Natural Grocers by Vitamin Cottage, Inc.

Previous wording

The growth in the organic and natural foods industry and growing consumer interest in health and nutrition have enabled us to continue to open new stores and enter new markets. During the five fiscal years ended September 30, 2024, we increased our store count at a compound annual growth rate of 2.0%. In fiscal year 2024, we opened four new stores and relocated/remodeled four existing stores. We plan to open three to four new stores and relocate/remodel two to four existing stores in fiscal year 2025. During the six months ended March 31, 2025, we opened two new stores, relocated/remodeled two existing stores and closed two stores. Between April 1, 2025 and the date of this Form 10-Q, we did not open any new stores nor relocate/remodel any existing stores.

Current wording

The growth in the organic and natural foods industry and growing consumer interest in health and nutrition have enabled us to continue to open new stores and enter new markets. During the five fiscal years ended September 30, 2024, we increased our store count at a compound annual growth rate of 2.0%. In fiscal year 2024, we opened four new stores and relocated/remodeled four existing stores. We plan to open two new stores and relocate/remodel three existing stores in fiscal year 2025. During the nine months ended June 30, 2025, we opened two new stores, relocated/remodeled two existing stores and closed two stores. Between July 1, 2025 and the date of this Form 10-Q, we did not open any new stores and relocated/remodeled one existing store.

Previous wording

Key highlights of our performance for the three and six months ended March 31, 2025 are discussed briefly below and in further detail throughout this MD&A. Key financial metrics, including, but not limited to, daily average comparable store sales, are defined in the section “Key Financial Metrics in Our Business,” presented later in this MD&A.

Current wording

Key highlights of our performance for the three and nine months ended June 30, 2025 are discussed briefly below and in further detail throughout this MD&A. Key financial metrics, including, but not limited to, daily average comparable store sales, are defined in the section “Key Financial Metrics in Our Business,” presented later in this MD&A.

Previous wording

Net sales increased $27.7 million, or 9.0%, to $335.8 million for the three months ended March 31, 2025 compared to $308.1 million for the three months ended March 31, 2024, due to a $27.2 million increase in comparable store sales and a $3.5 million increase in new store sales, partially offset by a $2.9 million decrease in net sales related to closed stores. Daily average comparable store sales increased 8.9% for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The daily average comparable store sales increase resulted from a 5.9% increase in daily average transaction count and a 2.8% increase in daily average transaction size. Comparable store average transaction size was $48.94 for the three months ended March 31, 2025.

Current wording

Net sales increased $19.6 million, or 6.3%, to $328.7 million for the three months ended June 30, 2025 compared to $309.1 million for the three months ended June 30, 2024, due to a $19.0 million increase in comparable store sales and a $3.4 million increase in new store sales, partially offset by a $2.8 million decrease in net sales related to closed stores. We estimate that net sales for the three months ended June 30, 2025 were adversely impacted by the disruption to our operations resulting from the UNFI cybersecurity incident, as discussed above in “Industry Trends and Economics,” by approximately $3.5 million to $4.0 million. Daily average comparable store sales increased 7.4% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The daily average comparable store sales increase resulted from a 4.8% increase in daily average transaction count and a 2.4% increase in daily average transaction size. Comparable store average transaction size was $48.02 for the three months ended June 30, 2025.

Previous wording

Gross profit increased $11.4 million, or 12.6%, to $101.7 million for the three months ended March 31, 2025 compared to $90.4 million for the three months ended March 31, 2024. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased to 30.3% for the three months ended March 31, 2025 compared to 29.3% for the three months ended March 31, 2024. The increase in gross margin during the three months ended March 31, 2025 was driven by higher product margin primarily attributed to effective promotions.

Current wording

Gross profit increased $7.9 million, or 8.8%, to $98.3 million for the three months ended June 30, 2025 compared to $90.3 million for the three months ended June 30, 2024. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased to 29.9% for the three months ended June 30, 2025 compared to 29.2% for the three months ended June 30, 2024. The increase in gross margin during the three months ended June 30, 2025 was driven by higher product margin primarily attributed to effective promotions.

