What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-03-07 · 309 added, 258 removed, 1040 unchanged (35% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included elsewhere in this Annual Report.

Our mission is to bring ethical food to the table, and we are disrupting the U.S.

food system by developing a framework that challenges the norms of the incumbent food model, allowing us to bring high-quality products from our network of family farms to a national audience.

This framework has enabled us to become the leading U.S.

Our mission is to bring ethical food to the table, and we carry out this mission by raising the standards in the food industry and disrupting industrial, factory food norms.

Our approach has allowed us to bring high-quality products from our network of family farms to a national audience and has enabled us to become the leading U.S.

brand of pasture-raised eggs and the second-largest U.S.

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Supported by a steadfast adherence to the values on which we were founded, we have designed our brand and products to appeal to this consumer movement.

Our purpose is rooted in a commitment to Conscious Capitalism, which prioritizes the long-term benefits of each of our stakeholders (farmers and suppliers, customers and consumers, communities and the environment, crew members and stockholders).

Our purpose is to improve the lives of people, animals and the planet through food.

We are committed to Conscious Capitalism, which prioritizes positive, long-term outcomes with all of our stakeholders – farmers and suppliers, customers and consumers, communities and the environment, employees, who we refer to as crew members, and stockholders.

We make decisions based on what is sustainable for all our stakeholders.

Our collective sustainable business practices will enable us to fulfill our purpose of improving the lives of people, animals, and the planet through food, now and long into the future.

For us, it is not about short-term outcomes or a trade-off between purpose and profit.

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These principles guide our day-to-day operations and, we believe, help us deliver a more sustainable and successful business.

Our approach has been validated by our financial performance and our January 2022 recertification as a Certified B Corporation, a designation reserved for businesses that balance profit and purpose to meet the highest verified standards of social and environmental performance, public transparency and legal accountability.

Our approach has been validated by our financial performance and our impact on the food industry.

We are also a Delaware public benefit corporation and a Certified B Corporation, a designation reserved for businesses that balance profit and purpose to meet the highest verified standards of social and environmental performance, public transparency and legal accountability.

We source our eggs from a network of over 425 family farms.

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Under these arrangements, the farmer is responsible for all of the working capital and investments required to produce the eggs and manage the farm, including purchasing the birds and feed supply.

During the last quarter of fiscal 2023, as a result of increasing construction costs associated with our new farms, we incurred incremental farm recruitment costs that will be required to be paid in advance of these farms beginning to produce eggs, and we expect such incremental costs to continue into fiscal 2024.

As a result of ongoing elevated construction costs associated with our new farms, we incurred incremental farm recruitment costs in 2024 that were required to be paid in advance of these farms beginning to produce eggs, and we expect such incremental costs to continue into fiscal 2025.

These costs are expected to be recognized over the term of the related buy-sell contracts with the new farms, which are generally four to five years in length.

We believe the unfavorable impact to our working capital resulting from these upfront costs could range from $10.0 million to $12.0 million during fiscal 2024.

The impact to fiscal year 2023 working capital was immaterial, and the impact to our gross margin is also expected to be immaterial during the term of these agreements.

The impact to fiscal 2024 was approximately $15.0 million to working capital.

We believe the impact to our working capital resulting from these upfront costs could range from $7.0 million to $10.0 million in fiscal 2025.

We are contractually obligated to purchase all of the eggs produced by the farmer during the term of the contract at an agreed-upon price that depends upon pallet weight and is adjusted quarterly for changes in feed cost.

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We believe the success of our brand demonstrates that consumers are demanding premium products that meet a higher ethical standard of food production.

We have a strong presence at The Kroger Co., or Kroger, Sprouts Farmers Market, or Sprouts, Target Corporation and Whole Foods Market, Inc., or Whole Foods, and we also sell our products at Albertsons Companies, Inc., Publix Super Markets, Inc.

We have a strong presence at The Kroger Co., Sprouts Farmers Market, Target Corporation and Whole Foods Market, Inc., or Whole Foods, and we also sell our products at Albertsons Companies, Inc., Publix Super Markets, Inc.

and Walmart, Inc.

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Egg Central Station is capable of packing approximately six million eggs per day and has an SQF Excellent rating, the highest level of such certification from the Global Food Safety Initiative.

Our products are distributed through a broker-distributor-retailer network whereby brokers represent our products to distributors and retailers who will in turn sell our products to consumers.

To help support continued supply and further growth, we announced in 2024 that we plan to locate a second egg washing and packing facility in Seymour, Indiana, which we anticipate will be fully operational in 2027.

We intend to build upon the foundational key learnings and successes from our Egg Central Station facility in Missouri with this second facility and further expand our already resilient supply chain.

To help meet the continued demand for our shell eggs, we announced in January 2025 that we plan to install an additional Moba egg grading system, the primary automation technology used in washing, sorting, and packing shell eggs, at Egg Central Station.

Installation of this new system is expected to begin in the first quarter of 2025 and to be fully operational by the end of fiscal 2025.

In fiscal 2024, we purchased approximately 1,040 acres of farmland in Indiana for approximately $7.5 million.

Our intent is to develop this farmland (along with other potential parcels to be purchased in the future) and utilize it for “accelerator farms” to provide learning and development opportunities within our farm network and to help ensure adequate supply for our future egg washing and packing facility in Seymour, Indiana, while preserving the ability in the future to sell turnkey farms to interested farmers.

Our products are primarily distributed through a broker-distributor-retailer network whereby brokers represent our products to distributors and retailers who will in turn sell our products to consumers.

We serve the majority of natural channel customers through food distributors, which purchase, store, sell and deliver our products to our customers.

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Known Trends, Events and Uncertainties

Highly Pathogenic Avian Influenza (HPAI)

Since the initial outbreaks of HPAI in early 2022, we have been closely following the progression of the virus and working with our farmers, veterinarians, government health officials and animal welfare auditors to ensure that our flocks are kept as safe as possible.

To date, we have experienced outbreaks at four of our farms, one located in Missouri, one in Tennessee and two in Kansas.

While we have not experienced material disruptions to our egg supply due to HPAI outbreaks, if a substantial portion of our farms or production facilities were affected, this could materially and negatively affect our supply chain and operating results.

Additionally, HPAI has at times resulted in supply shortages and price increases across the egg market.

We are confident in the measures we have taken to reduce the risk of HPAI on our farms and production facilities, as well as our ability to mitigate impacts on supply.

However, given continued uncertainty about future outbreaks and governmental responses to such outbreaks, we cannot predict the ultimate impact that HPAI will have on our business.

Highly Pathogenic Avian Influenza (HPAI) and Other Agricultural Diseases

Since initial outbreaks of HPAI in early 2022, we have been closely following the progression of the virus and working with our farmers, veterinarians, government health officials and animal welfare auditors to ensure that our flocks are kept as safe as possible.

In fiscal 2024, we experienced an outbreak at one of our farms.

In fiscal 2024, we were made aware of an outbreak of a virus called Egg Drop Syndrome (EDS) in the Midwest, and nine of our farms were impacted in fiscal 2024.

EDS is characterized by the production of pale, thin-shelled, soft-shelled, or shell-less eggs by seemingly healthy laying hens.

In fiscal 2024 and continuing into fiscal 2025, HPAI-related disruptions in the supply of conventional eggs resulted at times in increased demand for premium egg products such as ours, which occasionally resulted in shortages of these eggs on shelves at our retail customers.

While we have not experienced material disruptions to our egg supply due to HPAI and EDS outbreaks, if a substantial portion of our farms or production facilities were affected, this could materially and negatively affect our supply chain and operating results.

Additionally, agricultural diseases such as HPAI or EDS have resulted and could continue to result in supply shortages and price increases across the egg market, including shortages of eggs on shelves at our retail customers.

We are confident in the measures we have taken to reduce the risk of HPAI and EDS on our farms and production facilities (including through procurement of newly available vaccinations for EDS), as well as our ability to mitigate impacts on supply.

However, given continued uncertainty about future outbreaks and governmental responses to such outbreaks, we cannot predict the ultimate impact that agricultural diseases such as HPAI and EDS will have on our business.

Economic Uncertainties

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economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.

Additionally, some economic observers suggest that we should expect a higher recession risk to continue over the next year, which, together with the foregoing, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations.

Furthermore, such economic conditions have at times produced downward pressure on share prices.

We have experienced and may continue to experience increases in our operating costs, including our labor costs and research and development costs, due to supply chain constraints, consequences associated with global health pandemics, geopolitical tensions, and employee availability and wage increases, all of which may result in additional stress on our working capital resources.

We work closely with our farmers, suppliers and third-party manufacturers to manage our supply chain activities and mitigate potential disruptions to our product supplies as a result of supply chain disruptions associated with such uncertainties.

We currently expect to have an adequate supply of our products, packaging, and freight through fiscal year 2024.

However, while we are currently ramping up capacity with our new supplier of butter, recent volatility in the markets for raw materials could affect supply of our butter products in fiscal year 2024.

We currently expect to have an adequate supply of our products, packaging and freight through fiscal 2025.

Liquidity and Capital Resources Overview

With cash, cash equivalents and marketable securities of $116.8 million as of December 31, 2023 and $20.0 million available under our credit facility agreement with PNC Bank, National Association, or the Credit Facility, we anticipate having sufficient liquidity to make investments in our business to support our long-term growth strategy.

