Vital Farms Inc

Previous wording

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A, “Risk Factors,” and “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report. The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report and the audited financial information and the notes thereto included in our Annual Report.

Current wording

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A, “Risk Factors,” and “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report. The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report and the audited financial information and the notes thereto included in our latest Annual Report.

Previous wording

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). 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. We are fierce business competitors who believe that prioritizing the long-term viability of all stakeholders will produce stronger outcomes, for everyone, over time. 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.

Current wording

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). 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. We are fierce business competitors who believe that prioritizing the long-term viability of all stakeholders will produce stronger outcomes, for everyone, over time. 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. We are in the process of seeking recertification as a Certified B Corporation, which is required every three years.

Previous wording

We source our eggs from a network of over 350 family farms. The cream for our butter is sourced from a network of family farms contracted by our butter supplier. We have strategically designed our supply chain to ensure high production standards and optimal year-round operation. We are motivated by the positive impact we have on rural communities and enjoy a strong relationship and reputation with our network of farmers.

Current wording

We source our eggs from a network of over 375 family farms. The cream for our butter is sourced from a network of family farms contracted by our butter supplier. We have strategically designed our supply chain to ensure high production standards and optimal year-round operation. We are motivated by the positive impact we have on rural communities and enjoy a strong relationship and reputation with our network of farmers.

Previous wording

We primarily work with our contracted egg farms pursuant to buy-sell contracts. 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 egg 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 through 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. 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. 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.

Current wording

We primarily work with our contracted egg farms pursuant to buy-sell contracts. 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 egg 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 through 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. We believe the unfavorable impact to our working capital resulting from these upfront costs could range from $12.0 million to $14.0 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. 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.

Previous wording

We believe we are a strategic and valuable partner to retailers. We have continued to command premium prices for our products, including our shell eggs. Our loyal and growing consumer base has fueled the expansion of our brand from the natural channel to the mainstream channel. 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. and Walmart, Inc. We offer 23 retail stock keeping units, or SKUs, through a multi-channel retail distribution network. We believe we have significant room for growth within the retail and foodservice channels through growing brand awareness, gaining additional points of distribution and new product innovation.

Current wording

We believe we are a strategic and valuable partner to retailers. We have continued to command premium prices for our products, including our shell eggs. Our loyal and growing consumer base has fueled the expansion of our brand from the natural channel to the mainstream channel. 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, 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. We offer 23 retail stock keeping units, or SKUs, through a multi-channel retail distribution network. We believe we have significant room for growth within the retail and foodservice channels through growing brand awareness, gaining additional points of distribution and new product innovation.

Previous wording

To date in fiscal 2024, we have purchased approximately 391 acres of farmland in Indiana for approximately $3.0 million. Our intent is to develop this farmland (along with other potential parcels to be purchased in the future) and utilize it 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 “starter farms” to interested farmers.

Current wording

To date in fiscal 2024, we have purchased approximately 587 acres of farmland in Indiana for approximately $4.2 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.

Previous wording

We have experienced consistent sales growth. We had net revenue of $147.4 million and $106.4 million, net income of $16.3 million and $6.7 million, and Adjusted EBITDA of $23.3 million and $11.3 million in the 13-week periods ended June 30, 2024 and June 25, 2023, respectively. We had net revenue of $295.3 million and $225.6 million, net income of $35.4 million and $13.8 million, and Adjusted EBITDA of $52.3 million and $25.2 million in the 26-week periods ended June 30, 2024 and June 25, 2023, respectively. Adjusted EBITDA is a non-GAAP financial measure. See the section titled “—Non-GAAP Financial Measure—Adjusted EBITDA” below for the definition of Adjusted EBITDA, as well as a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure stated in accordance with GAAP.

Current wording

We have experienced consistent sales growth. We had net revenue of $145.0 million and $110.4 million, net income of $7.4 million and $4.5 million, and Adjusted EBITDA of $15.2 million and $9.3 million in the 13-week periods ended September 29, 2024 and September 24, 2023, respectively. We had net revenue of $440.3 million and $336.0 million, net income of $42.8 million and $18.4 million, and Adjusted EBITDA of $67.6 million and $34.5 million in the 39-week periods ended September 29, 2024 and September 24, 2023, respectively. Adjusted EBITDA is a non-GAAP financial measure. See the section titled “—Non-GAAP Financial Measure—Adjusted EBITDA” below for the definition of Adjusted EBITDA, as well as a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure stated in accordance with GAAP.

