prices and breaker prices through the end of the year have stabilized at current levels. Should outdoor access egg retail prices erode further, and we have to invest more than currently planned to reduce price gaps, we will incur additional costs that will reduce revenue and profit. Second, we have high volume to the breaker channel and other low or no revenue outlets to manage our excess supply of eggs in the second quarter. Going forward, I will collectively refer to these as excess breaker sales. Third, for volume from revenue-generating channels, we assume negative price/mix for the remainder of the year as we are reducing price counts. As the price actions start to be reflected on shelf, revenue-generating volume growth is expected to turn positive in the third quarter. We assume an acceleration of growth in the fourth quarter as these initiatives fully take hold and we see the full anticipated benefits from distribution gains. And fourth, we estimate a $14 million net sales reduction compared to our previous guidance due to the wind-down of our butter business. For EBITDA specifically, the guidance reflects an estimated $32 million of incremental expenses to manage our current oversupply of eggs this year. We are incurring costs from sales to low or no revenue channels like the breaker market and other measures we are taking to manage supply. All of these costs are recorded in COGS. It also reflects higher than previously anticipated promotional spending and price investments that we expect will lead to a strong shell egg volume growth recovery. And we expect to incur additional costs in association with our butter exit and addressing our SG&A cost structure. The anticipated adjustable onetime costs from these actions are already reflected in the adjusted EBITDA guidance. Regarding the expenses to manage the oversupply of eggs, I want to point out that the profit impact of excess breaker sales is recorded in the quarter it is incurred. On the other hand, expenses for the amendments to farmer contracts will flow through the P&L over the next several years. Since they fall under lease accounting, we amortize them over the remaining length of each individual farmers contract. The cash impact is happening more quickly as we're paying farmers in equal installments over the duration they are not producing for us. We will provide an update each quarter on the impact from these costs, and we expect that excess breaker sales will likely be concentrated in the second quarter of 2026 and that farmer contract amendments will drive the majority of supply management costs thereafter. Regarding our expected cadence for the remainder of 2026, we anticipate an inflection beginning in the third quarter as our pricing actions show effects, our costs related to supply management begins to slow and our distribution gains from retail resets take full effect. Furthermore, we are shifting the intention of our marketing from building brand awareness to driving trial and expect to start seeing results from that by the third quarter as well. We expect the fourth quarter to show sequential improvement from holiday seasonality, driving stronger consumer demand from the full benefit of distribution gains secured throughout the year and from the cost structure adjustments taking hold across the P&L. That means that we expect the shape of the year will be back half weighted, reflecting the market dynamics we are navigating, the timing of our actions and the nature of the costs we are absorbing in the first half. We currently anticipate gross margin to return to 30% by late fourth quarter and underlying adjusted EBITDA margin to get back to double-digits in 2027. This assumes no change from the new price levels that we are now targeting with the actions we described today. As more of our cost reduction efforts start to benefit the P&L in 2027, we expect margins would improve from there even at current price levels. And as quarterly supply management costs start to decline, and we are improving scale again, we expect to see a clear path back to the earnings profile implied by our long-term model. Even if pricing in the industry were to temporarily deteriorate further this year, we still view our business model as very appealing with an attractive margin structure. To round out guidance, we are lowering our CapEx guidance to $70 million to $75 million by pausing construction of additional accelerator farms for the time being and slowing the construction of VXR. We are still very much pursuing the idea of accelerator farms to enable R&D that will lead to better outcomes for all of our family farmers. But as we are focused on limiting our cash outflow this year, pausing the build-out of the accelerator farms is a good lever to pull. Given the slower than initially expected growth this year, the slowdown of VXR allows us to more closely align future capacity needs with expected demand that will enable us to avoid adding costs to the P&L prematurely and will help with the recovery of our margin structure. With these 2 changes, we still anticipate negative free cash flow this year due to the cost to manage our oversupply, but we currently anticipate being able to fund this with our existing cash and investment position and by relying on our existing credit facility. To be clear, this is not a change to our long-term capacity strategy or our commitment to VXR. We remain fully committed to this project and the critical role it plays in our long-term growth aspirations. We plan to continue to pace the construction of VXR to match market reality and to manage our balance sheet prudently during this transition year. Let me close with reiterating what Russell shared. Our first quarter results fell short of what we expected to deliver and what we believe this business is capable of achieving. We believe we are addressing the challenges we are facing, and we are confident in our updated commercial plan going forward. We've identified the specific actions that we believe are necessary, and we are moving with urgency to execute against those plans. In addition, we are encouraged by meaningful recent wins, including expanded placement with top-tier customers. Thank you for your time and your interest today. We are now opening the call to questions. Operator: Your first question from the line of Matt Smith with Stifel. Matthew Smith: Russell, you called this reset, a reset of the year, not the ambition. The industry is recovering from a multiyear impact of avian influenza. And as you look at the competitive dynamic today, is this the new normal? And if that's so, is the long-term margin target, is that still relevant for Vital today? You talked about exiting this year at near 35% gross margin and double-digit EBITDA, but there's still some action in the background that could be a longer-term drag on the margin structure from pausing farmer contracts and incurring higher costs down the road. I guess what's the confidence in getting back to that double-digit EBITDA margin even if today's environment becomes the new normal? Russell Diez-Canseco: As we said in the prepared remarks, we are not assuming or waiting for a pricing recovery in the broader market to support our recovery in gross and EBITDA margins as we head into 2027. We are focused on making sure that we deliver the right economics even at these distressed prices in the market, although historically, they have not been enduring. Matthew Smith: And Thilo, as a follow-up on the oversupply of eggs. You called out a $32 million cost associated with excess breaker market sales. Can you talk about the scope of the oversupply initiatives? When you think about the difference between the anticipated supply this year versus your current outlook, how much of the difference there is weighted between what you're sending to the excess breaker volume market versus working with farmers to pause production? Just trying to understand the scope of