With cash, cash equivalents and marketable securities of $160.3 million as of December 29, 2024 and $60.0 million available under our credit facility agreement with JPMorgan Chase Bank, N.A., or the Credit Facility, we anticipate having sufficient liquidity to make investments in our business to support our long-term growth strategy.

We expect that our cash, cash equivalents and marketable securities as of December 29, 2024, together with cash provided by our operating activities and availability of borrowings under our Credit Facility, will be sufficient to fund our operating expenses for at least the next 12 months and to make investments in our business in support of our long-term growth strategy.

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We intend to increase household penetration by continuing to invest significantly in sales and marketing to educate consumers about our brand, our values and the premium quality of our products.

We believe these efforts will educate consumers on the attractive attributes of our products, generate further demand for our products and ultimately expand our consumer base.

Our ability to attract new consumers will depend, among other things, on the perceived value and quality of our products, the offerings of our competitors and the effectiveness of our marketing efforts.

We believe these efforts have helped and will continue to help educate consumers on the attractive attributes of our products, generate further demand for our products and ultimately expand our consumer base.

Our ability to continue to attract new consumers will depend, among other things, on the perceived value and quality of our products, the offerings of our competitors and the effectiveness of our marketing efforts.

Our performance depends significantly on factors that may affect the level and pattern of consumer spending in the U.S.

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We are not able to precisely attribute our net revenue to a specific retailer for products sold through such channels.

We rely on third-party data to calculate the portion of retail sales attributable to such retailers, but this data is inherently imprecise because it is based on gross sales generated by our products sold at retailers, without accounting for price concessions, promotional activities or chargebacks, and because it measures retail sales for only the portion of our retailers serviced through distributors.

Based on this third-party data and internal analysis, Whole Foods accounted for approximately 23% of our retail sales for each of the fiscal years ended December 31, 2023 and December 25, 2022, respectively.

We rely on third-party data to calculate the portion of retail sales attributable to such retailers, but this data is inherently imprecise because it is based on gross sales generated by our products sold at retailers, without accounting for price concessions, promotional activities or chargebacks in the ordinary course of business, and because it measures retail sales for only the portion of our retailers serviced through distributors.

Based on this third-party data and internal analysis, Whole Foods accounted for approximately 23% of our retail sales for each of the fiscal years ended December 29, 2024 and December 31, 2023.

As of December 2024, there were approximately 24,000 stores selling our products.

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We see considerable opportunity to continue to grow the channel in the medium- to long-term with our two-pronged sales approach to values-aligned foodservice operators and their distributors.

We are working with Acxion Foodservice, a foodservice sales and marketing agency in the consumer packaged goods industry, to increase our category share in broad-line distribution and to get on national and regional restaurant menus.

We are working with ROOTED Food Sales Agency, a foodservice sales and marketing agency, to increase our category share in broad-line distribution and to access additional national and regional restaurant menus.

We are also leveraging foodservice as a critical consumer touchpoint to drive brand awareness, and we are investing in co-marketing to reach new households.

We believe co-branding is mutually beneficial to foodservice operators because it helps to differentiate their brands, enhances their perceived customer value and drives loyalty.

A multi-unit example from our successful foodservice program is True Food Kitchen, an award-winning restaurant brand and a pioneer of wellness-driven dining with locations across the United States that shares our values for improving the lives of people, animals, and the planet through ethically produced food.

We believe co-marketing is mutually beneficial to foodservice operators because it helps to differentiate their brands, enhances their perceived customer value and drives loyalty.

Expand Our Product Offerings

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Key Components of Results of Operations

We generate net revenue primarily from sales of our products, including eggs and butter, to our customers, which include natural retailers, mainstream retailers and foodservice customers.

We generate net revenue primarily from sales of our products, including eggs and butter, to our customers, which include natural retailers, mainstream retailers, distributors and foodservice customers.

We sell our products to customers on a purchase-order basis.

We serve the majority of our natural channel customers and certain independent grocers and other customers through food distributors, which purchase, store, sell and deliver our products to these customers.

We periodically offer promotional incentives to our customers, including rebates, temporary price reductions, off-invoice discounts, retailer advertisements, product coupons and other trade activities.

We periodically offer promotional incentives to our customers, including customer rebates, temporary price reductions, off-invoice discounts, retailer advertisements, product coupons and other trade activities.

At the end of each accounting period, we recognize a liability for an estimated promotional allowance reserve.

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As a result, low commodity shell egg prices may adversely affect our net revenue.

We increased prices on certain of our products in each of fiscal year 2022, fiscal year 2023 and fiscal year 2024.

We increased prices on certain of our products in each of fiscal years 2022, 2023 and 2024.

While we have not seen significant decreases in sales volume due to previous price increases, if we further increase prices to offset higher commodity prices or other costs, we could experience lower demand for our products, decreased ability to attract new customers and lower sales volumes.

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The raw material is comprised of those items necessary to process our finished egg and butter products and the packaging costs are the cost of the packaging materials our finished products are sold in.

Overhead costs in cost of goods sold include utilities, insurance, inbound freight and storage fees related to our warehouse.

Overhead costs in cost of goods sold include utilities, insurance, inbound freight, storage fees related to our warehouse and depreciation and amortization expenses related to our assets used in production.

We expect cost of goods sold to increase in the future in connection with the development and staffing of our second egg washing and packing facility in Indiana.

Selling, General and Administrative

Selling, general and administrative expenses consist primarily of broker and contractor fees for sales and marketing, as well as personnel costs for sales and marketing, finance, human resources and other administrative functions, including salaries, benefits, bonuses, stock-based compensation expense and sales commissions.

Selling, general and administrative expenses also include advertising and digital media costs, agency fees, travel and entertainment costs, and costs associated with consumer promotions, product samples, sales aids incurred to acquire new customers, retain existing customers and build our brand awareness, overhead costs for facilities, including associated depreciation and amortization expenses, and information technology-related expenses.

We expect selling, general and administrative expenses to increase in the future in connection with the expansion of the business and increased marketing costs.

Shipping and Distribution

Shipping and distribution expenses consist primarily of costs related to third-party freight for our products.

Even though shipping and distribution expenses have decreased in absolute dollars in the short-term, we expect shipping and distribution expenses to increase in absolute dollars in the medium-to-long term as we continue to scale our business, and there is a risk that such expenses could continue to increase due to economic uncertainty, geopolitical tensions or wars.

We expect shipping and distribution expenses to increase in absolute dollars in the medium-to-long term as we continue to scale our business, and there is a risk that such expenses could continue to increase due to economic uncertainty, geopolitical tensions or wars.

Result of Operations

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The additional week in a 53-week fiscal year is added to the fourth quarter, making such quarter consist of 14 weeks.

Fiscal year 2023 was a 53-week fiscal year as compared to a 52-week fiscal year for fiscal year 2022.

Fiscal 2024 was a 52-week fiscal year, as compared to a 53-week fiscal year for fiscal 2023.

Comparison of Fiscal Years Ended December 29, 2024 and December 31, 2023

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Income tax provision

Net loss attributable to noncontrolling

Net income attributable to Vital Farms, Inc.

(1) Includes stock-based compensation expense of $9,972 and $7,157 in selling, general and administrative for the fiscal years ended 2024 and 2023, respectively, and $296 and $260 in cost of goods sold for the fiscal years then ended, respectively.

(2) As described in the notes to our financial statements elsewhere in this document, fiscal year 2023 was a 53-week fiscal year as compared to a 52-week fiscal year for fiscal year 2022.

(2) As described in the notes to our financial statements elsewhere in this document, fiscal 2024 was a 52-week fiscal year as compared to a 53-week fiscal year for fiscal 2023.

Fiscal Year Ended

(in thousands)

The increase in net revenue of $109.8 million, or 30%, was primarily driven by price-related increases of $59.4 million and volume-related increases of $50.5 million.

The increase in net revenue of $134.5 million, or 28%, was primarily driven by volume-related increases of $103.0 million and price-related increases of $31.5 million.

The volume favorability was primarily driven by increases at both new and existing customers.

Net revenue from sales through our retail channel was $582.4 million and $445.8 million for fiscal years ended 2024 and 2023, respectively.

The extra week in fiscal year 2023, which was 53 weeks compared to 52 weeks in fiscal year 2022, contributed $8.5 million in net revenue, or 2.3%, to growth.

Excluding the extra week, net revenue increased 28.0% in fiscal year 2023.

The extra week in fiscal 2023, which was 53 weeks compared to 52 weeks in fiscal 2024, partially offset the increase in net revenue in fiscal 2024 by $8.5 million.

Excluding the extra week, net revenue increased 30.9% in fiscal 2024.

Gross Profit and Gross Margin

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The increase in gross profit of $67.6 million, or 42%, was driven by higher net revenue generated during the fiscal year ended December 29, 2024.

The increase in gross margin during the fiscal year ended December 31, 2023 compared to the fiscal year ended December 25, 2022 was primarily driven by volume increases, in addition to pricing increases across the entire shell egg portfolio in January 2023.

The price increases offset an increase in input costs across our shell egg business (inclusive of commodity, packaging and labor impacts).

The increase in gross margin during the fiscal year ended December 29, 2024 compared to the fiscal year ended December 31, 2023 was primarily driven by price/mix benefits, including price increases on our organic egg portfolio in January 2024 and fully realizing our February 2023 price increase across the entire shell egg portfolio, as well as benefits of scale, operational efficiencies and more favorable commodity and diesel costs.

This was partially offset by an increase in labor and overhead costs.

