Vita Coco Company, Inc. 10-Q

Item 1. Financial Statements. THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in thousands, except share data) September 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 156,706 $ 132,537 Accounts receivable, net of allowance of $ 2,257 at September 30, 2024, and $ 2,486 at December 31, 2023 78,600 50,086 Inventory 64,905 50,757 Supplier advances, current 1,265 1,521 Derivative assets 1,299 3,876 Prepaid expenses and other current assets 27,986 24,160 Total current assets 330,761 262,937 Property and equipment, net 2,440 2,136 Goodwill 7,791 7,791 Supplier advances, long-term 2,732 2,820 Deferred tax assets, net 6,756 6,749 Right-of-use assets, net 648 1,406 Other assets 2,019 1,843 Total assets $ 353,147 $ 285,682 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 31,253 $ 21,826 Accrued expenses and other current liabilities 64,908 59,533 Notes payable, current 10 13 Derivative liabilities 4,533 1,213 Total current liabilities 100,704 82,585 Notes payable, long-term 5 13 Other long-term liabilities 318 647 Total liabilities 101,027 83,245 Commitments and contingencies (See Note 7) Stockholders’ equity: Common stock, $ 0.01 par value; 500,000,000 shares authorized; 63,472,285 and 63,135,453 shares issued at September 30, 2024 and December 31, 2023, respectively 56,731,839 and 56,899,253 shares outstanding at September 30, 2024 and December 31, 2023, respectively 635 631 Additional paid-in capital 169,736 161,414 Retained earnings 153,324 100,742 Accumulated other comprehensive loss 156 ( 649 ) Treasury stock, 6,740,446 shares at cost as of September 30, 2024, and 6,236,200 shares at cost as of December 31, 2023. ( 71,731 ) ( 59,701 ) Total stockholders’ equity 252,120 202,437 Total liabilities and stockholders’ equity $ 353,147 $ 285,682 See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Amounts in thousands, except for share and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net sales $ 132,906 $ 138,064 $ 388,720 $ 387,468 Cost of goods sold 81,344 81,893 231,244 246,542 Gross profit 51,562 56,171 157,476 140,926 Operating expenses Selling, general and administrative 30,967 32,649 87,941 89,855 Income (Loss) from operations 20,595 23,522 69,535 51,071 Other income (expense) Unrealized gain/(loss) on derivative instruments 2,592 ( 3,959 ) ( 5,896 ) ( 1,758 ) Foreign currency gain/(loss) 550 ( 1,211 ) 472 ( 430 ) Interest income 1,876 824 5,026 1,105 Interest expense — ( 1 ) — ( 31 ) Total other income (expense) 5,018 ( 4,347 ) ( 398 ) ( 1,114 ) Income before income taxes 25,613 19,175 69,137 49,957 Income tax expense ( 6,362 ) ( 4,011 ) ( 16,555 ) ( 10,101 ) Net income $ 19,251 $ 15,164 $ 52,582 $ 39,856 Net income per common share Basic $ 0.34 $ 0.27 $ 0.93 $ 0.71 Diluted $ 0.32 $ 0.26 $ 0.89 $ 0.68 Weighted-average number of common shares outstanding Basic 56,769,410 56,493,757 56,688,362 56,290,195 Diluted 59,314,805 59,271,757 59,099,179 58,494,045 See accompanying notes to the condensed consolidated financial statements. 6 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Amounts in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income $ 19,251 $ 15,164 $ 52,582 $ 39,856 Other comprehensive income (loss): Foreign currency translation adjustment 784 ( 426 ) 805 ( 317 ) Total comprehensive income attributable to The Vita Coco Company, Inc. $ 20,035 $ 14,738 $ 53,387 $ 39,539 See accompanying notes to the condensed consolidated financial statements. 7 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (Amounts in thousands, except for shares) Common Stock Common Stock with Exit Warrants Total Common Stock Additional Paid-In Retained Earnings Accumulated Other Comprehensive Income / (Loss) Treasury Stock Total Shareholders’ Equity Attributable to The Vita Coco Company, Inc. Shares $ Amount Shares $ Amount Shares $ Amount Capital Shares Amount Balance at December 31, 2022 54,112,145 $ 541 8,113,105 $ 81 62,225,250 $ 622 $ 145,210 $ 55,183 $ ( 994 ) 6,206,200 $ ( 58,928 ) $ 141,093 Net income — — — — — — — 6,705 — — — 6,705 Cumulative-effect adjustment related to the adoption of accounting guidance for credit losses — — — — — — — ( 1,070 ) — — — ( 1,070 ) Stock-based compensation — — — — — — 2,162 — — — — 2,162 Exercise of stock awards 185,783 2 — — 185,783 2 601 — — — — 603 Foreign currency translation adjustment — — — — — — — — 173 — — 173 Balance at March 31, 2023 54,297,928 543 8,113,105 81 62,411,033 624 147,973 60,818 ( 821 ) 6,206,200 ( 58,928 ) 149,666 Net income — — — — — — — 17,987 — — — 17,987 Stock-based compensation — — — — — — 2,102 — — — — 2,102 Exercise of stock awards 230,857 2 — — 230,857 2 2,112 — — — — 2,114 Foreign currency translation adjustment — — — — — — — — ( 64 ) — — ( 64 ) Balance at June 30, 2023 54,528,785 $ 545 8,113,105 $ 81 62,641,890 $ 626 $ 152,187 $ 78,805 $ ( 885 ) 6,206,200 $ ( 58,928 ) $ 171,805 Net income — — — — — — — 15,164 — — — 15,164 Stock-based compensation expense — — — — — — 2,862 — — — — 2,862 Exercise of stock awards 320,315 3 — — 320,315 3 3,195 — — — — 3,198 Foreign currency translation adjustment — — — — — — — — ( 426 ) — — ( 426 ) Balance at September 30, 2023 54,849,100 $ 548 8,113,105 $ 81 62,962,205 $ 629 $ 158,244 $ 93,969 $ ( 1,311 ) 6,206,200 $ ( 58,928 ) $ 192,603 Balance at December 31, 2023 55,022,348 $ 550 8,113,105 $ 81 63,135,453 $ 631 $ 161,414 $ 100,742 $ ( 649 ) 6,236,200 $ ( 59,701 ) $ 202,437 Net income — — — — — — — 14,238 — — — 14,238 Purchase of Treasury Shares — — — — — — — — — 391,544 ( 9,235 ) ( 9,235 ) Stock-based compensation — — — — — — 2,109 — — — — 2,109 Exercise of stock awards 176,284 2 — — 176,284 2 151 — — — — 153 Foreign currency translation adjustment — — — — — — — — ( 12 ) — — ( 12 ) Balance at March 31, 2024 55,198,632 552 8,113,105 81 63,311,737 633 163,674 114,980 ( 661 ) 6,627,744 ( 68,936 ) 209,690 Net income — — — — — — — 19,093 — — — 19,093 Stock-based compensation — — — — — — 2,399 — — — — 2,399 Exercise of stock awards 91,376 1 — — 91,376 1 790 — — — — 791 Foreign currency translation adjustment — — — — — — — — 33 — — 33 Balance at June 30. 