those 2 initiatives in relation to the supply dynamic. Thilo Wrede: Yes, great question, Matt. So the excess breaker market -- and to clarify, when we talk about the excess breaker market, we really talk about multiple outlets that are low or no revenue, right? That can be the breaker market, that can be wholesale. We might do donations from time to time. So that market, sending eggs to a market that doesn't really pay us a whole lot for the eggs, that is the fastest, most straightforward way to deal with an oversupply in the moment. Getting farmers to not produce for us is a much more enduring way to manage an oversupply. But it takes a bit of time to get that going. It's individual contract amendments that we sign with each farmer who we are asking not to produce for us. So the immediate action, the immediate outlet is this excess breaker market. You saw the impact that we had in Q1, that was $4.9 million. We talked about $32 million for the full year. The vast majority of that will hit us in Q2 as we are sending more to the breaker market while we're getting the contract amendments lined up. Once we get through the first half of the year, and we have managed this oversupply that we have in the moment, and we can address it much more thoughtfully with contract amendments for the farmers. The running cost will go down quite a bit from what you will see in the first half. But because of the accounting rules, those are costs that will follow us for several years. But on a -- you asked the question about long-term margins before. On a total margin impact for the year perspective, as we get back to volume growth and the scale that comes with that, the impact on margins in the longer term will be very limited. Operator: Our next question comes from the line of Eric Des Lauriers with Craig-Hallum Capital Group. Russell Diez-Canseco: Eric, we can't hear you. Eric Des Lauriers: Sorry about that. Can you guys hear me now? Russell Diez-Canseco: Yes, we can. Eric Des Lauriers: So I just wondering if you could touch on your source of cash outlook here. So you have $50 million in cash on the balance sheet or so and then plan to spend another $50 million to $55 million in CapEx this year. It looks like you'll likely need to draw down on the debt facility. Could you just remind us what sort of covenants to be aware of here and how discussions with the lenders are going? Russell Diez-Canseco: Yes. I think your math is right there, Eric. We will start using the revolver. We -- the 2 financial covenants that we are watching is a net leverage ratio, which sits at 3.5x and a fixed charge coverage ratio, which sits at 1.35x. We have been talking to JPMorgan for several weeks now. The process is ongoing. And once we have an update there, we'll provide that. Operator: Our next question comes from the line of Brian Holland with D.A. Davidson. Brian Holland: Can you just maybe help -- and you've provided sort of some broad brushstrokes on the balance of the year where you expect to end, et cetera. It sounds like Q2 will be the bottom. Can you get a little bit tighter on where exactly you expect EBITDA to bottom presumably in Q2, just to help understand the rate of inflection your outlook is sort of presuming for the second half? Thilo Wrede: Yes, in Q2, we're expecting negative EBITDA. The big impact will be that the majority of the $32 million in supply management costs that we are anticipating -- the big impact will be that the majority of this cost will hit us in Q2. The underlying EBITDA, so if you take out the supply management costs in Q2 will be probably very similar to what we had in Q1. So the shape of Q2 looks similar to Q1, maybe slightly lower revenue because we didn't have the strong performance that we had in January. And then you take the EBITDA without the onetime expenses and you subtract, let's call it, 80% or so of the supply management costs for the year, that gets you to an EBITDA number that's mid- to high teens on the negative side. Brian Holland: Okay. I appreciate that. Thilo Wrede: And so Brian, just to be clear, it includes about low 20s of supply management costs, right, low $20 million of supply management cost. Brian Holland: Got it. And then maybe just as we think through the balance of the year, obviously, it's been very difficult with industry dynamics to kind of even project your business in the near term. You -- and Russell obviously outlined a number of initiatives that are within your control and particularly on the top line, getting tighter on the price gaps, distribution gains that you seem to have visibility on. Maybe just from a competitive standpoint, to what extent can you or do you have visibility on what the price and promotion dynamics might look like around you to maybe give you confidence that the initiatives that you are implementing or that which is within your control will be kind of sufficient to support the glide back that you're projecting here? Russell Diez-Canseco: Yes. So we don't have clear visibility into the plans of other players in the marketplace. What we do see is that we've seen historically low pricing for commodity eggs. And to the extent that, that may be impacting the pricing and promotional cadence of other players in the premium egg space, you could imagine that, that influence doesn't become much stronger in terms of adding downward pressure. There's not much more room for commodity eggs to go in that regard. And the other thing is that historically, we've seen that most players in this space respond to an oversupply dynamic in the way that we are, which is to say you're making some investments in price, you're also making some plans to reduce the supply overhang and get your supply back into balance with your demand. So that's historically how this has all played out over the course of a cycle, and we don't have any reason to believe it will be different this time. Operator: Your next question from the line of Robert Moskow from TD Cowen. Robert Moskow: I guess a couple of questions. One is, is the butter business losing money? And what were some of the other options you may have pursued other than just, I guess, just exiting the business? If there's consumers who buy it, is there a licensing arrangements you could have explored? It seems like reducing your presence in the store feels like a bit of a step backward just in terms of brand awareness. So I was just wondering what other options you may have explored. Russell Diez-Canseco: Yes. I appreciate that, Rob. And this -- as we said in the prepared remarks, this wasn't an easy decision, but it was one that we put a lot of thought into, and we believe it was the right one for the business. We work with our supply chain partners to explore a variety of potential changes to the business to make it sustainable for us and to make it the right area of focus at a time when we have a lot of opportunities for both capital and management focus. And we just felt like at this time, the highest and best use of our capital and management capacity was to focus on the opportunities in the egg business. We've got much more of a competitive advantage there. We've got much more of our own differentiated supply chain there. And so that's where we saw the enduring upside potential for now. Robert Moskow: Okay. And then a follow-up. You've been working very hard to expand your farmer network. It's competitive, getting farmers to join your system. And now you're kind of buying them out to reduce production. Does that impact your relationship with these farmers in any way? Like do they view -- you always take care of your farmer network. So do they feel like they're being taken care of right now? Or is there any kind of backlash from these changes? Russell Diez-Canseco: I think the way we approach those conversations is in the same spirit as we approach our relationship with our stakeholders. This is voluntary on their part. So it's got to meet the market. They have