Operating Expenses

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The increase in selling, general and administrative expenses of $32.2 million, or 32%, was primarily driven by:

• an increase of $10.3 million in marketing-related expenses related to continued investment in brand and product marketing;

• an increase of $15.5 million in employee-related costs, including stock-based compensation, driven by an overall increase in employee headcount to support our continued growth;

• an increase of $2.4 million in legal and professional service expense to support increased operations and expansion of the business;

• an increase of $900,000 in brokerage-related and selling-related expenses due to expansion of the business;

• an increase of $600,000 in technology and software-related expenses to support increased operations and employee headcount

• an increase of $11.1 million in marketing and brokerage-related expenses due to the expansion of the business;

• an increase of $3.8 million in legal and professional service expenses due to the expansion of the business;

• an increase of $1.8 million in technology and software-related expenses due to the expansion of the business.

Shipping and Distribution

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Percentage of net revenue

The decrease in shipping and distribution costs of $2.8 million, or 9%, was driven by favorable freight rates and internal operational efficiency, partially offset by higher sales volumes.

The increase in shipping and distribution costs of $5.1 million, or 19%, was driven by higher sales volumes, partially offset by favorable linehaul and fuel rates.

Interest Expense

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• Stock-based compensation expense;

• Costs related to the discontinuation of our convenient breakfast product line (see Note 12 “Product Exit Costs” to our audited consolidated financial statements included elsewhere in this report);

• Costs related to the dissolution of the Ovabrite, Inc.

variable interest entity;

• Benefit or provision for income taxes, as applicable;

• Interest expense;

• Change in fair value of contingent consideration;

• Interest income.

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• It does not consider the impact of stock-based compensation expense, as such expenses in any specific period may not directly correlate to the underlying performance of our business operations and can vary significantly between periods as a result of the timing of grants of new stock-based awards;

• It does not include the costs related to the discontinuation of our convenient breakfast product line as these costs are infrequent, unusual and we do not anticipate that we will incur similar significant costs for product exits in the foreseeable future;

• It does not reflect the dissolution of the Ovabrite, Inc.

variable interest entity due to the infrequent nature of this transaction and we do not expect to experience similar dissolutions in the foreseeable future;

• It does not reflect other non-operating expenses, including interest expense;

• It does not consider the impact of any contingent consideration liability valuation adjustments;

• It does not reflect tax payments that may represent a reduction in cash available to us.

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Stock-based compensation expense

Costs related to our exit of the convenient breakfast product line

Dissolution of Ovabrite, Inc.

Income tax provision

Interest expense

Change in fair value of contingent consideration 2

Interest income

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(1) Amount also includes finance lease amortization.

2 Amount reflects the change in fair value of a contingent consideration liability in connection with our 2014 acquisition of certain assets of Heartland Eggs.

Liquidity and Capital Resources

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Funding Requirements

We expect that our cash, cash equivalents and marketable securities, together with cash provided by our operating activities and available borrowings under our existing Credit Facility, will be sufficient to fund our operating expenses for at least the next 12 months.

We further believe that we will be able to fund potential operating expenses and cash obligations beyond the next 12 months, through a combination of existing cash, cash equivalents and marketable securities, cash provided by our operating activities and available borrowings under our Credit Facility.

We expect that our cash, cash equivalents and marketable securities, together with cash provided by our operating activities and available borrowings under our existing JPMorgan Credit Facility, will be sufficient to fund our operating expenses for at least the next 12 months.

Our future capital requirements will depend on many factors, including our pace of new and existing customer growth, our investments in innovation, our investments in acquisitions, partnerships and unexplored channels and the potential costs associated with future expansion of our production capacity.

As of December 29, 2024, future minimum lease payments under non-cancelable operating leases totaled $7.2 million and future minimum lease payments under non-cancelable finance leases totaled $13.2 million.

In addition, as a result of increasing construction costs associated with our new farms, we incurred incremental farm recruitment costs that will be required to be paid in advance of these farms being able to produce eggs, and we expect such incremental costs to continue into fiscal 2024.

These costs are expected to be recognized over the term of the related buy-sell contracts with the new farms, which are generally four to five years in length.

Additionally, we are currently in the process of exploring potential sites and designs for an additional egg packing facility.

We anticipate that we will incur approximately $10.0 million in capital expenditures related to this goal in fiscal 2024 (including capital expenditures initially planned for fiscal 2023) and will incur further expenditures in the years following.

Additionally, in 2024 we acquired land in Seymour, Indiana for a planned additional egg washing and packing facility.

We anticipate that we will incur approximately $8.0 million to $11.0 million in capital expenditures related to the new egg washing and packing facility in the next 12 months and will incur further expenditures in the years following.

In January 2025, we announced that we plan to install an additional Moba egg grading system at our Egg Central Station facility in Missouri.

We anticipate that we will incur approximately $12.0 million to $16.0 million in capital expenditures related to the new Moba egg grading system in the next 12 months.

We also anticipate that we will incur approximately $20.0 million to $30.0 million in capital expenditures over the next 12 months related to the development of accelerator farms on previously acquired farmland in Indiana or the purchase and development of future parcels, with further expenditures incurred in the years following.

Finally, we anticipate increased expenditures in marketing during fiscal 2025 to support progress toward our long-term marketing goals.

Credit Facility

We originally entered into our Credit Facility with PNC Bank, National Association, or PNC Bank, in October 2017.

The Credit Facility initially included a $4.7 million term loan, a $10.0 million revolving line of credit and an equipment loan with a maximum borrowing capacity of $1.5 million.

Subsequently, terms of the Credit Facility were modified at various times between fiscal 2018 and fiscal 2023.

Such amendments (i) amended various definitions, (ii) waived a technical default in May 2020 which was triggered by exceeding the capital expenditure limit, (iii) increased borrowing capacity and (iv) extended the maturity date.

The Ninth Amendment to the Credit Facility in April 2021 eliminated the term loan and equipment loan.

The Tenth Amendment to the Credit Agreement in December 2022 modified certain covenants related to commodity hedging, consented to the dissolution of immaterial subsidiaries and implemented changes related to the discontinuation of LIBOR.

The Eleventh Amendment to the Credit Facility, effective July 26, 2023, extended the maturity date by one year, from April 2, 2024 to April 2, 2025.

The maximum borrowing capacity under the revolving line of credit is currently $20.0 million.

Interest on borrowings under the revolving line of credit, as well as loan advances thereunder, accrues at a rate, at our election at the time of borrowing, equal to (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York plus 2.00% or (ii) 1.00% plus the alternate base rate, as defined in the Credit Facility.

The Credit Facility is secured by all of our assets (other than real property and certain other property excluded pursuant to the terms of the Credit Facility) and requires us to maintain three financial covenants:

a fixed charge coverage ratio, a leverage ratio and a minimum tangible net worth requirement.

The Credit Facility also contains various covenants relating to limitations on indebtedness, acquisitions, mergers, consolidations, the sale of properties and liens.

As a result of the limitations contained in the Credit Facility, certain of the net assets on our consolidated balance sheet as of December 31, 2023 are restricted in use.

The Credit Facility contains other customary covenants, representations and events of default.

As of December 31, 2023, there was no outstanding balance under the Credit Facility, and we were in compliance with all covenants under the Credit Facility.

See “Long-Term Debt” in Note 13 to our consolidated financial statements included elsewhere in this Annual Report for additional details related to our Credit Facility.

On April 9, 2024, we entered into the JPMorgan Credit Facility with JPMorgan Chase Bank, N.A.

and the other lenders party thereto, which provides for a five-year, $60.0 million revolving credit facility.

The JPMorgan Credit Facility replaced the PNC Credit Facility, which terminated concurrently with our entry into the JPMorgan Credit Facility.

The JPMorgan Credit Facility includes a $5.0 million letter of credit sub-limit and an accordion option that would allow us to increase the aggregate revolving commitments or add incremental term loans in an aggregate amount not to exceed the greater of (i) $35.0 million and (ii) an amount equal to 100% of consolidated adjusted EBITDA.

Any borrowings under the JPMorgan Credit Facility bear interest, at our election, at either (i) an adjusted term Secured Overnight Financing Rate or adjusted daily Secured Overnight Financing Rate plus 0.10% plus a margin of either 0.75%, 1.00% or 1.25% depending on our net leverage ratio, or (ii) an alternative base rate plus a margin of either 1.75%, 2.00% or 2.25%, depending on our net leverage ratio.

We are required to pay a commitment fee on the undrawn portion of the aggregate commitments that accrues at either 0.20% or 0.375% per annum depending on our revolving exposure.

Additionally, we are required to pay a participation fee on the account of each lender for each outstanding letter of credit at a rate equal to the applicable rate used to determine the interest rate applicable to term benchmark revolving loans.

The JPMorgan Credit Facility is secured by liens on substantially all of our assets, including certain intellectual property assets and investment securities.

It requires us to maintain (i) a net leverage ratio of no greater than 3.25 to 1.00, subject to two increases up to 4.00 to 1.00 for a certain period following material acquisitions, and (ii) a fixed charge coverage ratio of no less than 1.35 to 1.00.

The JPMorgan Credit Facility contains other customary covenants, representations and events of default.

As a result of the limitations contained in the JPMorgan Credit Facility, certain of the net assets on our consolidated balance sheet as of December 29, 2024 are restricted in use.

As of December 29, 2024, there was no outstanding balance under the JPMorgan Credit Facility, and we were in compliance with all covenants under the JPMorgan Credit Facility.