2024 55,290,008 $ 553 8,113,105 $ 81 63,403,113 $ 634 $ 166,863 $ 134,073 $ ( 628 ) 6,627,744 $ ( 68,936 ) $ 232,006 Net income — — — — — — — 19,251 — — — 19,251 Purchase of Treasury Shares — — — — — — — — — 112,702 ( 2,795 ) ( 2,795 ) Stock-based compensation — — — — — — 2,141 — — — — 2,141 Exercise of stock awards 69,172 1 — — 69,172 1 732 — — — — 733 Foreign currency translation adjustment — — — — — — — — 784 — — 784 Balance at September 30, 2024 55,359,180 $ 554 8,113,105 $ 81 63,472,285 $ 635 $ 169,736 $ 153,324 $ 156 6,740,446 $ ( 71,731 ) $ 252,120 See accompanying notes to the condensed consolidated financial statements. 8 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in thousands) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net income $ 52,582 $ 39,856 Adjustments required to reconcile net income to cash flows from operating activities: Depreciation and amortization 540 503 (Gain)/loss on disposal of equipment 13 19 Bad debt expense ( 665 ) 255 Unrealized (gain)/loss on derivative instruments 5,896 1,758 Stock-based compensation 6,649 7,126 Impairment loss on assets held for sale — 363 Noncash lease expense 764 966 Changes in operating assets and liabilities: Accounts receivable ( 26,910 ) ( 37,234 ) Inventory ( 13,974 ) 33,815 Prepaid expenses, net supplier advances, and other assets ( 2,585 ) 5,215 Accounts payable, accrued expenses, and other liabilities 13,667 17,361 Net cash provided by (used in) operating activities 35,977 70,003 Cash flows from investing activities: Cash paid for property and equipment ( 849 ) ( 533 ) Proceeds from sale of property and equipment — 5 Net cash used in investing activities ( 849 ) ( 528 ) Cash flows from financing activities: Proceeds from exercise of stock awards 1,676 5,915 Cash paid on notes payable ( 10 ) ( 18 ) Cash paid to acquire treasury stock ( 12,030 ) — Net cash provided by (used in) financing activities ( 10,364 ) 5,897 Effects of exchange rate changes on cash and cash equivalents 333 212 Net increase/(decrease) in cash and cash equivalents 25,097 75,584 Cash, cash equivalents and restricted cash at beginning of the period ( 1 ) 132,867 19,629 Cash, cash equivalents and restricted cash at end of the period ( 1 ) $ 157,964 $ 95,213 1 Includes $ 1,258 and $ 328 of restricted cash as of September 30, 2024 and 2023, respectively, that were included in other current assets. See accompanying notes to the condensed consolidated financial statements. 9 Table of Contents THE VITA COCO COMPANY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands, except share and per share amounts) 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION The Vita Coco Company, Inc. and subsidiaries (the “Company”) develops, markets, and distributes various coconut water products under the brand name Vita Coco and for retailers' own brands, predominantly in the United States. Other products include coconut milk, coconut oil, coconut as a commodity, water (under the brand name Ever & Ever ), and protein infused fitness drinks (under the brand name PWR LIFT ). We also offered a natural energy drink (under the brand name Runa ), which we ceased selling in December 2023. The Company was incorporated in Delaware as All Market Inc. on January 17, 2007. On September 9, 2021, we changed our name to The Vita Coco Company, Inc. In 2018, the Company purchased certain assets and liabilities of Runa , which was marketed and distributed primarily in the United States until the Company ceased selling the brand in December 2023. We are a public benefit corporation under Section 362 of the Delaware General Corporation Law. As a public benefit corporation, our Board of Directors is required by the Delaware General Corporation Law to manage or direct our business and affairs in a manner that balances the pecuniary interests of our stockholders, the best interests of those materially affected by our conduct and the specific public benefits identified in our certificate of incorporation. The Company has ten wholly-owned subsidiaries, including four wholly-owned Asian subsidiaries established between fiscal 2012 and 2015, four North American subsidiaries established between 2012 and 2018, All Market Europe, Ltd. (“AME”) in the United Kingdom established 2009, and one subsidiary in Germany established during 2024. Unaudited interim financial information The Company’s condensed consolidated interim financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Article 10 of Regulation S-X. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the Company’s financial information for the interim period presented. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period or for any other future year. The condensed consolidated balance sheet as of September 30, 2024 is unaudited and should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the fiscal year ended December 31, 2023. During the nine months ended September 30, 2024, there were no significant changes to the Company’s significant accounting policies as described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2023 . 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements are presented in accordance with U.S. GAAP. Principles of Consolidation The condensed consolidated financial statements include all the accounts of the wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates Preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and 10 Table of Contents expenses during the reporting period. Management considers many factors in selecting appropriate financial accounting policies and controls in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. Additionally, uncertainty in the macroeconomic environment resulting from current geopolitical and economic instability (including the effects of current wars and other international conflicts) and the high interest rate and inflationary cost environment make estimates and assumptions difficult to calculate with precision. The estimation process often may yield a range of reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. The most significant estimates in the condensed consolidated financial statements relate to share-based compensation, assessing long-lived assets for impairment, estimating the net realizable value of inventories, determining the accounts receivables reserve, assessing goodwill for impairment, determining the value of trade promotions, and assessing the realizability of deferred income taxes. Actual