Previous wording

Store expenses increased $3.6 million, or 5.1%, to $72.8 million for the three months ended March 31, 2025 compared to $69.2 million for the three months ended March 31, 2024. The increase in store expenses was primarily driven by higher compensation expenses. Store expenses as a percentage of net sales were 21.7% and 22.5% for the three months ended March 31, 2025 and 2024, respectively. The decrease in store expenses as a percentage of net sales reflects expense leverage.

Current wording

Store expenses increased $4.1 million, or 6.1%, to $71.7 million for the three months ended June 30, 2025 compared to $67.6 million for the three months ended June 30, 2024. The increase in store expenses was primarily driven by higher compensation expenses. Store expenses as a percentage of net sales were 21.8% and 21.9% for the three months ended June 30, 2025 and 2024, respectively. The decrease in store expenses as a percentage of net sales reflects expense leverage.

Previous wording

Administrative expenses increased $1.5 million, or 15.8%, to $11.0 million for the three months ended March 31, 2025 compared to $9.5 million for the three months ended March 31, 2024. The increase in administrative expenses was driven by higher compensation expenses and technology expenses. Administrative expenses as a percentage of net sales were 3.3% and 3.1% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Administrative expenses increased $1.4 million, or 14.7%, to $10.9 million for the three months ended June 30, 2025 compared to $9.5 million for the three months ended June 30, 2024. The increase in administrative expenses was driven by higher technology expenses and compensation expenses. Administrative expenses as a percentage of net sales were 3.3% and 3.1% for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

Pre-opening expenses were $0.4 million for each of the three months ended March 31, 2025 and 2024.

Current wording

Pre-opening expenses were less than $0.1 million for the three months ended June 30, 2025 compared to $0.4 million for the three months ended June 30, 2024.

Previous wording

Interest expense, net of capitalized interest, was $0.8 million for the three months ended March 31, 2025 compared to $1.2 million for the three months ended March 31, 2024.

Current wording

Interest expense, net of capitalized interest, was $0.7 million for the three months ended June 30, 2025 compared to $1.1 million for the three months ended June 30, 2024.

Previous wording

Income tax expense increased $1.6 million for the three months ended March 31, 2025 to $3.7 million compared to $2.1 million for the three months ended March 31, 2024. The Company’s effective income tax rate was 22.0% and 21.1% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Income tax expense increased $0.7 million for the three months ended June 30, 2025 to $3.3 million compared to $2.6 million for the three months ended June 30, 2024. The Company’s effective income tax rate was 22.1% and 21.9% for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

Net income was $13.1 million, or $0.56 diluted earnings per share, for the three months ended March 31, 2025 compared to $8.0 million, or $0.35 diluted earnings per share, for the three months ended March 31, 2024.

Current wording

Net income was $11.6 million, or $0.50 diluted earnings per share, for the three months ended June 30, 2025 compared to $9.2 million, or $0.40 diluted earnings per share, for the three months ended June 30, 2024.

Previous wording

Net sales increased $56.1 million, or 9.2%, to $666.0 million for the six months ended March 31, 2025 compared to $609.8 million for the six months ended March 31, 2024, due to a $53.8 million increase in comparable store sales and a $6.4 million increase in new store sales, partially offset by a $4.1 million decrease in net sales related to closed stores. Daily average comparable store sales increased 8.9% for the six months ended March 31, 2025 compared to the six months ended March 31, 2024. The daily average comparable store sales increase for the six months ended March 31, 2025 resulted from a 5.6% increase in daily average transaction count and a 3.1% increase in daily average transaction size. Comparable store average transaction size was $48.94 for the six months ended March 31, 2025.

Current wording

Net sales increased $75.8 million, or 8.2%, to $994.7 million for the nine months ended June 30, 2025 compared to $918.9 million for the nine months ended June 30, 2024, due to a $72.8 million increase in comparable store sales and a $9.8 million increase in new store sales, partially offset by a $6.8 million decrease in net sales related to closed stores. Daily average comparable store sales increased 8.4% for the nine months ended June 30, 2025 compared to the nine months ended June 30, 2024. The daily average comparable store sales increase for the nine months ended June 30, 2025 resulted from a 5.4% increase in daily average transaction count and a 2.9% increase in daily average transaction size. Comparable store average transaction size was $48.63 for the nine months ended June 30, 2025.