See “Long-Term Debt—JPMorgan Credit Facility” in Note 14 to our consolidated financial statements included elsewhere in this Annual Report for additional details related to our JPMorgan Credit Facility.

The following table summarizes our cash flows for the periods indicated:

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(in thousands)

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net cash provided by operating activities

Net cash (used in) provided by investing activities

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Operating Activities

The increase in net cash provided by operating activities during the fiscal year ended December 31, 2023 compared to the fiscal year ended December 25, 2022 was due primarily to higher net income in the current fiscal year due to gross margin improvements and improving leverage our of selling, general and administrative costs.

Increases in our accounts payable and accrued liabilities also contributed to the improved cash from operations, partially offset by an increase in our inventory.

Our accrued liabilities were up across nearly all categories with the largest contributor being promotions and customer deductions.

The increase in net cash provided by operating activities during the fiscal year ended December 29, 2024 compared to the fiscal year ended December 31, 2023 was due primarily to higher net income in the current fiscal year due to higher sales, gross margin improvements and better leveraging of selling, general and administrative costs.

The increase was also attributable to an increase in depreciation and amortization and stock-based compensation expenses in fiscal 2024.

These increases were partially offset by changes in operating assets and liabilities, driven by payments on operating lease liabilities.

Investing Activities

The increase in cash provided by investing activities during the fiscal year ended December 31, 2023 is primarily due to the continuing maturities of our available for sale securities and the reinvestment of these amounts into cash equivalents during the year ended December 31, 2023.

The change in cash (used in) provided by investing activities during the fiscal year ended December 29, 2024 was primarily due to an increase in purchases of property, plant and equipment and fewer proceeds received on the maturities of our available for sale securities during the year ended December 29, 2024 compared to the year ended December 31, 2023.

Financing Activities

The change in cash used in financing activities during the fiscal year ended December 31, 2023 compared to the fiscal year ended December 25, 2022 was primarily due to an increase of principal payments on our finance lease obligations.

The change in cash provided by (used in) financing activities during the fiscal year ended December 29, 2024 compared to the fiscal year ended December 31, 2023 was primarily due to an increase in the proceeds received from the exercise of stock options.

Demand for our products fluctuates in response to seasonal factors.

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The following is a summary of certain accounting estimates we consider critical.

For further discussion about our accounting policies, see Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report.

For further discussion about our accounting policies, see Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements appearing elsewhere in this Annual Report.

Revenue Recognition and Trade Promotions

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To the extent we prevail in matters for which unrecognized tax benefit liabilities have been established or are required to pay amounts in excess of our recorded liability, our effective tax rate in a given financial statement period could be materially affected.

Contingencies

We recognize the costs of legal defense for the legal proceedings to which we are a party during the periods in which the costs are incurred.

After considerable analysis of the facts and circumstances of each case, we determine the amount of reserves required, if any.

We evaluate whether a loss contingency exists, and if the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the loss can be reasonably estimated, the estimated loss would be accrued.

There were no loss contingency reserves for the past three fiscal years.

In May 2021, the Company and certain of its current and former officers were named as defendants in a class action complaint captioned Nicholas A.

Vital Farms, Inc.

in the United States District Court for the Western District of Texas.

The plaintiffs alleged false advertising claims on behalf of themselves and a putative class of alleged consumers of the Company’s shell egg products.

The named officers of the Company were subsequently dismissed as defendants in this matter.

In September 2023, the parties engaged in mediation to discuss potential settlement of remaining claims, but no agreement was reached and the lawsuit is ongoing.

The Company believes the claims are without merit and is vigorously defending itself in this matter.

Given the uncertainty of the litigation, the stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company is unable to reasonably estimate the possible loss or range of loss, if any, that may result from the claim.

Future reserves may be required if losses are deemed reasonably estimable and probable due to changes in our assumptions, the effectiveness of legal strategies, or other factors beyond our control.

Future results of operations may be materially affected by the creation of reserves or by accruals of losses to reflect any adverse determinations in these legal proceedings.

Recent Accounting Pronouncements

See the sections titled “Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements” and “—Recently Issued Accounting Pronouncements Not Yet Adopted” in Note 2 to our consolidated financial statements included elsewhere in this Annual Report for a discussion of recent accounting pronouncements.

Emerging Growth Company Status

In April 2012, the JOBS Act was enacted.

Section 107 of the JOBS Act provides that an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

Therefore, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have elected to use the extended transition period under the JOBS Act.

Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Quantitative and Qualitat ive Disclosures About Market Risk

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Commodity Price Risk

We source our eggs and cream for our butter products from our network of family farms.

Our eggs and butter are sourced through a distributed supply chain of small farms.

The price we pay to purchase shell eggs from farmers fluctuates based on pallet weight, and under our buy-sell contracts, which account for all of the laying hens in our network of family farms as of December 29, 2024, the price we pay is also adjusted quarterly for changes in feed cost, which may cause our agreed-upon pricing under these contracts to fluctuate on a quarterly basis.

Our buy-sell contracts subject us to risk of price fluctuations in feed ingredients, primarily consisting of corn and soy.

The price we pay for cream is subject to butter commodity fluctuations.

A hypothetical 10% increase or decrease in the weighted-average cost of these ingredients across our product lines as of December 31, 2023 would have resulted in an increase or decrease to cost of sales for the fiscal year ended December 31, 2023 of approximately $8.8 million.

We strive to offset the impact of ingredient cost increases with a combination of cost savings initiatives and efficiencies and price increases to our customers.

The price we pay for butter is subject to butter commodity fluctuations.

A hypothetical 10% increase or decrease in the weighted-average cost of these ingredients across our product lines as of December 29, 2024 would have resulted in an increase or decrease to cost of goods sold for the fiscal year ended December 29, 2024 of approximately $11.1 million.

We strive to offset the impact of ingredient cost increases with a combination of cost savings initiatives and efficiencies and price increases on our products.

Costs of packaging are volatile and can fluctuate due to conditions that are difficult to predict creating price risk.

A hypothetical 10% increase or decrease in the weighted-average cost of packaging raw materials as of December 31, 2023 would have resulted in an increase or decrease to cost of sales for the fiscal year ended December 31, 2023 of approximately $3.5 million.

We seek to mitigate the impact of raw materials cost increases with a combination of negotiated pricing agreements, cost savings initiatives and efficiencies and price increases to our customers.

A hypothetical 10% increase or decrease in the weighted-average cost of packaging raw materials as of December 29, 2024 would have resulted in an increase or decrease to cost of goods sold for the fiscal year ended December 29, 2024 of approximately $4.5 million.

We seek to mitigate the impact of raw materials cost increases with a combination of negotiated pricing agreements, cost savings initiatives and efficiencies and price increases on our products.

Interest Rate Risk

We are subject to interest rate risk in connection with our credit facility agreement with PNC Bank, National Association, or the Credit Facility.

See the section titled “—Liquidity and Capital Resources—Credit Facility” above for additional details related to our Credit Facility.

We are subject to interest rate risk in connection with our credit facility agreement with JPMorgan Chase, N.A., or the JPMorgan Credit Facility.

See the section titled “—Liquidity and Capital Resources—Credit Facility” above for additional details related to our JPMorgan Credit Facility.

Based on the average interest rate on the instruments under the Credit Facility during the fiscal year ended December 29, 2024, and to the extent that borrowings were outstanding, we do not believe that a hypothetical 10% change in the interest rate would have a material effect on our results of operations or financial condition for the fiscal year ended December 29, 2024.

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Index to Financial Statements

Report of Independent Registered Accounting Firm (KPMG LLP, Austin, TX, PCAOB ID:

Reports of Independent Registered Accounting Firm ( KPMG LLP , Austin, TX, PCAOB ID:

Consolidated Balance Sheets

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We have audited the accompanying consolidated balance sheets of Vital Farms, Inc.

and subsidiaries (the Company) as of December 31, 2023 and December 25, 2022, the related consolidated statements of income, comprehensive income, redeemable noncontrolling interest and stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 25, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S.

and subsidiary (the Company) as of December 29, 2024 and December 31, 2023, the related consolidated statements of income, comprehensive income, redeemable noncontrolling interest and stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended December 29, 2024, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 29, 2024, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2025 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the sufficiency of audit evidence obtained over eggs and butter revenue

As discussed in Notes 2 and 6 to the consolidated financial statements, the Company generates revenue primarily through the sale of eggs and butter.

The Company recognized $580,954 thousand of eggs and egg-related products net revenue and $25,353 thousand of butter and butter-related products net revenue for the fiscal year ended December 29, 2024.

The Company’s management identified a material weakness related to the revenue process as of December 29, 2024.

We identified the evaluation of the sufficiency of audit evidence obtained over eggs and egg-related products net revenue and butter and butter-related products net revenue as a critical audit matter.

Subjective auditor judgment was required due to the highly automated nature of certain processes to record revenue that involve interfacing data across multiple information technology (IT) systems, and the material weakness described above.

The following are the primary procedures we performed to address this critical audit matter.

We applied auditor judgment to determine the nature and extent of procedures to be performed over the processing and recording of revenue, including consideration of the material weakness.

We evaluated the reliability of information used in our procedures by comparing information in certain IT systems to underlying documentation.

We performed a software-assisted data analysis to test relationships among certain revenue transactions.

On a sample basis, we tested certain revenue transactions by comparing the

recorded amounts to underlying documentation, including invoices, cash receipts, bills of lading, and contracts with customers.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.