results could differ from those estimates. Concentration of Credit Risk The Company’s cash and accounts receivable are subject to concentrations of credit risk. The Company’s cash balances are primarily on deposit with banks in the U.S. which are guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to $250. At times, such cash may be in excess of the FDIC insurance limit. To minimize the risk, the Company’s policy is to maintain cash balances with high quality institutions, which may include banks, financial institutions and investment firms, and invest daily or reserve operating cash in money market funds, government securities, bank obligations, municipal securities or other investment vehicles with short-term maturities. Substantially all of the Company’s customers are either wholesalers or retailers of beverages. A material default in payment, a material reduction in purchases from these or any large customers, or the loss of a large customer or customer groups could have a material adverse impact on the Company’s financial condition, results of operations and liquidity. The Company is exposed to concentration of credit risk from its major customers for which two customers in aggregate represented 48 % and 51 % of total net sales for the nine months ended September 30, 2024 and 2023, respectively. In addition, the two customers in aggregate also accounted for 37 % and 43 % of total accounts receivable as of September 30, 2024 and December 31, 2023, respectively. The Company has not experienced credit issues with these customers. Refer to Note 7, Commitments and Contingencies regarding additional information on our major customers. Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The new accounting standard introduced the current expected credit losses methodology ("CECL") for estimating allowances for credit losses. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized costs, including loans and trade receivables. ASU 2016-13 was effective for the Company for annual and interim reporting periods beginning after December 15, 2022. The Company adopted the standard on January 1, 2023 using the modified retrospective method for all financial assets in scope. As a part of the adoption, the Company selected to apply roll-rate method to estimate current expected credit losses for its accounts receivable population and weighted average remaining maturity ("WARM") method for supplier advances. The difference of $ 1,070 between the incurred credit loss estimate and current expected credit loss estimate was recorded as cumulative effect adjustment to the Company’s opening retained earnings and reflected on the consolidated balance sheet as of January 1, 2023 as a result of the ASC Topic 326, Financial Instruments - Credit Losses ("ASC 326") adoption. The adoption of the standard did not have a material impact on the Company’s consolidated statements of operations, or consolidated statements of cash flows. The following table illustrates the impact of ASC 326. As of January 1, 2023 As reported under ASC 326 Pre-ASC 326 adoption Impact of ASC 326 adoption Allowance for credit losses on accounts receivables $ 3,552 $ 2,898 $ 654 Allowance for credit losses on supplier advances 416 — 416 Total $ 3,968 $ 2,898 $ 1,070 11 Table of Contents Leases As of September 30, 2024, the Company signed a lease agreement for a new office in New York, NY. The operating lease will commence in fiscal year 2025, ending in 2034 with an option to extend for an additional two years . Total undiscounted future payments for this new office lease are $ 15,766 . Additionally upon signing the agreement, the Company was required to establish a line of credit of $ 920 as a security deposit which may be used in case of delinquency. As of September 30, 2024, the Company has established the letter of credit and accounted $ 920 as restricted cash. Recently Issued Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis ("ASU 2023-07"). Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC Topic 280, Segment Reporting on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the effective tax rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction ("ASU 2023-09"). ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09. 3. REVENUE RECOGNITION Revenues are accounted for in accordance with ASC Topic 606, Revenue Recognition ("ASC 606"). The Company disaggregates revenue into the following product categories: • Vita Coco Coconut Water —This product category consists of all branded coconut water product offerings under the Vita Coco labels, where the majority ingredient is coconut water. The Company determined that the sale of the products represents a distinct performance obligation as customers can benefit from purchasing the products on their own or together with other resources that are readily available to the customers. For these products, control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue. • Private Label —This product category consists of all private label product offerings, which includes coconut water and oil. The Company determined the production and distribution of private label products represents a distinct performance obligation. Since there is no alternative use for these products and the Company has the right to payment for performance completed to date, the Company recognizes the revenue for the production of these private label products over time as the production for open purchase orders occurs, which may be prior to any shipment. • Other —This product category consists of all other products, which included Runa (until we ceased selling it in December 2023), and includes Ever & Ever and PWR LIFT product offerings and Vita Coco product extensions beyond coconut water, coconut milk products, and other revenue transactions (e.g., bulk product sales). For these products, control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue. The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers. The Company provides trade promotions and sales discounts to its customers and distributors. Since these sales promotions and sales discounts do not meet the criteria for a distinct good or service, they are primarily accounted for as a reduction of revenue and include payments to customers and