Previous wording

Gross profit increased $21.5 million, or 12.0%, to $200.6 million for the six months ended March 31, 2025 compared to $179.1 million for the six months ended March 31, 2024. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased to 30.1% for the six months ended March 31, 2025 compared to 29.4% for the six months ended March 31, 2024. The increase in gross margin during the six months ended March 31, 2025 was driven by higher product margin primarily attributed to effective promotions, and store occupancy cost leverage.

Current wording

Gross profit increased $29.4 million, or 10.9%, to $298.9 million for the nine months ended June 30, 2025 compared to $269.4 million for the nine months ended June 30, 2024. Gross profit reflects earnings after product and store occupancy costs. Gross margin increased to 30.0% for the nine months ended June 30, 2025 compared to 29.3% for the nine months ended June 30, 2024. The increase in gross margin during the nine months ended June 30, 2025 was driven by higher product margin primarily attributed to effective promotions, and store occupancy cost leverage.

Previous wording

Store expenses increased $9.1 million, or 6.6%, to $146.3 million for the six months ended March 31, 2025 compared to $137.2 million for the six months ended March 31, 2024. The increase in store expenses was primarily driven by higher compensation expenses. Store expenses as a percentage of net sales were 22.0% and 22.5% for the six months ended March 31, 2025 and 2024, respectively. The decrease in store expenses as a percentage of net sales reflects expense leverage.

Current wording

Store expenses increased $13.2 million, or 6.4%, to $218.0 million for the nine months ended June 30, 2025 compared to $204.8 million for the nine months ended June 30, 2024. The increase in store expenses was primarily driven by higher compensation expenses. Store expenses as a percentage of net sales were 21.9% and 22.3% for the nine months ended June 30, 2025 and 2024, respectively. The decrease in store expenses as a percentage of net sales reflects expense leverage.

Previous wording

Administrative expenses increased $3.6 million, or 19.1%, to $22.5 million for the six months ended March 31, 2025 compared to $18.9 million for the six months ended March 31, 2024. The increase in administrative expenses was driven by higher compensation expenses, including costs related to our Chief Financial Officer transition, and technology expenses. Administrative expenses as a percentage of net sales were 3.4% and 3.1% for the six months ended March 31, 2025 and 2024, respectively.

Current wording

Administrative expenses increased $5.0 million, or 17.6%, to $33.5 million for the nine months ended June 30, 2025 compared to $28.5 million for the nine months ended June 30, 2024. The increase in administrative expenses was driven by higher compensation expenses, including costs related to our Chief Financial Officer transition, and technology expenses. Administrative expenses as a percentage of net sales were 3.4% and 3.1% for the nine months ended June 30, 2025 and 2024, respectively.

Previous wording

Pre-opening expenses were $0.9 million for each of the six months ended March 31, 2025 and 2024.

Current wording

Pre-opening expenses were $0.9 million for the nine months ended June 30, 2025 compared to $1.3 million for the nine months ended June 30, 2024.

Previous wording

Interest expense, net of capitalized interest, was $1.7 million for the six months ended March 31, 2025 compared to $2.1 million for the six months ended March 31, 2024.

Current wording

Interest expense, net of capitalized interest, was $2.4 million for the nine months ended June 30, 2025 compared to $3.1 million for the nine months ended June 30, 2024.

Previous wording

Income tax expense increased $1.9 million for the six months ended March 31, 2025 to $6.2 million compared to $4.3 million for the six months ended March 31, 2024. The Company’s effective income tax rate was 21.2% and 21.4% for the six months ended March 31, 2025 and 2024, respectively.

Current wording

Income tax expense increased $2.6 million for the nine months ended June 30, 2025 to $9.5 million compared to $6.9 million for the nine months ended June 30, 2024. The Company’s effective income tax rate was 21.5% and 21.6% for the nine months ended June 30, 2025 and 2024, respectively.

Previous wording

Net income was $23.0 million, or $0.99 diluted earnings per share, for the six months ended March 31, 2025 compared to $15.7 million, or $0.68 diluted earnings per share, for the six months ended March 31, 2024.