We have served as the Company’s auditor since 2019.

Austin, Texas

March 7, 2024

February 27, 2025

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

Vital Farms, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Vital Farms, Inc.

and subsidiary's (the Company) internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 29, 2024 and December 31, 2023, the related consolidated statements of income, comprehensive income, redeemable noncontrolling interest and stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended December 29, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 27, 2025 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

A material weakness related to the Company’s revenue process has been identified and included in management’s assessment.

The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Austin, Texas

February 27, 2025

VITAL FARMS, INC.

CONSOLIDA TED BALANCE SHEETS

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Preferred stock, $ 0.0001 par value per share, 10,000,000 shares authorized as of December 29, 2024 and December 31, 2023;

no shares issued and outstanding as of December 31, 2023 and December 25, 2022, respectively

no shares issued and outstanding as of December 29, 2024 and December 31, 2023

Common stock, $ 0.0001 par value per share, 310,000,000 shares authorized as of December 29, 2024 and December 31, 2023;

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Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Total stockholders’ equity

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Other expense, net

Total other (expense) income, net

Total other income (expense), net

Net income before income taxes

Income tax provision (benefit)

Income tax provision

Net loss attributable to noncontrolling interests

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Noncontrolling

Treasury Stock

Comprehensive

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Stockholders’

(Loss) Income

Balances at December 26, 2021

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Vesting of restricted stock units

Shares issued under employee stock purchase plan

Stock-based compensation expense

Dissolution of noncontrolling interest

Net loss attributable to noncontrolling interests - stockholders

Retirement of treasury stock

Other comprehensive loss, net

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Vesting of restricted stock units

Shares withheld for tax liability on vested restricted stock units

Shares issued under employee stock purchase plan

Stock-based compensation expense

Dissolution of noncontrolling interest

Net loss attributable to noncontrolling interests - stockholders

Other comprehensive loss, net

Other comprehensive income, net

Net income attributable to Vital Farms, Inc.

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Amortization of available-for-sale debt securities

Amortization of debt issuance costs

Stock-based compensation expense

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Dissolution of equity investment

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

See accompanying notes to the consolidated financial statements

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Principal payments under finance lease obligations

Payment of financing costs

Payment of contingent consideration

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

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Vital Farms, Inc.

(the “Company,” “we,” “us” or “our”) was incorporated in Delaware on June 6, 2013 and is headquartered in Austin, Texas.

(the “Company”) was incorporated in Delaware on June 6, 2013 and is headquartered in Austin, Texas.

The Company packages, markets and distributes shell eggs, butter and other products.

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All significant intercompany transactions and balances have been eliminated in the audited consolidated financial statements.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Certain information and note disclosures normally included in financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the included disclosures are adequate, and the accompanying consolidated financial statements contain all adjustments necessary for a fair statement of our consolidated financial position as of December 31, 2023, consolidated results of operations and the consolidated cash flows for the fiscal years ended December 31, 2023, December 25, 2022 and December 26, 2021 .

Such adjustments are of a normal and recurring nature and certain reclassifications of previously reported amounts have been made to conform to the current year presentation.

A reclassification of $ 1,539 has been made from accounts receivable, net to prepaids and other current assets, net in the consolidated balance sheet as of December 25, 2022 to conform to the current year presentation of our accounts receivable from the Company's network of farms.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

The Company’s fiscal year ends on the last Sunday in December and contains either 52 or 53 weeks.

Therefore, the financial results of certain 53-week fiscal years will not be exactly comparable to the prior and subsequent 52-week fiscal years.

The fiscal year ended December 31, 2023 contains operating results for 53 weeks, while the fiscal years ended December 25, 2022, and December 26, 2021 contain operating results for 52 weeks.

The audited consolidated financial statements for the fiscal years ended December 29, 2024 and December 25, 2022 contain operating results for 52 weeks, while the audited consolidated financial statements for the fiscal year ended December 31, 2023 contain operating results for 53 weeks.

Summary of Significant Accounting Policies

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The preparation of financial statements in conformity with 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 financial statements and the reported amounts of revenues and expenses during the reporting period.

Such estimates principally include revenue recognition, determination of useful lives for property and equipment, trade spend accruals, goodwill, allowance for credit losses, inventory obsolescence, stock option valuations, accrued liabilities, income taxes and contingencies.

Such estimates principally include revenue recognition, determination of useful lives for property, plant and equipment, leases, variable consideration, goodwill, allowance for credit losses, inventory obsolescence, stock option valuations, accrued liabilities, income taxes and contingencies.

Actual results could differ from those estimates.

Concentrations of Customers and Risk:

A substantial amount of our shell egg processing occurs at our Egg Central Station shell egg processing facility.

Any shutdown or period of reduced production at Egg Central Station, which may be caused by regulatory noncompliance or other issues, as well as factors beyond our control, such as natural disaster, weather, fire, power interruption, work stoppage, disease outbreaks or pandemics, equipment failure or delay in raw materials delivery, would significantly disrupt our ability to deliver our products in a timely manner, meet our contractual obligations and operate our business.

A substantial amount of shell egg processing occurs at the Company’s Egg Central Station shell egg processing facility in Missouri.

Any shutdown or period of reduced production at this facility, which may be caused by regulatory noncompliance or other issues, as well as factors beyond the Company’s control, such as natural disaster, weather, fire, power interruption, work stoppage, disease outbreaks or pandemics, equipment failure or maintenance or delay in raw materials delivery, would significantly disrupt the Company’s ability to deliver its products in a timely manner, meet contractual obligations and operate the business.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments, accounts receivable and derivative instruments.

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The Company has not experienced any losses related to its cash and cash equivalents balances.

The Company's customer concentration for the fiscal year ended December 31, 2023 was as follows:

The Company's customer concentration for the periods presented were as follows:

Year Ended December 29, 2024

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The Company classifies these securities as current, because the amounts invested are available for current operations.

Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, recorded in other comprehensive income until the security is settled or sold, except for changes in allowance for expected credit losses, which are reported on a gross basis in other expense.

Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, recorded in other comprehensive income until the security is settled or sold, except for changes in allowance for any expected credit losses, which are reported on a gross basis in other expense.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity.

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The Company consolidates all entities where a controlling financial interest exists.

The Company has considered its relationship with Ovabrite, Inc.

to determine whether the Company has a variable interest in that entity, and if so, whether the Company is the primary beneficiary of the relationship.

For fiscal 2022, the Company considered its relationship with Ovabrite, Inc., which was dissolved in September 2022, to determine whether the Company had a variable interest in that entity, and if so, whether the Company was the primary beneficiary of the relationship.

GAAP requires variable interest entities (“VIEs”) to be consolidated if an entity’s interest in the VIE is a controlling financial interest.

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The allowance for expected credit losses related to other non-trade receivables are estimated based on the aging category and the probability of default.

Provisions for current estimated credit losses are classified within selling, general and administrative costs.

Inventories are stated at the lower of cost (determined under the weighted average cost method) or net realizable value.

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Therefore, the changes in fair value of these derivatives are recorded as incurred within other expense, net.

Net realized gains and losses on derivative instruments are reported as a reconciling item from net income to cash from operating activities in our consolidated statements of cash flows.

Net realized gains and losses on derivative instruments are reported as a reconciling item from net income to cash from operating activities in the consolidated statements of cash flows.

Cash flows related to settlements and purchases of derivative instruments are reported as investing activities within the consolidated statements of cash flows.

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To date, the Company has not recorded any impairment charges associated with its goodwill.

Cloud Computing Arrangements:

The Company incurs costs to implement cloud computing arrangements hosted by third party vendors.

Costs incurred to implement cloud computing service arrangements are capitalized when incurred during the application development phase and recognized as other current assets and other non-current assets in the consolidated balance sheets.

Amortization of the cloud computing arrangement implementation costs will begin once the software is placed in service.

The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to and the agreement creates enforceable rights and obligations.

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Revenue Recognition:

The Company generates revenue primarily through sales of products to its customers, which include natural channel retailers, mainstream channel retailers and foodservice customers.

The Company generates revenue primarily through sales of products to its customers, which include natural channel retailers, mainstream channel retailers, distributors and foodservice customers.

The Company sells its products to customers on a purchase-order basis.

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The Company offers sales incentives through various programs to customers and allow deductions from its customers, which may include credits or discounts to customers in the event that products do not conform to customer specifications or expire at a customer’s site.

The cost associated with promotions and chargebacks is estimated and recorded as a reduction in revenue and is recognized at the time the related revenue is recorded, which normally precedes the actual cash expenditure.

The cost associated with variable consideration is estimated and recorded as a reduction in revenue and is recognized at the time the related revenue is recorded, which normally precedes the actual cash expenditure.

The recognition of this cost therefore requires management judgment regarding the volume of promotional offers that will be redeemed.

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Amounts billed and due from customers are short-term in nature and are classified as receivables since payments are unconditional and only the passage of time is required before payments are due.

Treasury Stock:

The Company records treasury stock activities under the cost method whereby the cost of the acquired stock is recorded as treasury stock.

The Company’s accounting policy upon the formal retirement of treasury stock is to deduct the par value from the Company’s common stock and to reflect any excess of cost over par value as a reduction to additional paid-in capital (to the extent created by previous issuances of the shares).

Shipping and Distribution:

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Restricted stock awards generally vest ratably over three years from the date of grant and contain no other service or performance conditions.