distributors for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. These condensed consolidated financial statements include accruals for these promotion and discounts. The accruals are made for invoices that have not yet been received as of the end of the reporting period and are 12 Table of Contents recorded as a reduction of sales, and are based on contract terms and our historical experience with similar programs and require management judgment with respect to estimating customer and consumer participation and performance levels. Disaggregation of Revenue The following table disaggregates net revenue by product type and reportable segment: Three Months Ended September 30, 2024 Americas International Consolidated Vita Coco Coconut Water $ 94,013 $ 14,883 $ 108,896 Private Label 16,489 4,800 21,289 Other 1,744 977 2,721 Total $ 112,246 $ 20,660 $ 132,906 Three Months Ended September 30, 2023 Americas International Consolidated Vita Coco Coconut Water $ 89,683 $ 11,350 $ 101,033 Private Label 28,257 5,421 33,678 Other 2,706 647 3,353 Total $ 120,646 $ 17,418 $ 138,064 Nine Months Ended September 30, 2024 Americas International Consolidated Vita Coco Coconut Water $ 262,029 $ 38,500 $ 300,529 Private Label 63,897 14,768 78,665 Other 6,913 2,613 9,526 Total $ 332,839 $ 55,881 $ 388,720 Nine Months Ended September 30, 2023 Americas International Consolidated Vita Coco Coconut Water $ 253,825 $ 33,628 $ 287,453 Private Label 77,366 13,140 90,506 Other 7,490 2,019 9,509 Total $ 338,681 $ 48,787 $ 387,468 4. INVENTORY Inventory consists of the following: September 30, 2024 December 31, 2023 Raw materials and packaging $ 3,753 $ 3,360 Finished goods 61,152 47,397 Inventory $ 64,905 $ 50,757 13 Table of Contents 5. GOODWILL Goodwill consists of the following: September 30, 2024 December 31, 2023 Goodwill $ 7,791 $ 7,791 All of the Company’s goodwill is associated with an acquisition, which occurred in June 2018. The goodwill is allocated to the Americas reporting unit and is tax deductible. The Company has not recognized any impairment since acquisition. 6. DEBT The table below details the outstanding balances on the Company’s debt as of September 30, 2024 and December 31, 2023: September 30, 2024 December 31, 2023 Notes payable Vehicle loans 15 26 $ 15 $ 26 Current 10 13 Non-current $ 5 13 Revolving Credit Facility In May 2020, the Company entered into the five-year credit facility with Wells Fargo Bank, National Association consisting of a revolving line of credit, which currently provides for committed borrowings of $ 60 million (the "2020 Credit Facility"). The maturity date on the 2020 Credit Facility is May 12, 2026. Starting in December 2022, borrowings on the 2020 Credit Facility bear interest at rates based on either: 1) a fluctuating rate per annum determined to be the sum of Daily Simple Secured Overnight Financing Rate ("SOFR") plus a spread defined in the credit agreement (the "Spread"); or 2) a fixed rate per annum determined to be the sum of the Term SOFR plus the Spread. The Spread ranges from 1.00 % to 1.75 %, which is based on the Company’s leverage ratio (as defined in the credit agreement) for the immediately preceding fiscal quarter as defined in the credit agreement. In addition, the Company is currently subject to an unused commitment fee ranging from 0.10 % and 0.20 % on the unused amount of the line of credit, with the rate being based on the Company’s leverage ratio (as defined in the credit agreement). As of September 30, 2024 and December 31, 2023, the Company had no outstanding balance and $ 60 million undrawn and available under its amended 2020 Credit Facility. The Company incurred no interest expense for the 2020 Credit Facility for the nine months ended September 30, 2024 and September 30, 2023, respectively. The unused commitment fee for the 2020 Credit Facility amounted to $ 15 and $ 15 for the three months ended September 30, 2024 and September 30, 2023, respectively. The unused commitment fee for the 2020 Credit Facility amounted to $ 46 and $ 46 for the nine months ended September 30, 2024 and September 30, 2023, respectively. The 2020 Credit Facility is collateralized by substantially all of the Company’s assets. The 2020 Credit Facility contains certain affirmative and negative covenants that, among other things, limit the Company’s ability to, subject to various exceptions and qualifications: (i) incur liens; (ii) incur additional debt; (iii) sell, transfer or dispose of assets; (iv) merge with or acquire other companies, (v) make loans, advances or guarantees; (vi) make investments; (vii) make dividends and distributions on, or repurchases of, equity; and (viii) enter into certain transactions with affiliates. The 2020 Credit Facility also requires the Company to maintain certain financial covenants including a maximum leverage ratio, a minimum fixed charge coverage ratio, and a minimum asset coverage ratio. As of September 30, 2024, the Company was in compliance with all financial covenants. 14 Table of Contents Vehicle Loans We periodically enter into vehicle loans. Interest rates on these vehicle loans range from 4.56 % to 5.68 %. The outstanding balance on the vehicle loans as of September 30, 2024 was less than $ 0.1 million. 7. COMMITMENTS AND CONTINGENCIES Contingencies: Litigation —The Company may engage in various litigation matters in the ordinary course of business. The Company intends to vigorously defend itself in such matters, based upon the advice of legal counsel, and is of the opinion that the resolution of these matters will not have a material effect on the condensed consolidated financial statements. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. The Company also discloses when it is reasonably possible that a material loss may be incurred. As of September 30, 2024 and December 31, 2023, the Company has not recorded any liabilities relating to such legal matters. Business Risk —The Company imports finished goods predominantly from manufacturers located in South American and Southeast Asian countries. The Company may be subject to certain business risks due to potential instability in these regions. Major Customers — The Company’s customers that accounted for 10% or more of total net sales and total accounts receivable were as follows: Net sales Accounts receivable Nine Months Ended September 30, September 30, 2024 December 31, 2023 2024 2023 Customer A 25 % 29 % 14 % 20 % Customer B 23 % 22 % 23 % 23 % One of the customers acquired less than 5% ownership in the Company upon consummation of the Company's initial public offering ("IPO"). As discussed in Note 10, Stockholders' Equity , the same customer also was granted 200,000 restricted stock awards at the time of the IPO, of which 100,000 vested on March 31, 2023 and 100,000 vested on March 31, 2024. The customer continues to hold less than 5% ownership in the Company as of September 30, 2024. In 2023, we agreed to start to discontinue the private label coconut water and coconut oil supply relationship with one of our significant customers as the terms required to retain the business were contrary to our long term margin targets. However, at the request of this customer, we have continued the supply relationship for a significant portion of their private label coconut water needs. Major Suppliers — The Company’s suppliers that accounted for 10% or more of the Company’s purchases were as follows: Nine Months Ended September 30, 2024 2023 Supplier A 19 % 20 % Supplier B 13 % 14 % 8. DERIVATIVE INSTRUMENTS The Company accounts for derivative instruments in accordance with the ASC Topic 815, Derivatives and Hedging ("ASC 815"). These principles require that all derivative instruments be recognized at fair value on each balance sheet date unless they qualify for a scope exclusion as a normal purchase or sales transaction, which is accounted for under the accrual method of accounting. In addition, these principles permit derivative instruments that qualify for hedge accounting to reflect the changes in the fair value of the derivative instruments through earnings or stockholders’ equity as other comprehensive income on a net basis until the hedged item is settled and recognized in earnings, depending on whether the derivative is being used to hedge changes in fair value or cash flows. The ineffective portion of a derivative instrument’s change in fair value is immediately recognized in earnings. As of September 30, 2024 and December 31, 2023, the Company did not have any derivative instruments that it had designated as fair value or cash flow hedges. 15 Table of Contents The Company is subject to the following currency risks: Inventory Purchases from Brazilian, Malaysian and Thai Manufacturers —In order to mitigate the currency risk on inventory purchases from its Brazilian, Malaysian and Thai manufacturers, which are settled in Brazilian real ("BRL"), Malaysian ringgit ("MYR") and Thai baht ("THB"), the Company's subsidiary, All Market Singapore Pte. Ltd. ("AMS"), enters a series of forward currency swaps to buy BRL, MYR and THB. Intercompany Transactions Between AME and AMS —In order to mitigate the currency risk on intercompany transactions between AME and AMS, AMS enters into foreign currency swaps to sell British pounds ("GBP"). Intercompany Transactions with Canadian Customer and Vendors —In order to mitigate the currency risk on transactions with Canadian customer and vendors, the Company enters into foreign currency swaps to sell Canadian dollars ("CAD"). The notional amount and fair value of all outstanding derivative instruments in the condensed consolidated balance sheets consist of the following at: September 30, 2024 Derivatives not designated as hedging instruments under ASC 815-20 Notional Amount Fair Value Balance Sheet Location Assets Foreign currency exchange contracts Receive THB/sell USD $ 21,324 $ 1,298 Derivative assets Receive USD/pay CAD 6,442 1 Derivative assets Liabilities Foreign currency exchange contracts Receive BRL/sell USD $ 42,900 $ ( 2,999 ) Derivative liabilities Receive USD/pay GBP 22,063 ( 1,375 ) Derivative liabilities Receive USD/pay EUR 6,691 ( 159 ) Derivative liabilities December 31, 2023 Derivatives not designated as hedging instruments under ASC 815-20 Notional Amount Fair Value Balance Sheet Location Assets Foreign currency exchange contracts Receive BRL/sell USD $ 62,253 $ 3,876 Derivative assets Liabilities Foreign currency exchange contracts Receive THB/sell USD 21,971 ( 285 ) Derivative liabilities Receive USD/pay EUR 5,627 ( 90 ) Derivative liabilities Receive USD/pay GBP 23,512 ( 749 ) Derivative liabilities Receive USD/pay CAD 7,666 ( 89 ) Derivative liabilities The amount and location of realized and unrealized gains and losses of the derivative instruments in the condensed consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023 are as follows: 16 Table of Contents Three Months Ended September 30, Location 2024 2023 Unrealized gain/(loss) on derivative instruments $ 2,592 $ ( 3,959 ) Location Unrealized gain/(loss) on derivative instruments Unrealized gain/(loss) on derivative instruments Foreign currency gain / (loss) $ ( 610 ) $ 1,909 Location Foreign currency gain/(loss) Foreign currency gain/(loss) Nine Months Ended September 30, 2024 2023 Unrealized gain/(loss) on derivative instruments $ ( 5,896 ) $ ( 1,758 ) Location Unrealized gain/(loss) on derivative instruments Unrealized gain/(loss) on derivative instruments Foreign currency gain / (loss) $ 185 $ 4,552 Location Foreign currency gain/(loss) Foreign currency gain/(loss) The Company applies recurring fair value measurements to its derivative instruments in accordance with ASC Topic 820, Fair Value Measurements ("ASC 820"). In determining fair value, the Company used a market approach and incorporated the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable internally developed inputs. 9. FAIR VALUE MEASUREMENTS ASC 820 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observability of the inputs used in valuation techniques, the Company’s assets and liabilities are classified as follows: Level 1 —Quoted market prices in active markets for identical assets or liabilities. Level 2 —Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted market prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes internally developed models and methodologies utilizing significant unobservable inputs. Forward Currency Swap Contracts —See Note 8, Derivative Instruments , for a description of these contracts. The Company’s valuation methodology for forward currency swap contracts is based upon third-party institution data. 17 Table of Contents The Company’s fair value hierarchy for those assets (liabilities) measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023, is as follows: Level 1 Level 2 Level 3 Total Forward Currency Swaps/Contracts September 30, 2024 $ — $ ( 3,234 ) $ — $ ( 3,234 ) December 31, 2023 $ — $ 2,663 $ — $ 2,663 There were no transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements. 