to feel that what we're offering them is still beneficial to them and consistent with what they expected. And I think that only serves to strengthen our relationship with our farmers, treating them in this way, fulfilling our obligations and making that long-term investment in those relationships, I think, serves us well over the long haul. Operator: Your next question from the line of Glenn West with William Blair. Glenn West: This is Glenn West on for Jon Andersen this morning. Russell, you kind of noted some category metrics just on the outdoor access category. It's grown to 50% volume share, I think you said and up 32% year-over-year. I guess I just -- maybe you could help lay out the category. Is it like private label that's driving a lot of those share gains, more competition from new in surgeon smaller players? Or how is Vital sitting there in terms of share as well? Russell Diez-Canseco: I'd start by saying that we have seen for more than a decade that countries like the U.K. that are much further ahead in general awareness of food choices and food production systems are well above a majority of eggs being produced from outdoor access flocks. I believe the U.K. is well over 75%, in fact. And so one of the questions we've gotten over the years is, well, how high is that for the U.S. And I think part of what underlies that question is what's the willingness of consumers broadly across the economy to pay up for a better egg in their estimation. And we're seeing growth both in branded and private label. But most importantly, I think against an increasingly challenged macro backdrop, we're actually seeing an acceleration of adoption of outdoor access eggs on a volume share basis. And that shows up in the accompanying exhibits. And so from that perspective, I think the thesis that there's a real opportunity, an enduring opportunity in premium outdoor access eggs is as strong as it ever was. And we're seeing room for brands and for private label and for us in that group. Operator: Your next question from the line of Benjamin Mayhew with BMO Capital Markets. Benjamin Mayhew: My first question has to do with the Vital Crossroads plant. And just thinking about when the industry might be able to adjust production and how long you're going to be able to slow roll the construction of this plant while still making the return economics make sense. If you could just reconcile kind of how you're thinking about that, that would be great. Russell Diez-Canseco: So our focus now is returning Vital Farms to volume-led growth, and we see a clear path to doing that with the pricing actions we're taking. The approach with Vital Crossroads is to pause construction at the point at which we can turn it back on and complete it in less than a year. And that means that we have a relatively short lead time to add that capacity when we have clear visibility to needing that capacity. So we don't see the pause as impacting our medium or long-term growth plans or potential. At the same time, it gives us the ability to pause the investment until we're clear we'll need that capacity. Remember that Egg Central Station has capacity for roughly $1 billion in net revenue even at these new prices that we're investing in this year. Benjamin Mayhew: And then for my second question, just more of a big picture look back over the past year as it pertains to the growth in industry supply. So a year ago today, we were in an environment that was very tight. Margins were good. And clearly, the competition rolled into the space at an aggressive rate over the following year period. And I'm just wondering, like when did it become really apparent that market fundamentals were deteriorating at a rate that was surprising to you and your team. I mean just if you could just discuss that -- the journey over the last year and kind of where we are now and what the industry might have to face over the next couple of quarters in order to kind of bring back equilibrium? Russell Diez-Canseco: Yes. So it's a very fair question. We -- certainly, there's been an intensity of competition and competitive offerings in the premium egg space building for several years. I think that this is -- there's a real sort of secular trade up to premium eggs. That's not new news. And we've certainly faced plenty of outdoor access competition. It preceded us. There were free range eggs before there was Vital Farms. And while we pioneered a pasture space, there are certainly plenty of entries in that premium part of the egg category across virtually all of our top customers. So that's not new news. And I think that it was not hard to see that with the lighter avian influenza impact that we saw over the last season that we would see a broad industry recovery in supply. Where we saw the impact on our own velocities is when price gaps to other premium branded and private label offerings grew wider than we had experienced historically. We didn't have historical experience at those wider price gaps. And we exceeded a point at which it was -- we were no longer kind of immune to them. We've always been able to command a premium over similarly positioned products. That hasn't changed. What we hadn't done is been able to see with experience price gaps in some markets as extreme as we started to see as other premium branded and private label products started bringing their prices down. So seeing that, reacting to it in scan data, as you've all been able to follow along, we're taking the actions to narrow those gaps to a more sustainable level. Operator: Your next question from the line of Ben Klieve with Benchmark StoneX. Benjamin Klieve: Only one for me, and that's on this excess egg supply dynamic. I know historically, you guys have been kind of resistant to the liquid and hard-boiled market just because of the margin structure relative to shell eggs. But I'm wondering in this environment today, the degree to which you view that outlet as more favorable. And if that's something that you're considering, I'm wondering how quickly this could get -- how quickly the supply chain could respond to that pivot and then how quickly the retail network could take additional volume from either of those 2 products? Russell Diez-Canseco: Yes, I appreciate that, Ben. So we currently do have both hard boiled and liquid products at retail and in foodservice. So that is not a new business for us. I think it's important to balance bringing the right products to market as we build our brand and build the right solutions for both retail and foodservice customers versus the short-term actions, we might take to address the supply overhang. Again, we want to make sure that businesses we're in have the right economics and take advantage of our competitive advantages over the long haul. And so there is a distinction, I think, between the short-term actions we'll take to right-size supply and make it fit with short-term demand, and the things we would do long term to, for example, expand our product portfolio, which I think is a much more kind of intentional path for us because of the brand we've built and the role we play in the market. Operator: Your next question from the line of Scott Marks with Jefferies. Scott Marks: I wanted to touch a bit on some of the retailer negotiations, some of the distribution wins that you've been speaking to. Wondering if you can just help us understand what is the state of negotiations currently? How are retailers thinking about the market? And how are you pushing your product at a time when all of these dynamics are hitting the industry? Russell Diez-Canseco: So as we mentioned in the prepared remarks, it was always the plan this year to work with our retail partners to expand distribution, benefiting from the work we did over the last couple of years to expand supply and to be in a position to build confidence that we could keep them in good in-stock conditions as we did so. We continue to enjoy category-leading velocities