Performance stock awards vest at the end of a three-year period dependent upon the level of achievement of certain Company performance metrics and the recipient’s continued service over such period.

The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service or vesting period.

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During the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022, the Company incurred advertising and promotion expenses of approximately $ 32,138 , $ 23,625 , and $ 13,301 , respectively.

Emerging Growth Company Status:

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”).

Under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies.

Recently Adopted Accounting Pronouncements:

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ASU 2019-12 is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

The Company adopted ASU 2019-12 during fiscal year 2022 and there was no material impact on the Company’s consolidated financial statements for the fiscal years ended December 25, 2022 and December 31, 2023 .

Recently Issued Accounting Pronouncements Not Yet Adopted:

The Company adopted ASU 2019-12 during fiscal 2022 and there was no material impact on the Company’s consolidated financial statements for the fiscal years ended December 25, 2022, December 31, 2023 and December 29, 2024.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures (“ASU 2023-07”) in order to improve stockholders’ understanding of an entity’s business activities through enhanced disclosures around reportable segments.

ASU 2023-07 will require incremental and more detailed disclosure regarding segment expenses on both an annual and interim basis.

For public companies ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

The Company expects to adopt the standard for the fiscal year beginning January 1, 2024.

The Company is currently evaluating the impact of its pending adoption of ASU 2023-07 on its consolidated financial statements.

ASU 2023-07 requires incremental and more detailed disclosure regarding segment expenses on both an annual and interim basis.

The Company adopted ASU 2023-07 on December 29, 2024.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements but resulted in expanded disclosures in Note 23 “Segment Reporting” below.

Recently Issued Accounting Pronouncements Not Yet Adopted:

In December 2023, the FASB issued ASU No 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures (“ASU 2023-09”) in order to enhance the transparency and usefulness of income tax disclosures.

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The Company is currently evaluating the impact of its pending adoption of ASU 2023-09 on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

The new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

The requirements will be applied prospectively with the option for retrospective application.

The Company is currently evaluating the impact of its pending adoption of ASU 2024-03 on its consolidated financial statements.

Investment Securities

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denominated foreign bonds

As of the fiscal year ended December 31, 2023, there were 47 diversified issuances in the Company’s securities portfolio in an unrealized loss position, with credit ratings from BBB- to AAA.

As of December 29, 2024, there were 13 diversified issuances in the Company’s securities portfolio in an unrealized loss position, with credit ratings from BBB- to A+.

As of December 29, 2024, there are no individual bonds with unrealized losses exceeding $ 3 , and 13 issuances have been in a loss position greater than 12 months.

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denominated foreign bonds

Prepaid expenses and other current assets:

Derivative financial instruments

Total assets measured at fair value

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The Company recognizes current estimated credit losses (“CECL”) for accounts receivable.

The CECL for trade receivables are estimated based on the trade receivable aging category, credit risk of specific customers, past collection history, and management’s evaluation of accounts receivable.

The CECL for trade receivables is estimated based on the trade receivable aging category, credit risk of specific customers, past collection history, and management’s evaluation of accounts receivable.

The Company also has other receivables which are classified within prepaid expenses and other current assets.

The CECL for other receivables are estimated based on the other receivables aging category and the probability of default.

The CECL for other receivables is estimated based on the other receivables aging category and the probability of default.

Provisions for CECL are classified within selling, general and administrative costs.

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Property, plant and equipment, net

During the fiscal years ended December 31, 2023, December 25, 2022, and December 26, 2021, depreciation and amortization of property, plant and equipment was approximately $ 7,925 , $ 5,441 , and $ 3,540 , respectively.

During the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022, depreciation of property, plant and equipment was approximately $ 9,255 , $ 7,925 , and $ 5,441 , respectively.

The Company leases office facilities, warehouses, office equipment and vehicles for delivery of products under lease agreements with initial terms approximating one to five years.

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there are no minimum purchase commitments associated with these long-term supply contracts.

During December 2023, the Company executed two long-term supply contracts with farms to provide an upfront lease payment to offset farm construction costs, loans and other startup costs.

The upfront leasing costs have been classified within our operating lease right-of-use assets on the consolidated balance sheet for the year ended December 31, 2023 and will be amortized to cost of goods sold over the term of the long term supply arrangements.

Beginning in December 2023, the Company executed long-term supply contracts with farms to provide an upfront lease payment to offset farm construction costs, loans and other startup costs.

The upfront leasing costs have been classified within operating lease right-of-use assets on the consolidated balance sheet for the years ended December 29, 2024 and December 31, 2023 and are amortized to cost of goods sold over the term of the long term supply arrangements.

As the classification and timing of recognition of costs attributable to the eggs and embedded cost of the lease rentals are identical, the Company does not allocate the total purchase cost of eggs between the cost of the eggs and the embedded cost of the lease rentals or distinguish between them in its accounting records.

The Company records the total purchase cost of eggs, which includes costs associated with the eggs and the corresponding cost of embedded lease rentals from the same arrangement, into inventory.

These costs are expensed to cost of goods sold when the associated eggs are sold to customers and are also reported as part of our variable lease cost.

These costs are expensed to cost of goods sold when the associated eggs are sold to customers and are also reported as part of variable lease cost.

The Company’s office lease for its corporate headquarters facility in Austin, Texas includes an option to renew, generally at the Company's sole discretion, with renewal terms that can extend the lease term up to five years.

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Operating lease cost is recognized on a straight-line basis over the lease term and finance lease cost is recognized as amortization expense for ROU assets and interest expense associated with finance lease liabilities.

Amortization expense associated with our finance leases during the fiscal years ended December 31, 2023 and December 25, 2022 was $ 2,565 and $ 439 , respectively, and is recorded within costs of goods sold and selling, general and administrative costs in the consolidated statement of income.

Amortization expense associated with finance leases during the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022 was $ 3,838 , $ 2,565 and $ 439 , respectively, and is recorded within costs of goods sold and selling, general and administrative costs in the consolidated statement of income.

The components of lease cost consisted of the following for the periods presented:

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Finance leases

Goodwill and Other Assets

Goodwill and other assets consisted of the following as of the periods presented:

Cloud computing implementation costs

Deferred tax asset

Other non-current assets

Goodwill and other assets

Accrued Liabilities

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Employee-related costs

Promotions and customer deductions

Trade promotions and chargebacks

Distribution fees and freight

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Product Exit Costs

During the fiscal year ended December 25, 2022, the Company made the decision to exit its convenient breakfast product category due to a shift in focus to product offerings that are core to the Company’s operations.

During the fiscal year ended December 25, 2022, the Company made the decision to exit its convenient breakfast product category due to a shift in focus to product offerings core to the Company’s operations.

Charges incurred in connection with these product exits were substantially complete by December 25, 2022, and the Company believes the actual charges as shown below approximate fair value.

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Charges incurred in connection with these product exits were immaterial.

As of December 25, 2022 , the ending liability balance related to the convenience breakfast category exit was $ 119 .

As of December 31, 2023, remaining liabilities of $ 45 are expected to be settled or released by the end of the 13-week period ending March 31, 2024 .

The ending liability balances related to the convenience breakfast category exit as of December 29, 2024 and December 31, 2023 were immaterial.

The following table summarizes the activity related to the exit of the Company’s convenient breakfast products during the periods presented:

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Classification

Beginning Liability Balance

Charges Incurred

Amounts Paid or Settled

Amounts Released as Unutilized

Ending Liability Balance

Asset write-downs

Cost of goods sold

For the Fiscal Year Ended December 25, 2022

Statement of Income

Classification

Charges Incurred

Amounts Paid or Settled

Amounts Released as Unutilized

Amounts Realized as Unutilized

Ending Liability Balance

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Cost of goods sold

Co-manufacturer charges

Co-manufacturer chargers

Cost of goods sold

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Long-Term Debt

In October 2017, the Company entered into a credit facility agreement with PNC Bank, National Association (the “Credit Facility”) that initially included a $ 4.7 million term a loan, a $ 10.0 million revolving line of credit and an equipment loan with a maximum borrowing capacity of $ 1.5 million.

Subsequently, the terms of the Credit Facility were modified at various times between fiscal 2018 and fiscal 2023 .

The Ninth Amendment to the Credit Facility in April 2021 eliminated the term loan and equipment loan.

The Tenth Amendment to the Credit Facility in December 2022 modified certain covenants related to commodity hedging, consented to the dissolution of immaterial subsidiaries and implemented changes related to the discontinuation of LIBOR.

The Eleventh Amendment to the Credit Facility, effective July 26, 2023 extended the maturity date by one year, from April 2, 2024 to April 2, 2025 .

The maximum borrowing capacity under the revolving line of credit is currently $ 20.0 million .

Interest on borrowings under the revolving line of credit, as well as loan advances thereunder, accrues at a rate, at the Company’s election at the time of borrowing, equal to (i) the secured overnight financing rate as administered by the Federal Reserve Bank of New York plus 2.00 % or (ii) 1.00 % plus the alternate base rate, as defined in the Credit Facility.

During the fiscal year ended December 31, 2023, the Company borrowed and repaid $ 7.5 million under the revolving line of credit.

As of December 31, 2023 , there were no outstanding amounts under the revolving line of credit.

The Credit Facility is secured by all of the Company’s assets (other than real property and certain other property excluded pursuant to the terms of the Credit Facility) and requires the Company to maintain three financial covenants:

PNC Credit Facility

In October 2017, the Company entered into a credit facility agreement with PNC Bank, National Association (the “PNC Credit Facility”) which was modified at various times between fiscal 2018 and fiscal 2023.