10. STOCKHOLDERS’ EQUITY Common and Treasury Stock —Each share of Common Stock entitles its holder to one vote on matters required to be voted on by the stockholders of the Company and to receive dividends, when and if declared by the Company’s Board of Directors. As of September 30, 2024 and December 31, 2023, the Company held 6,740,446 and 6,236,200 shares, respectively, in treasury stock. As of September 30, 2024 and December 31, 2023, the Company had 3,257,423 and 3,124,326 shares, respectively, of Common Stock available for issuance upon the conversion of outstanding equity awards under the 2021 Incentive Award Plan ("2021 Plan"). On October 30, 2023, the Company's Board of Directors approved a share repurchase program ("Program") authorizing the Company to repurchase up to $ 40,000 of Common Stock. Shares of Common Stock may be repurchased under the Program from time to time through open market purchases, block trades, private transactions or accelerated or other structured share repurchase programs. To the extent not retired, shares of Common Stock repurchased under the Program will be placed in the Company's treasury shares. The extent to which the Company repurchases shares of Common Stock, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by the Company. The Program has no time limits and may be suspended or discontinued at any time. The Company repurchased 112,702 shares under this Program during the three months ended September 30, 2024. The Company repurchased 504,246 shares under this Program at a cost of $ 12,030 during the nine months ended September 30, 2024. The Company repurchased 30,000 shares under this Program at a cost of $ 773 during the year ended December 31, 2023. As of September 30, 2024, the Company had $ 27,196 remaining under this Program. On May 23, 2023, the Company entered into an underwriting agreement (the "Underwriting Agreement") with BofA Securities, Inc., Evercore Group L.L.C. and Goldman Sachs & Co. LLC, as the representative of the underwriters named in Schedule I thereto (collectively, the "Underwriters"), and a stockholder of the Company, Verlinvest Beverages SA (the "Selling Stockholder"), relating to an underwritten public offering of 5,000,000 shares (the "Offering") of Common Stock at a price to the public of $ 23.00 per share, before deducting underwriting discounts. Pursuant to the Underwriting Agreement, all 5,000,000 shares of Common Stock were sold by the Selling Stockholder. Under the terms of the Underwriting Agreement, the Selling Stockholder granted the Underwriters an option exercisable for 30 days to purchase up to an additional 750,000 shares of Common Stock from the Selling Stockholder at the public offering price, less underwriting discounts and commissions, which option was exercised in full prior to the closing of the Offering. The closing of the Offering occurred on May 26, 2023. The Company did not receive any of the proceeds from the sale of the shares. Additionally, the Company incurred $ 856 of administrative expenses related to the Offering, which were expensed in the nine months ended September 30, 2023. Stock-based Compensation —The stockholders of the Company approved the adoption of the Company’s 2014 Stock Option and Restricted Stock Plan (the “2014 Plan”). The 2014 Plan allowed for a maximum of 8 % of the sum of the Available Equity defined as the sum of: (i) the total then outstanding shares of common shares; and (ii) all available stock options (i.e., granted and outstanding stock options and stock options not yet granted). Under the terms of the 2014 Plan, the Company may grant employees, directors and consultants stock options and restricted stock awards and has the authority to establish the specific terms of each award, including exercise price, expiration and vesting. Currently, only stock options were granted under the 2014 Plan. Generally, stock options issued pursuant to the 2014 Plan contain exercise prices no less than the fair value of Common Stock on the date of grant and have a ten-year contractual term. 18 Table of Contents Subsequent to September 30, 2021, the stockholders of the Company approved the adoption of the 2021 Plan, which became effective after the closing of the Company's IPO completed in October 2021. On and after closing of the offering and the effectiveness of the 2021 Plan, no further grants have been made under the 2014 Plan. The maximum number of shares of our Common Stock available for issuance under the 2021 Plan is equal to the sum of: (i) 3,431,312 shares of our Common Stock; and (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) two percent ( 2 %) of the outstanding shares of our Common Stock on the last day of the immediately preceding fiscal year; and (B) such lesser amount as determined by our Board of Directors; provided, however, no more than 3,431,312 shares may be issued upon the exercise of incentive stock options ("ISOs"). The 2021 Plan provides for the grant of stock options, including ISOs and nonqualified stock options ("NSOs"), restricted stock, dividend equivalents, stock payments, restricted stock units ("RSUs"), other incentive awards, stock appreciation rights ("SARs"), and cash awards. As of September 30, 2024, only stock options, restricted stock, and RSU's have been granted under the 2021 Plan. For the three and nine months ended September 30, 2024 and 2023, the Company recorded stock compensation costs totaling: Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Reduction in Revenue (1) $ — $ 153 $ 151 $ 1,169 Selling, General & Administrative Expenses $ 2,141 $ 2,709 $ 6,498 $ 5,957 Total Stock Compensation Expense $ 2,141 $ 2,862 $ 6,649 $ 7,126 1 The cost recognized as a reduction in revenue is related to the RSUs previously granted to a major customer based