Previous wording

Highly Pathogenic Avian Influenza (HPAI)

Current wording

Highly Pathogenic Avian Influenza (HPAI) and Other Agricultural Diseases

Previous wording

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 five of our farms, one located in Missouri, one in Tennessee and three 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.

Current wording

While we have not experienced material disruptions to our egg supply due to HPAI or 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 could result 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 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.

Previous wording

With cash, cash equivalents and marketable securities of $152.7 million as of June 30, 2024 and $60.0 million available under our syndicated revolving credit facility agreement with JPMorgan Chase Bank, N.A. and the others lenders party thereto, or the JPMorgan 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 June 30, 2024, together with cash provided by our operating activities and availability of borrowings under our JPMorgan Credit Facility, will be sufficient to fund our operating expenses for at least the next 12 months. For additional information regarding our JPMorgan Credit Facility, see “Long-Term Debt” at Note 14 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

With cash, cash equivalents and marketable securities of $163.0 million as of September 29, 2024 and $60.0 million available under our syndicated revolving credit facility agreement with JPMorgan Chase Bank, N.A. and the others lenders party thereto, or the JPMorgan 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 September 29, 2024, together with cash provided by our operating activities and availability of borrowings under our JPMorgan Credit Facility, will be sufficient to fund our operating expenses for at least the next 12 months. For additional information regarding our JPMorgan Credit Facility, see “Long-Term Debt” in Note 13 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Previous wording

We have positioned our brand to capitalize on growing consumer interest in natural, clean-label, traceable, ethical, great-tasting and nutritious foods. We believe there is substantial opportunity to grow our consumer base and increase the velocity at which households purchase our products. U.S. household penetration for the shell egg category is approximately 96.8%, while the household penetration for our shell eggs is approximately 8.2%. 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. Our performance depends significantly on factors that may affect the level and pattern of consumer spending in the U.S. natural food market in which we operate. Such factors include consumer preference, consumer confidence, consumer income, consumer perception of the safety and quality of our products and shifts in the perceived value for our products relative to alternatives.

Current wording

We have positioned our brand to capitalize on growing consumer interest in natural, clean-label, traceable, ethical, great-tasting and nutritious foods. We believe there is substantial opportunity to grow our consumer base and increase the velocity at which households purchase our products. U.S. household penetration for the shell egg category is approximately 96.9%, while the household penetration for our shell eggs is approximately 8.6%. 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. Our performance depends significantly on factors that may affect the level and pattern of consumer spending in the U.S. natural food market in which we operate. Such factors include consumer preference, consumer confidence, consumer income, consumer perception of the safety and quality of our products and shifts in the perceived value for our products relative to alternatives.

Previous wording

We believe that our ability to increase the number of customers that sell our products to consumers is an indicator of our market penetration and our future business opportunities. We define our customers as the entities that sell our products to consumers. With certain of our retail customers, like Whole Foods, we sell our products through distributors. 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% and 22% of our retail sales for the 13-week periods ended June 30, 2024 and June 25, 2023, respectively and 22% and 23% for the 26-week periods ended June 30, 2024 and June 25, 2023, respectively.

Current wording

We believe that our ability to increase the number of customers that sell our products to consumers is an indicator of our market penetration and our future business opportunities. We define our customers as the entities that sell our products to consumers. With certain of our retail customers, like Whole Foods, we sell our products through distributors. 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 21% and 22% of our retail sales for the 13-week periods ended September 29, 2024 and September 24, 2023, respectively and 21% and 23% for the 39-week periods ended September 29, 2024 and September 24, 2023, respectively.

Previous wording

We believe there is significant demand for our products in the foodservice channel since we offer versatile ingredients with high menu penetrations across commercial and non-commercial operator segments. 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.

Current wording

We believe there is significant demand for our products in the foodservice channel since we offer versatile ingredients with high menu penetrations across commercial and non-commercial operator segments. 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 ROOTED Food Service Sales Agency, 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.