Such amendments included (i) amendments to various definitions and covenants, (ii) waiver of a technical default in May 2020, (iii) increased borrowing capacity, (iv) elimination of a term loan and equipment loan, and (v) extension of the maturity date.

The PNC Credit Facility was terminated on April 9, 2024 when the Company entered into a syndicated credit agreement with JPMorgan Chase Bank, N.A.

and the other lenders party thereto (the “JPMorgan Credit Facility”).

The maximum borrowing capacity under the PNC Credit Facility’s revolving line of credit was $ 20.0 million.

Interest on borrowings under the revolving line of credit, as well as loan advances thereunder, accrued at a rate, at the Company’s election at the time of borrowing, equal to (i) the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York plus 2.00 % or (ii) 1.00 % plus the alternate base rate, as defined in the PNC Credit Facility.

The PNC Credit Facility was secured by all of the Company’s assets (other than real property and certain other property excluded pursuant to the terms of the PNC Credit Facility) and required the Company to maintain three financial covenants:

a fixed charge coverage ratio, a leverage ratio and a minimum tangible net worth requirement.

The Credit Facility also contains various covenants relating to limitations on indebtedness, acquisitions, mergers, consolidations and the sale of properties and liens.

As a result of the limitations contained in the Credit Facility, certain of the net assets on the Company’s consolidated balance sheet as of December 31, 2023 are restricted in use.

The PNC Credit Facility also contained various covenants relating to limitations on indebtedness, acquisitions, mergers, consolidations and the sale of properties and liens.

The PNC Credit Facility also contained other customary covenants, representations and events of default.

JPMorgan Credit Facility

On April 9, 2024, the Company entered into the JPMorgan Credit Facility, which provides for a five-year, $ 60.0 million revolving credit facility.

The JPMorgan Credit Facility includes a $ 5.0 million letter of credit sub-limit and an accordion option that would allow the Company to increase the aggregate revolving commitments or add incremental term loans in an aggregate amount not to exceed the greater of (i) $ 35.0 million and (ii) an amount equal to 100 % of consolidated adjusted EBITDA.

Any borrowings under the JPMorgan Credit Facility bear interest, at the Company’s election, at either (i) an adjusted term Secured Overnight Financing Rate or adjusted daily Secured Overnight Financing Rate plus 0.10 % plus a margin of either 0.75%, 1.00% or 1.25% depending on the Company’s net leverage ratio or (ii) an alternative base rate plus a margin of either 1.75%, 2.00% or 2.25%, depending on the Company’s net leverage ratio.

The Company is required to pay a commitment fee on the undrawn portion of the aggregate commitments that accrues at either 0.20% or 0.375% per annum depending on the Company’s revolving credit exposure.

Additionally, the Company is required to pay a participation fee on the account of each lender for each outstanding letter of credit at a rate equal to the applicable rate used to determine the interest rate applicable to term benchmark revolving loans.

The JPMorgan Credit Facility is secured by liens on substantially all of the Company’s assets, including certain intellectual property assets and investment securities.

It requires the Company to maintain (i) a net leverage ratio of no greater than 3.25 to 1.00, subject to two increases up to 4.00 to 1.00 for a certain period following material acquisitions, and (ii) a fixed charge coverage ratio of no less than 1.35 to 1.00.

As a result of the limitations contained in the JPMorgan Credit Facility, certain of the net assets on the Company’s consolidated balance sheet as of December 29, 2024 are restricted in use.

The Company’s wholly owned subsidiaries are non-operating and have no restricted net assets within the meaning of Rule 4-08(e)(3) or Rule 12-04 of Regulation S-X.

The Credit Facility also contains other customary covenants, representations and events of default.

As of December 31, 2023 , the Company was in compliance with all covenants under the Credit Facility.

During the fiscal years ended December 31, 2023, December 25, 2022, and December 26, 2021, the Company recognized interest expense related to draws on the revolving line of credit of $ 7 , $ 0 , and $ 52 , respectively.

Preferred Stock

As of December 31, 2023 , the Company’s amended and restated certificate of incorporation authorized the Company to issue 10,000,000 shares, par value $ 0.0001 per share, of preferred stock, in one or more series and with such designation, rights and preferences as may be determined from time to time (collectively, the “preferred stock”) by the Company ’s Board of Directors.

As of December 31, 2023 , there were no shares of preferred stock issued or outstanding.

Common Stock:

As of December 29, 2024, the Company was in compliance with all covenants under the JPMorgan Credit Facility.

During the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022, the Company recognized interest expense related to draws on the respective revolving lines of credit of $ 0 , $ 7 and $ 0 , respectively.

As of December 29, 2024 , the Company’s amended and restated certificate of incorporation authorized the Company to issue 310,000,000 shares of common stock, par value $ 0.0001 per share, of which 44,042,355 shares were issued and outstanding.

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Each share of the Company’s common stock is entitled to one vote on all matters submitted to a vote of the Company’s stockholders .

Holders of the Company’s common stock are entitled to receive dividends as may be declared by the Board of Directors, if any, subject to the preferential dividend rights of preferred stock, if any.

Holders of the Company’s common stock are entitled to receive dividends as may be declared by the Board of Directors (the “Board of Directors”) , if any, subject to the preferential dividend rights of preferred stock, if any.

No cash dividends were declared or paid during the periods presented.

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Options to purchase common stock

Restricted stock units

Restricted stock units (“RSUs”)

Performance stock units (“PSUs”)

Shares available for grant under the 2020 Equity Incentive

Plan and 2020 Employee Stock Purchase Plan

Treasury Stock :

In August 2021, the Company retired an aggregate of 5,494,918 shares of its common stock held in treasury.

Upon retirement, the shares were redesignated as authorized but unissued shares of the Company’s common stock.

Plan (“2020 Incentive Plan”) and 2020 Employee Stock Purchase Plan (“2020 ESPP”)

Stock-Based Compensation

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Selling, general and administrative expense 2

Includes $ 7 , $ 6 and $ 0 of expense related to the 2020 Employee Stock Purchase Plan as of December 31, 2023, December 25, 2022, and December 26, 2021 , respectively.

Includes $ 97 , $ 57 and $ 0 of expense related to the 2020 Employee Stock Purchase Plan as of December 31, 2023, December 25, 2022, and December 26, 2021 , respectively.

Includes $ 18 , $ 7 and $ 6 of expense related to the 2020 ESPP as of December 29, 2024, December 31, 2023, and December 25, 2022 , respectively.

Includes $ 149 , $ 97 and $ 57 of expense related to the 2020 ESPP as of December 29, 2024, December 31, 2023, and December 25, 2022 , respectively.

Stock Option Activity

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27.6 % - 28.6 %

28.5 % - 29.4 %

Risk-free interest rate

1 unchanged sentence

1.64 % - 4.16 %

0.57 % - 1.36 %

Expected dividend yield

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Restricted Stock Unit Activity

The following table summarizes the restricted stock units ("RSU") activity since December 25, 2022:

The following table summarizes the RSU activity since December 31, 2023:

Grant Date Fair Value

1 unchanged sentence

Unvested as of December 29, 2024

Shares of common stock that were withheld to cover taxes on the release of vested RSUs and became available for future grants pursuant to the 2020 Equity Incentive Plan

Includes 68,219 shares of common stock that were withheld to cover taxes on the release of vested RSUs and became available for future grants pursuant to the 2020 Equity Incentive Plan.

As of December 29, 2024, total unrecognized stock-based compensation expense related to the Company’s unvested RSU activity was $ 8,114 , which is expected to be recognized over a weighted-average period of 1.92 years.

The fair value of RSU shares vested during the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 was $ 3,681 , $ 3,044 and $ 1,549 , respectively.

Performance Stock Unit Activity

In fiscal 2024, the Company granted PSUs to certain of its officers and employees.

These PSUs vest at the end of a three-year period based upon the level of achievement of certain Company performance metrics and the recipient’s continued service over such period.

The number of shares that can be earned will range from 0 % to 200 % of the granted PSUs, based upon the Company’s level of achievement of the stated performance metrics.

The number of PSUs expected to vest and for which compensation cost has been recognized is based on the number of awards that the Company believes are probable to vest as of December 29, 2024.

The following table summarizes the PSU activity since December 31, 2023:

Grant Date Fair Value

Unvested as of December 31, 2023

Unvested as of December 29, 2024

As of December 29, 2024, total unrecognized stock-based compensation expense related to the Company’s unvested PSU activity was $ 7,564 , which is expected to be recognized over a weighted-average period of 2.05 years.

The fair value of PSU shares vested during the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022 was $ 0 , as no shares have vested as of such periods.

2020 Equity Incentive Plan:

In July 2020, the Board of Directors adopted the Vital Farms, Inc.

2020 Equity Incentive Plan (“2020 Incentive Plan”), which was subsequently approved by the Company’s stockholders and became effective on July 30, 2020.

In July 2020, the Board of Directors adopted the 2020 Incentive Plan, which was subsequently approved by the Company’s stockholders and became effective on July 30, 2020.

Initially, the maximum number of shares of the Company’s common stock that may be issued under the 2020 Incentive Plan was 8,595,871 shares.

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Employee Stock Purchase Plan:

In July 2020, the Board of Directors adopted the 2020 Employee Stock Purchase Plan (“2020 ESPP”), which was subsequently approved by the Company’s stockholders and became effective on July 30, 2020.