on guidance in ASC 606 as stock based sales incentive. Option Awards with Service-based Vesting Conditions Most of the stock option awards granted under the 2014 Plan and 2021 Plan vest based on continuous service. The options awarded to the employees have differing vesting schedules as specified in each grant agreement. There were 168,076 new service-based stock option awards granted during the nine months ended September 30, 2024. Exercises of stock options during the three months ended September 30, 2024, and 2023 were 61,763 and 314,210 , respectively. Exercises of stock options during the nine months ended September 30, 2024, and 2023 were 148,311 and 583,201 , respectively. Option Awards with Performance and Market-based Vesting Conditions There are also outstanding stock option awards containing performance-based vesting conditions, subject to achievement of various performance goals by a future period, such as revenue and adjusted EBITDA targets. There were also stock option awards granted in 2019 to the current Chief Executive Officer ("CEO") containing performance and market vesting conditions vesting upon occurrence of an IPO or other qualifying liquidity event and upon achieving a predetermined equity value of the Company, which fully vested as of July 31, 2023. There were no new stock option awards granted during the nine months ended September 30, 2024 with performance-based vesting conditions. Service & Performance based Restricted Stock and RSUs Restricted stock and RSUs were granted under the 2021 Plan and primarily vest based on continuous service. The RSUs with service-based vesting conditions awarded to the employees have differing vesting schedules as specified in each grant agreement. The RSUs granted to non-employee directors vest in full on the earlier of: (i) the day immediately preceding the date of the first Annual Shareholders Meeting following the date of grant; or (ii) the first anniversary of the date of grant. During the nine months ended September 30, 2024 and September 30, 2023, the Company also granted RSUs that contain performance-based vesting conditions, subject to achievement of various performance goals in the future, specifically net sales growth and Adjusted EBITDA targets. Also included in these awards are shares of restricted Common Stock valued at $ 3,000 granted at the time of the IPO to entities affiliated with a significant customer, at a price per share granted at the IPO of $ 15.00 , or 200,000 restricted 19 Table of Contents shares, in connection with an amendment to extend the distributor agreement term to June 10, 2026. Since the distribution agreement had not been terminated by either party for cause as of March 31, 2023, 50 % of the shares were released on March 31, 2023. The remaining 50 % were released on March 31, 2024. The grant was accounted for as a stock-based sales incentive based on guidance in ASC 606 and is reflected as a reduction in the transaction price of revenue on the basis of the grant-date fair-value measure in accordance with the stock compensation guidance in ASC 718. During the nine months ended September 30, 2024, there were 259,221 service based and 58,365 performance based RSUs granted, which had an aggregate grant date fair value of $ 8,348 . During the three months ended September 30, 2024 and September 30, 2023, awards vested were 7,275 and 6,105 , respectively. During the nine months ended September 30, 2024 and September 30, 2023, awards vested were 188,387 and 153,754 , respectively, which includes service based RSUs and restricted stock of the major customer. 11. INCOME TAXES For the three months ended September 30, 2024 and 2023, the Company recorded income tax expense of $ 6,362 and $ 4,011 , respectively, in its condensed consolidated statements of operations. For the nine months ended September 30, 2024 and 2023, the Company recorded $ 16,555 and $ 10,101 , respectively, in income tax expense in its condensed consolidated statements of operations. In assessing the recoverability of its deferred tax assets, the Company continually evaluates all available positive and negative evidence to assess the amount of deferred tax assets for which it is more likely than not to realize a benefit. For any deferred tax asset in excess of the amount for which it is more likely than not that the Company will realize a benefit, the Company establishes a valuation allowance. As of September 30, 2024 and December 31, 2023, there was a $ 106 liability for income tax uncertainties recorded in the Company's consolidated balance sheets. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company does not expect its uncertain tax positions to change significantly over the next twelve months. The Company recognized no interest and penalties related to income tax uncertainties in its consolidated balance sheets or consolidated statement of operations for the three and nine months ended September 30, 2024 and 2023. The Company is subject to income tax examinations by the Internal Revenue Service ("IRS") and various state and local jurisdictions for the open tax years between December 31, 2019 and December 31, 2022. 12. EARNINGS PER SHARE Basic and diluted earnings per share were calculated as follows: Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Numerator: Net income $ 19,251 $ 15,164 $ 52,582 $ 39,856 Denominator: Weighted-average number of common shares used in earnings per share—basic 56,769,410 56,493,757 56,688,362 56,290,195 Effect of conversion of stock options 2,545,395 2,778,000 2,410,817 2,203,850 Weighted-average number of common shares used in earnings per share—diluted 59,314,805 59,271,757 59,099,179 58,494,045 Earnings per share—basic $ 0.34 $ 0.27 $ 0.93 $ 0.71 Earnings per share—diluted $ 0.32 $ 0.26 $ 0.89 $ 0.68 20 Table of Contents The following potentially dilutive securities, prior to the use of the treasury stock method, have been excluded from the computation of diluted weighted-average number of common shares outstanding, as they would be anti-dilutive: Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Options to purchase common stock and RSUs 203,880 34,178 237,620 385,207 13. SEGMENT REPORTING The Company has two operating and reportable segments: • Americas—The Americas segment