Previous wording

We intend to continue to strengthen our product offerings by investing in innovation in new and existing categories. We have a history of product introductions and intend to continue to innovate by introducing new products from time to time. Eggs and egg-related products generated $142.9 million, or approximately 97%, of net revenue in the 13-week period ended June 30, 2024. Eggs and egg-related products generated $286.7 million, or approximately 97%, of net revenue in the 26-week period ended June 30, 2024. We expect eggs and egg-related products to be our largest source of net revenue for the foreseeable future. We believe that investments in innovation will contribute to our long-term growth, including by reinforcing our efforts to increase household penetration. Our ability to successfully develop, market and sell new products will depend on a variety of factors, including the availability of capital to invest in innovation, as well as changing consumer preferences and demand for food products.

Current wording

We intend to continue to strengthen our product offerings by investing in innovation in new and existing categories. We have a history of product introductions and intend to continue to innovate by introducing new products from time to time. Eggs and egg-related products generated $138.1 million, or approximately 95%, of net revenue in the 13-week period ended September 29, 2024. Eggs and egg-related products generated $424.9 million, or approximately 96%, of net revenue in the 39-week period ended September 29, 2024. We expect eggs and egg-related products to be our largest source of net revenue for the foreseeable future. We believe that investments in innovation will contribute to our long-term growth, including by reinforcing our efforts to increase household penetration. Our ability to successfully develop, market and sell new products will depend on a variety of factors, including the availability of capital to invest in innovation, as well as changing consumer preferences and demand for food products.

Previous wording

Our shell eggs are sold to consumers at a premium price point, and when prices for commodity shell eggs fall relative to the price of our shell eggs (including due to any price increases we may implement), price-sensitive consumers may choose to purchase commodity shell eggs offered by our competitors instead of our eggs. 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 2023 and fiscal year 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. Net revenue may also vary from period to period depending on the purchase orders we receive, the volume and mix of our products sold, and the channels through which our products are sold.

Current wording

Our shell eggs are sold to consumers at a premium price point, and when prices for commodity shell eggs fall relative to the price of our shell eggs (including due to any price increases we may implement), price-sensitive consumers may choose to purchase commodity shell eggs offered by our competitors instead of our eggs. 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 years 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. Net revenue may also vary from period to period depending on the purchase orders we receive, the volume and mix of our products sold, and the channels through which our products are sold.

Previous wording

The results of operations data for the 13-week and 26-week periods ended June 30, 2024 and June 25, 2023 have been derived from the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

The results of operations data for the 13-week and 39-week periods ended September 29, 2024 and September 24, 2023 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Previous wording

Includes stock-based compensation expense of $107 and $80 in cost of goods sold for the 13-week periods ended June 30, 2024 and June 25, 2023, respectively, and $2,809 and $1,366 in selling, general and administrative for the 13-week periods then ended, respectively.

Current wording

Includes stock-based compensation expense of $72 and $61 in cost of goods sold for the 13-week periods ended September 29, 2024 and September 24, 2023, respectively, and $2,602 and $1,754 in selling, general and administrative for the 13-week periods then ended, respectively.

Previous wording

The increase in net revenue of $40.9 million, or 38%, was primarily driven by volume-related increases of $38.1 million and price-related increases of $2.8 million. The volume favorability was driven by accelerated demand for existing products, expanded item offerings, and store distribution at existing customers. Net revenue from sales through our retail channel was $141.9 million and $99.1 million for the 13-week periods ended June 30, 2024 and June 25, 2023, respectively.

Current wording

The increase in net revenue of $34.6 million, or 31%, was primarily driven by volume-related increases of $24.0 million and price-related increases of $10.5 million. The volume favorability was driven by accelerated demand for existing products, expanded item offerings, and store distribution at existing customers. Net revenue from sales through our retail channel was $139.0 million and $104.8 million for the 13-week periods ended September 29, 2024 and September 24, 2023, respectively. Additionally, we had a two-day production shutdown due to a water main break near our Egg Central Station processing facility in Springfield, Missouri. This resulted in net $2.0 million less revenue after recovery efforts were made.