Current wording

Net income was $34.6 million, or $1.49 diluted earnings per share, for the nine months ended June 30, 2025 compared to $24.9 million, or $1.08 diluted earnings per share, for the nine months ended June 30, 2024.

Previous wording

EBITDA increased 34.2% to $25.4 million for the three months ended March 31, 2025 compared to $19.0 million for the three months ended March 31, 2024. EBITDA increased 25.6% to $46.7 million for the six months ended March 31, 2025 compared to $37.2 million for the six months ended March 31, 2024. EBITDA as a percentage of net sales was 7.6% and 6.2% for the three months ended March 31, 2025 and 2024, respectively. EBITDA as a percentage of net sales was 7.0% and 6.1% for the six months ended March 31, 2025 and 2024, respectively.

Current wording

EBITDA increased 13.8% to $23.5 million for the three months ended June 30, 2025 compared to $20.7 million for the three months ended June 30, 2024. EBITDA increased 21.4% to $70.3 million for the nine months ended June 30, 2025 compared to $57.9 million for the nine months ended June 30, 2024. EBITDA as a percentage of net sales was 7.2% and 6.7% for the three months ended June 30, 2025 and 2024, respectively. EBITDA as a percentage of net sales was 7.1% and 6.3% for the nine months ended June 30, 2025 and 2024, respectively.

Previous wording

Adjusted EBITDA increased 33.3% to $26.3 million for the three months ended March 31, 2025 compared to $19.7 million for the three months ended March 31, 2024. Adjusted EBITDA increased 27.6% to $49.1 million for the six months ended March 31, 2025 compared to $38.5 million for the six months ended March 31, 2024. Adjusted EBITDA as a percentage of net sales was 7.8% and 6.4% for the three months ended March 31, 2025 and 2024, respectively. Adjusted EBITDA as a percentage of net sales was 7.4% and 6.3% for the six months ended March 31, 2025 and 2024, respectively.

Current wording

Adjusted EBITDA increased 10.1% to $24.4 million for the three months ended June 30, 2025 compared to $22.2 million for the three months ended June 30, 2024. Adjusted EBITDA increased 21.2% to $73.5 million for the nine months ended June 30, 2025 compared to $60.6 million for the nine months ended June 30, 2024. Adjusted EBITDA as a percentage of net sales was 7.4% and 7.2% for the three months ended June 30, 2025 and 2024, respectively. Adjusted EBITDA as a percentage of net sales was 7.4% and 6.6% for the nine months ended June 30, 2025 and 2024, respectively.

Previous wording

Our ongoing primary sources of liquidity are cash generated from operations, current balances of cash and cash equivalents and borrowings under our Credit Facility. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures predominantly in connection with opening, relocating and remodeling stores, debt service, cash dividends, share repurchases and corporate taxes. As of March 31, 2025, we had $21.2 million in cash and cash equivalents and $70.3 million available for borrowing under our Credit Facility.

Current wording

Our ongoing primary sources of liquidity are cash generated from operations, current balances of cash and cash equivalents and borrowings under our Credit Facility. Our primary uses of cash are for purchases of inventory, operating expenses, capital expenditures predominantly in connection with opening, relocating and remodeling stores, debt service, cash dividends, share repurchases and corporate taxes. As of June 30, 2025, we had $13.2 million in cash and cash equivalents and $69.5 million available for borrowing under our Credit Facility.

Previous wording

We paid a quarterly cash dividend of $0.12 per share of common stock in each of the first two quarters of fiscal year 2025. On May 7, 2025, our Board approved the payment of a quarterly cash dividend of $0.12 per share of common stock to be paid on June 11, 2025 to stockholders of record as of the close of business on May 27, 2025.

Current wording

We paid a quarterly cash dividend of $0.12 per share of common stock in each of the first three quarters of fiscal year 2025. On August 6, 2025, our Board approved the payment of a quarterly cash dividend of $0.12 per share of common stock to be paid on September 17, 2025 to stockholders of record as of the close of business on September 2, 2025.