on shelf. The economics of carrying our products and our brands are still critical, we believe, to overall category performance for our customers. We bring a higher price point. We bring gross margin dollars in a category that, as we've all seen, is broadly seeing major price declines across the board. So the appeal of working with Vital Farms, the brand we've built, our connection with consumers, the loyalty we've built there continues unabated. And so those conversations have been really fruitful. Our current slowdown in velocity because of these widened price gaps hasn't done anything to diminish that. So we're really excited about the impact that those additional points of distribution will bring to us as we come out of the second quarter and as we compound that with what we believe will be growing velocities in the coming months. Operator: Our next question from the line of John Baumgartner with Mizuho Securities. Russell Diez-Canseco: John, we can't hear you? Operator: Analyst, your line is now open. John Baumgartner: Can you hear me? Russell Diez-Canseco: Yes. John Baumgartner: Perfect. Great. Russell, I wanted to follow up. You spoke to your price gaps relative to other premium eggs. But I'm wondering, if you cut the drivers differently in terms of the balance of pressure here, to what extent are you seeing pressure on Vital's buy rate where you need these price adjustments to get folks back into your brand relative to responding to maybe a sharper decline in new households coming into the pasture-raised market to begin with. I guess what's the balance of pressure there right now? Russell Diez-Canseco: Yes. So our analysis shows that we're not seeing pressure on our existing consumer base, frankly, at all. We're actually seeing buy rate from existing households slightly increase in Q1. So the real focus here is on bridging that gap to help encourage more households to try us for the first time and to join that brand against the backdrop of heated up promotions and lower price alternatives on the shelf. So we haven't given consumers a reason to trade down so much as we haven't given them enough of a reason to trade up to us. Operator: Your next question from the line of Megan Clapp with Morgan Stanley. Megan Christine Alexander: I wanted to ask about price gaps again. And on Slide 8 in your presentation, I think it's really helpful for kind of framing the opportunity as you think about closing the price gaps. But I guess even in the tightest gap quartile on the left side, volumes are only growing 7% and presumably, you've got distribution within there. So the velocity is probably more modest. So as you think back -- as you think about kind of this path to volume growth inflecting in the third quarter and more so in the fourth quarter, how much of it is the pricing reset restoring velocity versus just the new TDPs you've secured driving incremental growth? And how do you think about how long it might take for velocities to fully normalize once you've narrowed those gaps? Russell Diez-Canseco: Yes, I appreciate that. So first of all, the impact -- the early impact of additional distribution across all the markets on that page, I start there. And again, we've got some preview of where we believe TDPs will get by the end of the year. That part is, I think, quite strong and the part that needs to be activated by the increased velocities. So that -- a lot of that distribution starts showing up as we continue through the back half of the year. And I think that's where we'll see the combined impact of both velocities and additional distribution. Megan Christine Alexander: And then maybe just a follow-up for Thilo, just back to kind of the shape of the year and the EBITDA outlook. So I think based on what you said, if I heard you correctly, and if I'm doing my math correctly, I think you'll -- you're kind of guiding to a low to mid-single digit type EBITDA margin in the back half of the year. So can you maybe just give us some puts and takes of as we exit the year, kind of what changes as we move into 2027 to get back to double-digits? Thilo Wrede: Yes. I think it's pretty straightforward, Megan. The -- ultimately, what changes back half of the year and then into 2027 is that some of the benefits from these cost reduction initiatives that Russell had talked about, they will take hold a lot more. Russell had mentioned in the prepared remarks that we're looking at feed costs, for example. As you know, feed flows through our P&L with 1 quarter in arrears. And so anything that we can do on feed by the time we have made changes there, let's say, by the end of Q3, we only start seeing a benefit from it in the P&L by the end of Q4. So there is this lag effect there. The other part then to the improving margin structure is the return to volume-driven growth. With that come scale benefits, we'll get better leverage on SG&A again. And those are the factors that will help us to return back to the margin profile that we had anticipated to begin with. Operator: Your next question from the line of Brian Holland with D.A. Davidson. Brian Holland: I know in recent months, there's been some noise on social media sort of hitting at the brand promise for Vital Farms. Obviously, myriad of moving parts here and which you've gone through in exhaustive detail this morning. I'm just curious if and to what extent you believe that has had any impact. Obviously, you talked about the difficulties in drawing in new households relative to recent periods. So I'm curious if you are able at all to isolate the impact of that on the business? And then also kind of what are you doing? What can you do to refute that social media campaign for lack of a better term? Russell Diez-Canseco: Sure. Yes, that was frustrating for us to see happen in January. But our survey work and the fact that our existing households continue to buy us and are even increasing their buy rate without any material attrition suggests that the impact has been quite limited. On the margin, it may be a reason for a new household to look elsewhere, but we're seeing a very limited impact from that. Our work actually doesn't change a whole lot. Our approach to the way we operate and the way we talk about our brand has always been rooted in transparency and trust building. We are what we say. We do what we say, we say what we do. And the social media controversy actually didn't demonstrate any deviation from that. It's simply -- there were simply some players who pointed out things that we do, choices that we've made and talked about very openly. So what we're doing from here is just continuing to do that. It's the reason to choose us because we are transparent. We do tell you exactly what we're doing and why we're doing it. So from that perspective, luckily, I think thankfully, the work is pretty straightforward. It doesn't require any new behaviors from us but simply continuing to behave the way we have historically. Operator: There are no further questions at this time. I will now turn the call back over to Brian Shipman for closing remarks. Brian S. Shipman: Thank you, and thank you all for joining us and for your interest in Vital Farms. We remain focused on the long term and look forward to updating you on our progress next quarter. That's it, and we'll talk to you soon. Thank you. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Vital Farms, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vital Farms wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends Vital Farms. The Motley Fool has a disclosure policy. Vital Farms (VITL) Q1 2026 Earnings Transcript was originally published by The Motley Fool