Previous wording

The increase in gross profit of $19.9 million, or 53%, was driven by higher net revenue generated during the period, as well as benefits of scale and enhanced operational efficiencies. The increase in gross margin during the 13-week period ended June 30, 2024 compared to the corresponding period in the prior year was primarily driven by price/mix benefits, including price increases on our organic egg portfolio in January 2024, as well as benefits of scale, operational efficiencies and more favorable commodity and diesel costs. This was partially offset by an increase in promotional rate as well as an increase in labor and overhead costs.

Current wording

The increase in gross profit of $16.8 million, or 46%, was driven by higher net revenue generated during the period, as well as benefits of scale and operational efficiencies. The increase in gross margin during the 13-week period ended September 29, 2024 compared to the corresponding period in the prior year was primarily driven by price/mix benefits, including price increases on our organic egg portfolio in January 2024, as well as benefits of scale, operational efficiencies and more favorable commodity and diesel costs. This was partially offset by an increase in trade as a percentage of gross revenue, labor and overhead costs.

Previous wording

The increase in selling, general and administrative expenses of $9.4 million, or 39%, was primarily driven by:

Current wording

The increase in selling, general and administrative expenses of $11.0 million, or 44%, was primarily driven by:

Previous wording

increase of $0.8 million in brokerage-related expenses due to the expansion of the business.

Current wording

an increase of $4.7 million in marketing-related and brokerage-related expenses due to the expansion of the business;

Previous wording

an increase of $5.7 million in employee-related costs, including stock-based compensation, and an overall increase in employee headcount to support our operations;

Current wording

an increase of $3.8 million in employee-related costs, including stock-based compensation, and an overall increase in employee headcount to support our operations;

Previous wording

an increase of $1.2 million in professional service expenses to support operational expansion;

Current wording

an increase of $1.8 million in professional service expenses to support operational expansion; and

Previous wording

an increase of $0.5 million in technology and software-related expenses to support increased operations and employee headcount; and

Current wording

an increase of $0.7 million in technology and software-related expenses to support increased operations and employee headcount.

Previous wording

The increase in shipping and distribution costs of $1.4 million, or 23%, was driven by higher sales volumes, partially offset by favorable linehaul and fuel rates.

Current wording

The increase in shipping and distribution costs of $1.8 million, or 28%, was driven by higher sales volumes, partially offset by favorable linehaul and fuel rates.

Previous wording

The increase in interest income of $0.9 million, or 192%, was primarily driven by higher interest income on our available-for-sale securities and marketable securities portfolios resulting from a higher balance and higher interest rates.

Current wording

The increase in interest income of $0.7 million, or 99%, was primarily driven by higher interest income on our available-for-sale securities and marketable securities portfolios resulting from a higher balance and higher interest rates.

Previous wording

The decrease in other expense, net of $0.4 million was primarily driven by a reduction in losses on our commodity derivative instruments during the 13-week period ended June 30, 2024 as compared to the 13-week period ended June 25, 2023.

Current wording

The decrease in other expense, net of $0.6 million was primarily driven by a reduction in losses on our commodity derivative instruments during the 13-week period ended September 29, 2024 as compared to the 13-week period ended September 24, 2023.

Previous wording

The increase in the income tax provision of $0.5 million, or 44%, was related to an increase in net income for the 13-week period ended June 30, 2024 as compared to the same period in the prior year, partially offset by the tax benefit of a non-qualified stock option exercises and RSU releases that occurred during the 13-week period ended June 30, 2024.

Current wording

The increase in the income tax provision of $2.4 million, or 451%, was related to an increase in net income for the 13-week period ended September 29, 2024 as compared to the same period in the prior year, partially offset by the tax benefit of non-qualified stock option exercises and RSU releases that occurred during the 13-week period ended September 29, 2024.

Previous wording

Includes stock-based compensation expense of $154 and $133 in cost of goods sold for the 26-week periods ended June 30, 2024 and June 25, 2023, respectively, and $4,744 and $3,554 in selling, general and administrative for the 26-week periods then ended, respectively.

Current wording

Includes stock-based compensation expense of $226 and $194 in cost of goods sold for the 39-week periods ended September 29, 2024 and September 24, 2023, respectively, and $7,346 and $5,308 in selling, general and administrative for the 26-week periods then ended, respectively.