Previous wording

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, impairment of long-lived assets and store closures, share-based compensation, and changes in deferred taxes, and the effect of changes in operating assets and liabilities. Cash provided by operating activities decreased $0.1 million, or 0.3%, to $36.7 million for the six months ended March 31, 2025 compared to $36.8 million for the six months ended March 31, 2024. The decrease in cash provided by operating activities was the result of a decrease in cash provided by operating assets and liabilities, partially offset by an increase in cash provided by net income as adjusted for non-cash items.

Current wording

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, impairment of long-lived assets and store closures, share-based compensation, and changes in deferred taxes, and the effect of changes in operating assets and liabilities. Cash provided by operating activities decreased $9.6 million, or 19.5%, to $39.7 million for the nine months ended June 30, 2025 compared to $49.3 million for the nine months ended June 30, 2024. The decrease in cash provided by operating activities was the result of a decrease in cash provided by operating assets and liabilities, partially offset by an increase in cash provided by net income as adjusted for non-cash items.

Previous wording

Net cash used in investing activities decreased $6.6 million, or 29.5%, to $15.9 million for the six months ended March 31, 2025 compared to $22.5 million for the six months ended March 31, 2024. This decrease was primarily the result of decreases in acquisitions of property and equipment of $6.1 million and other intangibles of $0.2 million during the six months ended March 31, 2025 compared to the six months ended March 31, 2024, and was attributed to the timing of new store openings, relocations/remodels, and software projects under development.

Current wording

Net cash used in investing activities decreased $8.9 million, or 27.9%, to $22.9 million for the nine months ended June 30, 2025 compared to $31.8 million for the nine months ended June 30, 2024. This decrease was primarily the result of decreases in acquisitions of property and equipment of $7.9 million and other intangibles of $0.7 million during the nine months ended June 30, 2025 compared to the nine months ended June 30, 2024, and was attributed to the timing of new store openings, relocations/remodels, and software projects under development.

Previous wording

We plan to spend approximately $20.1 million to $28.1 million on capital expenditures during the remainder of fiscal year 2025 primarily in connection with expected new store openings and store relocations/remodels.

Current wording

We plan to spend approximately $7.1 million to $10.1 million on capital expenditures during the remainder of fiscal year 2025 primarily in connection with expected new store openings and store relocations/remodels.

Previous wording

Acquisition of property and equipment not yet paid decreased $2.7 million to $2.7 million for the six months ended March 31, 2025 compared to $5.4 million for the six months ended March 31, 2024 due to the timing of payments related to new store openings and relocations/remodels.

Current wording

Acquisition of property and equipment not yet paid decreased $0.4 million to $2.2 million for the nine months ended June 30, 2025 compared to $2.6 million for the nine months ended June 30, 2024 due to the timing of payments related to new store openings and relocations/remodels.

Previous wording

Net cash used in financing activities consists primarily of borrowings and repayments under our Credit Facility and dividends paid to stockholders. Net cash used in financing activities was $8.5 million for the six months ended March 31, 2025 compared to $21.7 million for the six months ended March 31, 2024. During the six months ended March 31, 2024, we paid a special cash dividend to stockholders of $22.7 million.

Current wording

Net cash used in financing activities consists primarily of borrowings and repayments under our Credit Facility and dividends paid to stockholders. Net cash used in financing activities was $12.4 million for the nine months ended June 30, 2025 compared to $21.9 million for the nine months ended June 30, 2024. During the nine months ended June 30, 2024, we paid a special cash dividend to stockholders of $22.7 million.

Previous wording

We had no revolving loan amounts outstanding under the Credit Facility as of March 31, 2025 and September 30, 2024. As of March 31, 2025 and September 30, 2024, we had undrawn, issued and outstanding letters of credit of $2.2 million, which were reserved against the amount available for borrowing under the Credit Facility. We had $70.3 million and $72.8 million available for borrowing under the Credit Facility as of March 31, 2025 and September 30, 2024, respectively.

Current wording

We had no revolving loan amounts outstanding under the Credit Facility as of June 30, 2025 and September 30, 2024. As of June 30, 2025 and September 30, 2024, we had undrawn, issued and outstanding letters of credit of $3.0 million and $2.2 million, respectively, which were reserved against the amount available for borrowing under the Credit Facility. We had $69.5 million and $72.8 million available for borrowing under the Credit Facility as of June 30, 2025 and September 30, 2024, respectively.