Vital Farms (VITL) shares crashed on May 7 after the pasture-raised egg leader posted a surprising net loss for its fiscal Q1, missing analysts’ estimates by a significant margin. The post-earnings selloff saw VITL’s relative strength index (RSI) sink into the late 20s, signaling oversold conditions that often trigger a relief rally. 218,000 Reasons to Sell Tesla Stock in May Don’t Trust This Top-Heavy Stock Market, Hedge It. Here’s Your Roadmap. SanDisk to $2,000: Why This Analyst Is Betting SNDK Stock Can Still Almost Double — And Putting Up the Highest Price Target on Wall Street Our exclusive Barchart Brief newsletter is your FREE midday guide to what's moving stocks, sectors, and investor sentiment - delivered right when you need the info most. Subscribe today! Including the recent decline, Vital Farms stock is down more than 65% versus the start of this year. Investors bailed on VITL shares primarily because of a stark disconnect between revenue growth and profitability. While net revenue jumped over 15% in the first quarter, the Nasdaq-listed firm recorded a diluted per-share loss of $0.03, alarmingly worse than the $0.16 a share of profit that analysts had modeled. Vital Farms’ gross margin plummeted by more than 1,000 basis points to 28.3% due to an industry-wide oversupply crisis. As wholesale egg prices normalized from their 2025 peak, Vital Farms was forced to offload excess inventory into lower-priced breaker channels at a loss. Meanwhile, soaring SG&A expenses — up nearly 39% year-on-year — and the costs tied with exiting its butter business further eroded the bottom line. Following the dismal first-quarter report, Stifel analysts downgraded Vital Farms shares to “hold” and aggressively cut their price target to $10, signaling virtually no upside from current levels. In its research note, the investment firm cited a lack of visibility on when operating conditions will normalize, noting the company is currently paying farmers to halt production to manage the supply glut. Additionally, increased promotional activity across the category is failing to attract new customers, with the rate of first-time trial households dropping significantly. Until margins show a clear path to recovery, Stifel analysts expect VITL's valuation to remain under heavy scrutiny. Heading into the Q1 print, Wall Street had a consensus “Moderate Buy” rating on VITL stock, with a mean price target of roughly $21. However, it’s reasonable to expect notable downward revisions like Stifel’s to reflect Vital Farms’ broadly disappointing quarterly release. On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com

Interested in Vital Farms, Inc.? Here are five stocks we like better. Vital Farms said Q1 revenue rose 15.4% to $187.2 million, but profitability weakened sharply as gross margin fell to 28.3% and adjusted EBITDA dropped to $5 million. The company posted a net loss of $1.5 million versus a profit a year earlier. Management blamed the weak results on wider retail price gaps and excess egg supply, which hurt new household trial and forced more sales into low-margin breaker channels. The company said it is now narrowing price gaps, cutting promotions and resetting its 2026 guidance to $775 million-$800 million in sales and $0-$10 million in adjusted EBITDA. Vital Farms is responding with major cost-cutting and cash-preservation actions, including labor reductions, lower capex, and exiting the butter business, while still seeing strength in distribution gains. Executives said the company expects improvement later in the year and is targeting a return to double-digit underlying adjusted EBITDA margin in 2027. Egg Prices Surge: 3 Stocks Set to Benefit from Rising PPI Trends Vital Farms (NASDAQ:VITL) executives said the company’s first-quarter results and early second-quarter scanner data fell short of expectations as retail price gaps widened beyond levels the brand could sustain, prompting a reset of 2026 guidance and a series of cost and cash management actions. Executive Chairperson, President and Chief Executive Officer Russell Diez-Canseco said the company believes it is moving quickly to adapt by reducing price gaps, addressing its cost structure and managing cash. He emphasized that management views the changes as “a reset of our expectations for 2026, but not a reset of our ambitions.” → Insider Sales: Top AST SpaceMobile Insider Cuts Postion Over 30% Vital Farms Rides the Pasture-Raised Egg Trend to the Bank “To be clear, we believe our brand will support a price premium, just not as much as we’ve seen over the past few months,” Diez-Canseco said. Chief Financial Officer Thilo Wrede said net revenue for the first quarter of 2026 was $187.2 million, up 15.4% from the prior-year period. The increase was driven by $34.7 million of volume-related growth, partially offset by a $9.7 million price mix decline. → Light Speed Returns: Corning Cashes In on NVIDIA Growth Vital Farm’s Earnings: More than Sunny Side Up Wrede said the price mix decline was primarily due to a higher-than-anticipated contribution from the breaker channel as the company managed an oversupply of eggs. Breaker prices were as low as $0.10 per dozen during the quarter. Gross profit was $53 million, or 28.3% of net revenue, compared with $62.5 million, or 38.5% of net revenue, a year earlier. Wrede attributed the margin decline mainly to unfavorable volume mix from breaker sales, elevated costs tied to supply management actions and increased promotional activity. Excess breaker sales reduced gross profit by about $4.9 million. → Years in the Making, AMD’s Upside Movement Has Just Begun SG&A expenses rose to $44.2 million, or 23.6% of net revenue, from $31.9 million, or 19.7% of net revenue, a year earlier. Wrede said the increase reflected a planned doubling of marketing expenses from a low base, along with higher headcount and employee-related costs. Shipping and distribution expenses increased to $11 million from $8.8 million. The company reported a net loss of $1.5 million, or $0.03 per diluted share, compared with net income of $16.9 million, or $0.37 per diluted share, in the prior-year period. Adjusted EBITDA fell to $5 million, or 2.7% of net revenue, from $27.5 million, or 16.9% of net revenue. Diez-Canseco said Vital Farms had expected commodity egg prices to fall as avian influenza pressures eased and flocks were rebuilt. The company entered the year planning to increase promotional investment to levels appropriate for a better-supplied market, but he said first-quarter promotions were not enough as pricing across the category fell more sharply than fundamentals suggested. The CEO said the wider gaps hurt the company’s ability to attract new households, even as existing customers remained loyal. In 2024 and 2025, more than 55% of Vital Farms consumers were households that had not previously bought the brand. That figure fell to 50% in the first quarter of 2026. At the same time, Diez-Canseco said retained households continued to buy the brand, with units per retained household 2% above the average for the prior eight quarters. “We haven’t given consumers a reason to trade down so much as we haven’t given them enough of a reason to trade up to us,” he said during the question-and-answer session. Management said it is now narrowing price gaps in a targeted way by geography and retailer. Diez-Canseco cited an example at a top 10 customer where Vital Farms reduced its price gap versus competing premium-branded outdoor access eggs from about 35% to about 25%, after which volumes increased 18% over two weeks compared with the prior four weeks. Vital Farms lowered its full-year 2026 outlook. The company now expects net sales of $775 million to $800 million and adjusted EBITDA of $0 to $10 million. The adjusted EBITDA outlook includes an estimated $32 million negative impact from supply management costs. Wrede said the guidance assumes outdoor access egg retail prices and breaker prices remain at current levels through year-end. He said if outdoor access retail prices erode further and the company must invest more to reduce price gaps, revenue and profit would be reduced further. The company expects high volume to breaker and other low- or no-revenue channels in the second quarter as