Previous wording

The increase in net revenue of $69.7 million, or 31%, was primarily driven by volume-related increases of $60.0 million and price-related increases of $9.7 million. The volume favorability was primarily driven by increases at both new and existing customers. Net revenue from sales through our retail channel was $284.1 million and $207.8 million for the 26-week periods ended June 30, 2024 and June 25, 2023, respectively.

Current wording

The increase in net revenue of $104.3 million, or 31%, was primarily driven by volume-related increases of $84.1 million and price-related increases of $20.2 million. The volume favorability was primarily driven by increases at both new and existing customers. Net revenue from sales through our retail channel was $423.2 million and $312.6 million for the 39-week periods ended September 29, 2024 and September 24, 2023, respectively. Additionally, we had a two-day production shutdown due to a water main break near our Egg Central Station processing facility in Springfield, Missouri. This resulted in net $2.0 million less revenue after recovery efforts were made.

Previous wording

The increase in gross profit of $36.1 million, or 45%, was driven by higher net revenue generated during the period, as well as benefits of scale and enhanced operational efficiencies. The increase in gross margin during the 26-week period ended June 30, 2024 compared to the corresponding period in the prior year 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 promotional rate as well as an increase in labor and overhead costs.

Current wording

The increase in gross profit of $52.9 million, or 45%, was driven by higher net revenue generated during the period, as well as benefits of scale and enhanced operational efficiencies. The increase in gross margin during the 39-week period ended September 29, 2024 compared to the corresponding period in the prior year 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 trade as a percentage of gross revenue, labor and overhead costs.

Previous wording

The increase in selling, general and administrative expenses of $12.6 million, or 26%, was primarily driven by:

Current wording

The increase in selling, general and administrative expenses of $23.6 million, or 32%, was primarily driven by:

Previous wording

an increase of $6.6 million in employee-related costs, including stock-based compensation, driven by an overall increase in employee headcount to support our operations;

Current wording

an increase of $10.4 million in employee-related costs, including stock-based compensation, driven by an overall increase in employee headcount to support our operations;

Previous wording

an increase of $0.3 million in brokerage-related expenses due to the expansion of the business.

Current wording

an increase of $7.5 million in marketing and brokerage related expenses due to the expansion of the business;

Previous wording

an increase of $2.2 million in professional service expenses to support operational expansion;

Current wording

an increase of $4.0 million in professional service expenses to support operational expansion; and

Previous wording

an increase of $0.8 million in technology and software-related expenses to support increase operations and employee headcount; and

Current wording

an increase of $1.5 million in technology and software-related expenses to support increase operations and employee headcount.

Previous wording

The increase in shipping and distribution costs of $1.1 million, or 8%, was driven by higher sales volumes, partially offset by favorable linehaul and fuel rates.

Current wording

The increase in shipping and distribution costs of $2.9 million, or 14%, was driven by higher sales volumes, partially offset by favorable linehaul and fuel rates.

Previous wording

The increase in interest expense of $0.1 million, or 89%, was primarily driven by an increase in finance leases, which generated an increase in interest expense related to those leases.

Current wording

The increase in interest expense of $0.3 million, or 50%, was primarily driven by an increase in finance leases, which generated an increase in interest expense related to those leases.

Previous wording

The increase in interest income of $1.6 million, or 204%, was primarily driven by higher interest income on our available-for-sale securities and marketable securities portfolios resulting from a higher balance and higher interest rates.

Current wording

The increase in interest income of $2.3 million, or 155%, was primarily driven by higher interest income on our available-for-sale securities and marketable securities portfolios resulting from a higher balance and higher interest rates.

Previous wording

The decrease in other expense, net of $1.5 million was primarily driven by a reduction in losses on our commodity derivative instruments during the 26-week period ended June 30, 2024, as compared to those in the 26-week period ended June 25, 2023.

Current wording

The decrease in other expense, net of $2.1 million was primarily driven by a reduction in losses on our commodity derivative instruments during the 39-week period ended September 29, 2024, as compared to those in the 39-week period ended September 24, 2023.