is comprised primarily of the U.S. and Canada, and derives its revenues from the marketing and distribution of various coconut water and non-coconut water products (e.g., coconut oil and milk). The Company’s aluminum bottle canned water ( Ever & Ever ) and protein infused fitness drink ( PWR LIFT ) are marketed only in the Americas segment. The Company also offered guayusa leaf products ( Runa) in the Americas segment. As of December 2023, we ceased offering the Runa brand. • International—The International segment is comprised primarily of Europe, Middle East, and Asia Pacific, which includes the Company’s procurement arm and derives its revenues from the marketing and distribution of various coconut water and non-coconut water products. The Company’s CEO is the chief operating decision maker and evaluates segment performance primarily based on net sales and gross profit. All intercompany transactions between the segments have been eliminated. Information about the Company’s operations by operating segment as of the three and nine months ended September 30, 2024 and 2023 is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net sales $ 132,906 $ 138,064 $ 388,720 $ 387,468 Americas 112,246 120,646 332,839 338,681 International 20,660 17,418 55,881 48,787 Gross profit $ 51,562 $ 56,171 $ 157,476 $ 140,926 Americas 43,563 50,208 136,643 124,466 International 7,999 5,963 20,833 16,460 As of September 30, As of December 31, 2024 2023 Total segment assets $ 353,147 $ 285,682 Americas 235,406 209,984 International 117,741 75,698 21 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, Reconciliation 2024 2023 2024 2023 Total gross profit $ 51,562 $ 56,171 $ 157,476 $ 140,926 Less: Selling, general, and administrative expenses 30,967 32,649 87,941 89,855 Income (loss) from operations $ 20,595 $ 23,522 $ 69,535 $ 51,071 Less: Unrealized gain/(loss) on derivative instruments 2,592 ( 3,959 ) ( 5,896 ) ( 1,758 ) Foreign currency gain/(loss) 550 ( 1,211 ) 472 ( 430 ) Interest income 1,876 824 5,026 1,105 Interest expense — ( 1 ) — ( 31 ) Income before income taxes $ 25,613 $ 19,175 $ 69,137 $ 49,957 Geographic Data: The following table provides information related to the Company’s net sales by country, which is presented on the basis of the location that revenue from customers is recorded: Nine Months Ended September 30, 2024 2023 United States $ 311,168 $ 316,923 United Kingdom 40,801 34,223 All other countries(1) 36,751 36,322 Net sales $ 388,720 $ 387,468 ___________ (1) No individual country is greater than 10% of total net sales for the nine months ended September 30, 2024 and 2023. The following table provides information related to the Company’s property and equipment, net by country: September 30, 2024 December 31, 2023 United States $ 806 $ 729 Singapore 1,334 1,081 All other countries(1) 300 326 Property and equipment, net $ 2,440 $ 2,136 ___________ (1) No individual country is greater than 10% of total property and equipment, net as of September 30, 2024 and December 31, 2023. 14. RELATED-PARTY TRANSACTIONS Director Nominee Agreements - A member of the Board of Directors appointed under the Investor Rights Agreement by Verlinvest Beverages SA ("Verlinvest"), a stockholder of the Company, entered into a nominee agreement on May 24, 2022 instructing the Company to pay all cash and equity compensation earned in connection with his board of director service to Verlinvest. Based on the aforementioned nominee agreement, RSUs granted to this director will be held by him as nominee for Verlinvest and, upon vesting of the RSUs, the shares will be transferred to Verlinvest. The nominee agreements are primarily between the director and Verlinvest. The Company is a party to this arrangement solely to agree to the manner in which it would satisfy the compensation obligations to this director. 22 Table of Contents Registration Rights and Underwriting Agreements - Under the Registration Rights agreement by and among the Company, Verlinvest and certain other investors, in connection with each demand registration, piggyback or shelf offering, the Company agreed to reimburse the holders of registrable securities for the reasonable fees and disbursements of not more than one law firm. As part of the two secondary offerings during 2023, the Company also entered into underwriting agreements, to which Verlinvest was a party. In connection with the secondary share offering by Verlinvest in May 2023, Verlinvest agreed to waive its right to reimbursement of legal fees for its counsel in the fourth quarter of 2023, and those expenses, in the amount of $ 140 , were not reimbursed by the Company. In connection with the secondary share offering by Verlinvest in November 2023, in April 2024, Verlinvest agreed to waive its right to reimbursement of legal fees for its counsel, and those expenses, in the amount of $ 324 , were not reimbursed by the Company. 15. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE In accordance with ASC 323, Investments - Equity Method and Joint Ventures, investments in entities over which the Company does not have a controlling financial interest but has significant influence are accounted for using the equity method, with the Company’s share of earnings or losses reported in the condensed consolidated statements of operations. Through one of its subsidiaries, the Company has a 60 % joint venture interest in a company, Coco Ventures Limited, which provides for the development, marketing, distribution and branding of coconut water-based products under the Vita Coco brand in the People’s Republic of China. It is anticipated that Coco Ventures will initially purchase coconut water products from the Company. The Company acquired this interest on August 2, 2024, the date on which the Company obtained significant influence, for $ 0.6 million to be paid in cash within one year. The Company will record the initial investment in the joint venture upon cash payment. Since the Company is deemed not to have a controlling interest in Coco Ventures Limited, the Company’s investment will be accounted using the equity method of accounting in accordance with ASC 323. As of September 30, 2024, Coco Ventures Limited had not completed any activity and had no operations. 23 Table of Contents