it manages excess supply. Wrede said the second quarter is expected to produce negative adjusted EBITDA, with mid- to high-teens millions of dollars on the negative side, including roughly low-$20 million of supply management costs. Management expects an inflection beginning in the third quarter as pricing actions show results, supply management costs slow and retail distribution gains take effect. Wrede said the fourth quarter should improve sequentially due to holiday seasonality, stronger consumer demand, the full benefit of distribution gains and cost structure adjustments. The company expects gross margin to return to 30% by late in the fourth quarter and said it is targeting a return to double-digit underlying adjusted EBITDA margin in 2027, assuming no change from the new price levels being targeted. Diez-Canseco outlined several actions aimed at improving economics and preserving cash: Working with some farmer partners on voluntary contract amendments to cease production from existing flocks or delay placement of future flocks. Adjusting staffing at Egg Central Station to better match labor costs with processing volume, which the company expects to eliminate about $4 million of costs for the year. Targeting broader cost of goods sold reductions, including feed costs, which totaled roughly $125 million last year. Eliminating roles representing about 10% of remote or non-Egg Central Station headcount. Reducing projected 2026 capital expenditures by about $75 million by slowing construction of the planned Vital Crossroads facility in Seymour, Indiana, and pausing construction of additional accelerator farms. Exiting the butter business, with shipments ending toward the end of the year. Diez-Canseco said the butter exit is expected to free up $25 million in cash this year, reduce 2026 sales by an estimated $14 million and improve gross margin by 150 to 200 basis points starting in 2027. He said the complexity of an international supply chain and an uncertain global trade backdrop contributed to the decision. Wrede said capital expenditures are now expected to be $70 million to $75 million. He added that the company still expects negative free cash flow this year because of oversupply management costs, but currently anticipates funding the needs with its existing cash and investment position and its credit facility. As of March 29, 2026, Vital Farms had $51.4 million in cash equivalents and marketable securities and no debt outstanding. Wrede also said the company repurchased more than 1 million shares for $20 million during the quarter, with $80 million remaining authorized under its repurchase program. Despite the pricing and supply challenges, executives said distribution momentum remains strong. Diez-Canseco said Vital Farms secured at least a 50% TDP increase with a top three customer, negotiated direct distribution instead of using a distributor with a top 10 customer and was assigned the category captain role for eggs with a banner of another top three customer. The company expects to add 20 to 30 TDPs, or 15% to 25%, over the course of 2026. Diez-Canseco said Vital Farms expects its strongest annual TDP gain since going public, as measured in Circana MULO+ for shell eggs. Diez-Canseco also said the outdoor access egg category continues to expand, growing from 8% of category volume in 2023 to 15% so far in 2026. Year to date, he said outdoor access eggs have grown 32% in volume versus the prior year, compared with 4% growth for mainstream eggs. In response to an analyst question about recent social media criticism of the brand, Diez-Canseco said survey work and continued buying by existing households suggest the impact has been limited. He said the company’s response is to continue emphasizing transparency and trust. “We are what we say,” Diez-Canseco said. “We do what we say, we say what we do.” Vital Farms, traded on the NASDAQ under the symbol VITL, is a U.S.-based food company specializing in pasture-raised egg and dairy products. The company partners with a network of family farms across the United States to produce eggs, butter and related items under a certified humane, pasture-centric farming model. Vital Farms' supply chain emphasizes animal welfare, environmental stewardship and transparent sourcing, appealing to consumers seeking ethically produced, high-quality ingredients. Founded in 2007 and headquartered in Austin, Texas, Vital Farms began by marketing pasture-raised eggs to health- and ethically minded shoppers. The article "Vital Farms Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for May 2026.

First Quarter Net Revenue Grows 15.4% Versus Prior-Year Period to $187.2 Million Announces Plan to Wind Down Butter Business Adjusts Fiscal Year 2026 Net Revenue Outlook to $775 Million to $800 Million and Adjusted EBITDA Outlook to $0 Million to $10 Million AUSTIN, Texas, May 07, 2026--(BUSINESS WIRE)--Vital Farms (Nasdaq: VITL), a Certified B Corporation that offers a range of ethically produced foods nationwide, today reported financial results for its first quarter ended March 29, 2026. Financial highlights for the first quarter ended March 29, 2026, compared to the first quarter ended March 30, 2025, include: Net Revenue increased 15.4% to $187.2 million, compared to $162.2 million Gross Margin of 28.3%, compared to 38.5% Net Loss of $1.5 million, compared to Net Income of $16.9 million Net Loss per Diluted Share of $0.03, compared to Net Income per Diluted Share of $0.37 Adjusted EBITDA of $5.0 million, compared to $27.5 million1 "Our first quarter performance fell short of expectations, as the anticipated changes in industry pricing and promotional dynamics in the outdoor access egg subcategory had a much greater impact on our velocities than we expected," said Russell Diez-Canseco, Vital Farms' Executive Chairperson, President and CEO. "We are acting with urgency to restore volume growth by narrowing price gaps versus other outdoor access eggs, which we believe will help reaccelerate our velocities. We are streamlining our cost structure and reducing our CapEx this year to better align our operating model with the current environment. To be clear: this is a reset of the year, not a reset of ambition. While the near-term environment requires greater discipline, we believe the core fundamentals of the Vital Farms business remain intact, as evidenced by the distribution gains we have already secured for this year. Additionally, following a comprehensive review process, we have made the strategic decision to wind down the butter business. This decision was driven by increased complexity in our international supply chain and more volatile economics. Exiting butter will allow us to focus on our core egg categories, where we have the greatest competitive advantages and see the strongest path to long-term value creation at this time," concluded Diez-Canseco. 1Adjusted EBITDA is a non-GAAP financial measure defined in the section titled "Non-GAAP Financial Measures" below and is reconciled to net income, its closest comparable GAAP measure, at the end of this release. For the 13 Weeks Ended March 29, 2026 Net revenue increased 15.4% to $187.2 million in the first quarter of 2026, compared to $162.2 million in the first quarter of 2025. Net revenue growth in the first quarter of 2026 was driven by volume-related revenue growth of $34.7 million and partially offset by a price/mix decline of $9.7 million. Volume growth was driven by accelerated demand for existing products, expanded item offerings and store distribution at existing customers. The price/mix decline was driven by an oversupply of egg inventory, which resulted in increased sales to breaker and wholesale channels at lower prices. Gross profit was $53.0 million, or 28.3% of net revenue, in the first quarter of 2026, compared to $62.5 million, or 38.5% of net revenue, in the first quarter of 2025. Gross profit and margin decreased compared to the prior-year period reflecting higher input and production costs and unfavorable sales mix, which were partially offset by higher net revenue from volume growth and pricing actions taken last year. The unfavorable sales mix was driven by an oversupply of egg inventory, which resulted in increased sales to breaker and wholesale channels at lower prices, reducing gross profit by an estimated $4.9 million. Loss from operations was $2.3 million in the first quarter of 2026, compared to income from operations of $21.8 million in the first quarter of 2025. The decrease was driven by higher input and production costs, higher SG&A to support the growth of the business as well as an unfavorable sales mix, which were only partially offset by higher net revenue from volume growth and pricing actions taken last year. Net loss was $1.5 million in the first quarter of 2026, compared to net income of $16.9 million in the prior-year quarter. The decrease was driven by higher input and production costs and unfavorable sales mix, which were partially offset by higher net revenue from volume growth and pricing actions taken last year. Net loss per diluted share was ($0.03) for the first quarter of 2026, compared to net income per diluted share of $0.37 in the prior-year quarter. Adjusted EBITDA was $5.0 million, or 2.7% of net revenue, in the first quarter of 2026, compared to $27.5 million, or 16.9% of net revenue, in the first quarter of 2025. The decrease was driven by higher input and production costs, higher SG&A to support the growth of the business as well as an unfavorable sales mix, which were only partially offset by higher net revenue from volume growth and pricing actions taken last year. Adjusted EBITDA excludes certain non-cash items. Adjusted EBITDA is a non-GAAP financial measure defined in the section titled "Non-GAAP Financial Measures" below and is reconciled to net income, its closest comparable GAAP measure, at the end of this release. Balance Sheet and Cash Flow Highlights Cash, cash equivalents and marketable securities were $51.4 million as of March 29, 2026, and we had no outstanding debt. The sequential decrease in cash, cash equivalents and marketable securities of $61.9 million was primarily due to investments in Vital Crossroads (VXR), the company’s planned second egg washing and packing facility in Seymour, Indiana, and development of accelerator farms, as well as repurchases of the company’s common stock. Net cash used in operating activities was $18.6 million for the first quarter of 2026, compared to net cash provided by operating activities of $5.3 million for the prior-year quarter. Capital expenditures totaled $20.8 million in the 13-week period ended March 29, 2026, compared to $3.1 million in the prior-year quarter. The increase was primarily due to investments in VXR. Stock repurchased under the company’s previously announced stock repurchase program totaled 1,001,747 shares of common stock at an average price per share of $19.97, for an aggregate cost of $20.0 million, in the first quarter of 2026. As of March 29, 2026, $80.0 million remained authorized for repurchases of additional shares of the company’s common stock. Strategic Business Update Vital Farms announced the strategic decision to wind down its butter business by the end of fiscal 2026 to sharpen its focus on its core egg product categories where the company believes it maintains distinct competitive advantages. This portfolio optimization is expected to be margin accretive upon cessation of operations, while freeing management bandwidth to accelerate distribution in the company’s core egg categories. Fiscal 2026 Outlook Thilo Wrede, Vital Farms’ Chief Financial Officer, commented: "Our updated outlook for fiscal year 2026 reflects a prudent response to the current pricing environment in the egg category. We are proactively tightening our cost structure and aligning our capital allocation to prioritize operational discipline and margin protection. This is designed to ensure we navigate near-term headwinds effectively while maintaining a strong balance sheet and positioning us for strong future growth based on our trusted brand." For fiscal year 2026, we expect: Net revenue of $775 million to $800 million, which represents at least 5% growth versus fiscal year 2025. This assumes that our investments in price and our distribution gains lead to a return to positive shell egg volume growth by the third quarter of 2026 with acceleration in the fourth quarter. It also assumes that competitive activity does not intensify further. Adjusted EBITDA of $0 to $10 million, reflecting higher than previously anticipated promotional spending and price investments and the negative impact of approximately $32 million from costs to manage the current oversupply of eggs. Capital expenditures in the range of $70 million to $75 million, compared to our previous range of $140 million to $150 million. The lower capital expenditures outlook reflects our decision to slow the pace of capital spending, particularly at VXR and new accelerator farms, to better align the timing of capacity additions with demand realization. Vital Farms’ guidance assumes that there are no significant disruptions to the supply chain or its customers or consumers, including any issues from adverse macroeconomic factors. Vital Farms cannot provide a reconciliation between its forecasted Adjusted EBITDA and net (loss) income, its most directly comparable GAAP measure, without unreasonable effort due to the unavailability of reliable estimates for income taxes and stock-based compensation, among other items. These items are not within our control and may vary greatly between periods and could significantly impact future financial results. Conference Call and Webcast Details Vital Farms will host a conference call and webcast at 8:30 a.m. ET today to discuss the results. To participate in the conference call via phone, participants may register for the call here to receive dial-in details and a unique pin. Alternatively, participants may access the live webcast on the Vital Farms Investor Relations website at https://investors.vitalfarms.com under "Events & Presentations." The webcast will be archived for 30 days. In addition, Vital Farms will publish its May 2026 Corporate Presentation as supporting materials to the webcast on the Vital Farms Investor Relations website at https://investors.vitalfarms.com under "Events & Presentations." About Vital Farms Vital Farms (Nasdaq: VITL) is a Certified B Corporation that offers a range of ethically produced foods nationwide. Started on a single farm in Austin, Texas, in 2007, Vital Farms is now a national consumer brand that works with 625 small farms and is the leading U.S. brand of pasture-raised eggs by retail dollar sales. Vital Farms’ ethics are exemplified by its focus on the humane treatment of farm animals and sustainable farming practices. In addition, as a Delaware public benefit corporation, Vital Farms prioritizes the long-term benefits of each of its stakeholders, including farmers and suppliers, customers and consumers, communities and the environment, and crew members and stockholders. Vital Farms’ products, including shell eggs, hard-boiled eggs, and liquid whole eggs, are sold in more than 23,500 stores nationwide. Vital Farms pasture-raised eggs can also be found on menus at hundreds of foodservice operators across the country. For more information, visit https://vitalfarms.com/. Forward-Looking Statements This press release and the earnings call referencing this press release contain "forward-looking" statements, as that term is defined under the federal securities laws, including but not limited to statements regarding Vital Farms’ market opportunity, brand strength, anticipated growth, corporate and commercial strategy, expectations regarding tailwinds and headwinds facing Vital Farms’ industry, the impact of Vital Farms’ decision to wind down its butter business on its future operations and financial performance, including with respect to Vital Farms’ financial margins and management’s ability to accelerate distribution in the company’s core categories, the effect of prior or future expansions of Vital Farms’ processing facilities on its future revenue, the impact and expected benefits of anticipated changes in Vital Farms’ cost structure and capital expenditures, and future financial performance, including management’s outlook for fiscal year 2026 and management’s long-term outlook. These forward-looking statements are based on Vital Farms’ current assumptions, expectations, and beliefs and are subject to substantial risks, uncertainties, assumptions, and changes in circumstances that may cause Vital Farms’ actual results, performance, or achievements to differ materially from those expressed or implied in any forward-looking statement. The risks and uncertainties referred to above include, but are not limited to: Vital Farms’ expectations regarding its revenue, expenses, and other operating results; Vital Farms’ ability to attract new consumers and customers, to successfully retain existing consumers and customers, to attract and retain its suppliers, distributors, and co-manufacturers, and to maintain its relationships with the farmers in its network and further expand its farm network, and plans for operation of accelerator farms and the impact of its decision to pause development of future accelerator farms; Vital Farms’ ability to sustain or increase its profitability; Vital Farms’ expectations regarding its future growth in the foodservice channel; Vital Farms’ ability to procure sufficient high-quality eggs and other raw materials; Vital Farms’ ability to effectively manage its supply of eggs and the impact of its current and planned supply control initiatives; real or perceived quality or food safety issues with Vital Farms’ products or other issues that adversely affect Vital Farms’ brand and reputation; Vital Farms ability to manage changes in the tastes and preferences of consumers; the financial condition of, and Vital Farms’ relationships with, its farmers, suppliers, co-manufacturers, distributors, retailers, and foodservice customers, as well as the health of the foodservice industry generally; the effects of outbreaks of agricultural diseases, including avian influenza and egg drop syndrome, the perception that outbreaks may occur or regulatory or market responses to such outbreaks generally; the ability of Vital Farms, its farmers, suppliers, and its co-manufacturers to comply with food safety, environmental or other laws or regulations; specifications and timing regarding VXR in Seymour, including the impact of Vital Farms’ decision to slow construction on VXR, Indiana, and the impacts of prior or future expansions of such facilities on Vital Farms’ future revenue and farm network; future investments in its business, anticipated capital expenditures and estimates regarding capital requirements; anticipated changes in Vital Farms’ product offerings, including specifications, timing and financial impacts of the planned discontinuation of its butter products, and Vital Farms’ ability to innovate to offer new products or enter into new product categories; the costs and success of marketing efforts and ability to promote its brand; Vital Farms’ reliance on key personnel and its ability to identify, recruit and retain personnel; Vital Farms’ ability to effectively manage its growth; the potential influence of Vital Farms’ focus on a specific public benefit purpose and producing a positive effect for society; Vital Farms’ stated impact goals, opportunities and initiatives, as well as the standards and expectations of third parties regarding these matters; Vital Farms’ ability to maintain effective internal controls over financial reporting and to remediate and prevent material weaknesses in its internal controls; Vital Farms’ ability to compete effectively with existing competitors and new market entrants; the impact of adverse economic conditions, including as a result of unfavorable global economic and political conditions, elevated interest rates, and inflation; the impact of previous or future shutdowns of the U.S. federal government on Vital Farms and its contracted family farmers’ businesses; Vital Farms’ estimates of future capital expenditures and the sufficiency of Vital Farms’ cash, cash equivalents, marketable securities and availability of credit under its credit facility to meet liquidity needs; seasonality; and the growth rates of the markets in which Vital Farms competes. These risks and uncertainties are more fully described in Vital Farms’ filings with the Securities and Exchange Commission (SEC), including in the sections entitled "Risk Factors" in its Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2026, which Vital Farms anticipates filing on May 7, 2026, and other filings and reports that Vital Farms may file from time to time with the SEC. Moreover, Vital Farms operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for management to predict all risks, nor can Vital Farms assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements Vital Farms may make. In light of these risks, uncertainties, and assumptions, Vital Farms cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Forward-looking statements represent management’s beliefs and assumptions only as of the date of this press release. Vital Farms disclaims any obligation to update forward-looking statements except as required by law. Non-GAAP Financial Measures We report our financial results in accordance with GAAP. However, management believes that Adjusted EBITDA and Adjusted EBITDA Margin, non-GAAP financial measures, provide investors with additional useful information in evaluating our performance. Adjusted EBITDA and Adjusted EBITDA Margin are financial measures that are not required by or presented in accordance with GAAP. We believe that Adjusted EBITDA and Adjusted EBITDA Margin, when taken together with our financial results presented in accordance with GAAP, provide meaningful supplemental information regarding our operating performance and facilitate internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of Adjusted EBITDA and Adjusted EBITDA Margin are helpful to our investors as they are measures used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes. We calculate Adjusted EBITDA as net (loss) income, adjusted to exclude: (1) depreciation and amortization; (2) stock-based compensation expense; (3) (benefit) or provision for income taxes as applicable; (4) interest expense; (5) interest income; and (6) amortization of cloud computing arrangements. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. Adjusted EBITDA and Adjusted EBITDA Margin are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of the limitations of Adjusted EBITDA and Adjusted EBITDA Margin include that (1) they do not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect these capital expenditures, (3) they do not consider the impact of stock-based compensation expense, (4) they do not reflect other non-operating expenses, including interest expense; and (5) they do not reflect tax payments that may represent a reduction in cash available to us. In addition, our use of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similarly titled measures of other companies because they may not calculate Adjusted EBITDA and Adjusted EBITDA Margin in the same manner, limiting the usefulness as comparative measures. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA and Adjusted EBITDA Margin alongside other financial measures, including our net (loss) income, net (loss) income margin and other results stated in accordance with GAAP. View source version on businesswire.com: https://www.businesswire.com/news/home/20260507425592/en/ Contacts Media: Rob Discher [email protected] Investors: Brian S. Shipman, CFA [email protected]