In July 2020, the Board of Directors adopted the 2020 ESPP, which was subsequently approved by the Company’s stockholders and became effective on July 30, 2020.

The 2020 ESPP authorizes the initial issuance of up to 900,000 shares of the Company’s common stock to certain eligible employees or, as designated by the Board of Directors, employees of a related company.

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For the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022, the provision for income taxes consisted of the following:

Provision (benefit) for income taxes

Provision for income taxes

The Company’s income before income taxes is entirely derived from domestic sources for all periods presented.

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Changes in uncertain tax positions

Provision (benefit) for income taxes

Provision for income taxes

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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Net operating loss carryforwards

Charitable contributions

Stock-based compensation

5 unchanged sentences

Prepaid expenses

Property and equipment

Property, plant and equipment

Operating and finance lease right of use assets

Total deferred tax liabilities

Net deferred tax liabilities

Net deferred tax assets (liabilities)

A valuation allowance is required to be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized.

5 unchanged sentences

Increases recorded to income tax provision

Decreases recorded as benefit to income tax provision

Valuation allowance as of end of year

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Gross tax contingencies as of end of year

As of December 31, 2023, the Company had state net operating loss carryforwards of $ 0.4 million which begin to expire in funding re 2035 .

The Company files a U.S.

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Effect of potentially dilutive stock options

Effect of potentially dilutive restricted stock units

Effect of potentially dilutive RSUs

Effect of potentially dilutive PSUs

Effect of potentially dilutive common stock issuable pursuant to the ESPP

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Options to purchase common stock

Unvested restricted stock

Unvested RSUs

Unvested PSUs

Accumulated Other Comprehensive Income (Loss)

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Statement of Income Classification

Gains on available-for-sale securities

Losses on available-for-sale securities

Other income, net

5 unchanged sentences

Available-for-sale debt securities:

Unrealized net holding gain (loss)

Unrealized net holding gain

Amounts reclassified for realized losses to earnings

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The Company records the total cost of eggs into inventory and they are expensed to cost of goods sold when the associated eggs are sold to customers and are also reported as part of the Company’s variable lease cost.

During December 2023, the Company executed two long-term supply contracts with farms to provide a one-time payment of $ 200,000 each at lease inception as an incremental cost of obtaining the lease.

The Company has entered into agreements with certain qualifying suppliers to provide a one-time payment of up to $ 200,000 , for the purpose of funding costs associated with farm startup.

The payment of these incremental costs is contingent upon the achievement of certain milestones and is to be made no sooner than 90 days prior to the pullet placement date specified in each supplier agreement.

Upon the achievement of such milestones, the Company recognizes an operating ROU asset and lease liability as a cost of obtaining the embedded lease within the supplier contract, which is included in “Leases” in Note 10 above.

As of December 29, 2024, $ 13.4 million has been paid out and $ 1.6 million remains to be paid.

Indemnification Agreements:

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When the Company becomes aware of a claim or potential claim, the likelihood of any loss or exposure is assessed.

Based on these assessments and estimates, we may establish reserves, as appropriate.

Based on these assessments and estimates, the Company may establish reserves, as appropriate.

These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment.

Actual outcomes or losses may differ materially from our assessments and estimates.

Actual outcomes or losses may differ materially from the Company’s assessments and estimates.

On May 20, 2021, the Company and certain of its current and former officers were named as defendants in a class action complaint captioned Nicholas A.

Vital Farms, Inc.

in the United States District Court for the Western District of Texas.

in the United States District Court for the Western District of Texas (the “District Court”).

The plaintiffs alleged false advertising claims on behalf of themselves and a putative class of alleged consumers of the Company’s eggs.

The named officers of the Company were subsequently dismissed as defendants in this matter.

In September 2023, the parties engaged in mediation to discuss potential settlement of remaining claims, but no agreement was reached and the lawsuit is ongoing.

The Company believes the claims are without merit and is vigorously defending itself in this matter.

On July 9, 2024, a U.S.

Magistrate Judge issued an order and report and recommendation, for review and adoption by the District Court.

Collectively, the order and the report and recommendation (i) denied the plaintiffs’ motion for class certification, (ii) excluded the testimony and report of the plaintiffs’ damages expert and (iii) granted summary judgment for the Company with respect to two plaintiffs and three of the plaintiffs’ state claims.

On September 23, 2024, the Magistrate Judge’s order and report and recommendation was adopted by the District Court, and the plaintiffs did not appeal the District Court’s ruling within the required timeline.

The District Court’s order foreclosed the matter proceeding as a class action, and the plaintiffs in the matter agreed to drop their individual claims with prejudice.

The District Court ordered the case closed on January 7, 2025.

The Company does not consider these claims to be material to the Company individually or in the aggregate.

Although the Company maintains insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions and caps on amounts recoverable.

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Ovabrite, Inc., a Delaware corporation (“Ovabrite”), has been deemed a related party because its founders were stockholders of the Company, with the majority stockholder in Ovabrite also serving as the Company’s executive chairperson and member of the Board of Directors.

Since Ovabrite’s incorporation in November 2016, the Company has been deemed to have had a variable interest in Ovabrite, and Ovabrite has been deemed to have been a VIE, of which the Company has been the primary beneficiary.

Since Ovabrite’s incorporation in November 2016, the Company was deemed to have had a variable interest in Ovabrite, and Ovabrite was deemed to have been a VIE, of which the Company was the primary beneficiary.

Accordingly, the Company has consolidated the results of Ovabrite since November 2016.

1 unchanged sentence

Effective August 30, 2022, Ovabrite’s Board of Directors and the holders of the majority of its outstanding capital stock consented to dissolving the entity, and a Certificate of Dissolution was filed with the Delaware Secretary of State.

As of December 31, 2023, Ovabrite had completed its business activities and liquidated its remaining assets.

As of December 29, 2024 and December 31, 2023, Ovabrite had completed its business activities and liquidated its remaining assets.

The results of operations of the Ovabrite entity were immaterial for all periods presented.

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and Sandpebble South, Inc.

(collectively “Sandpebble”) for project management and related services associated with the construction and expansion of our egg processing facilities, including site selection, project management and related services for the Company’s potential future egg packing facility.

The Company's contract with Sandpebble for services related to the Company's next egg packing facility was awarded after a competitive bidding process.

(collectively “Sandpebble”) for project management and related services associated with the construction and expansion of the Company’s egg processing facilities, including site selection, project management and related services for the Company’s potential future egg packing facility in Seymour, Indiana.

The Company’s contract with Sandpebble for services related to the Company’s next egg packing facility in Seymour, Indiana was awarded after a competitive bidding process.

Victor Canseco, the owner and principal of Sandpebble, is the father of Russell Diez-Canseco, the Company’s President and Chief Executive Officer and a member of the Board of Directors.

1 unchanged sentence

Amounts paid to Sandpebble are included in property, plant and equipment, net and selling, general and administrative costs.

As of the fiscal years ended December 31, 2023 and December 25, 2022, amounts owed to Sandpebble were $ 0 and $ 51 , respectively, and are included in accounts payable.

As of the fiscal years ended December 29, 2024 and December 31, 2023, amounts owed to Sandpebble were $ 303 and $ 0 , respectively, and are included in accounts payable and accrued liabilities.

Whole Foods Market, Inc:

2 unchanged sentences

and United Natural Foods, Inc., who purchase, store, sell and deliver products to Whole Foods.

While the Company cannot precisely determine its specific revenue attributable to Whole Foods, it is a significant customer.

While the Company cannot precisely determine its specific revenue attributable to Whole Foods, it is a significant end customer.

401(k) Savings Plan

3 unchanged sentences

During the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022, the Company made contributions totaling $ 1,472 , $ 1,185 , and $ 861 respectively, to the plan.

Segment Reporting

The Company has only one reportable segment for which discrete financial information is available:

Eggs and Butter.

The Company derives revenue in the United States and manages and organizes its business activities on a consolidated basis.

The Eggs and Butter segment derives revenues primarily from sales of its products, including eggs and butter, to customers, which include natural retailers, mainstream retailers, distributors, and foodservice customers.

The accounting policies of the Eggs and Butter segment are the same as those described in the “Summary of Significant Accounting Policies” in Note 2 above.

The Company’s chief operating decision maker ( “CODM”) as defined by ASU 2023-07, currently the Company’s President and Chief Executive Officer , assesses performance for the segment and decides how to allocate resources based on net income that also is reported on the consolidated statements of income as consolidated net income.

The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets.

The CODM uses net income to evaluate income generated from net revenue in deciding whether to reinvest profits into the Eggs and Butter segment or for other valid corporate purposes.

Net income is also used to monitor the Company ’s forecasted budget versus actual results.

The CODM also uses net income in competitive analysis by benchmarking to the Company’ s competitors.

The following table presents the significant segment expenses and other segment items regularly reviewed by the Company’s CODM:

Eggs and Butter Segment

Fiscal Year Ended

December 29, 2024

December 31, 2023

December 25, 2022

Cost of goods sold 1

Shipping and distribution

Other selling expenses

Other selling, general & administrative 1

Interest income

Interest expense

Depreciation and amortization

Income tax provision

Other segment expenses 2

Segment net income

Reconciliation of profit or loss

Adjustments and reconciling items

Consolidated net income

Excludes depreciation and amortization.

Other segment expenses included in segment net income includes the change in fair value of derivative instruments and other miscellaneous gains and losses.

Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis