The Vita Coco Company Reports Third Quarter 2023 Financial Results

10/31/2023

Third Quarter Net Sales Increased 11% to $138MM; Year-To-Date Net Sales Grew 15%

Third Quarter Gross Margin of 41%, an Improvement of Over 1,400 Basis Points Over 2022

Company Raises Full Year Net Sales and Adjusted EBITDA(1) Guidance

Company Announces $40MM Share Repurchase Program

NEW YORK, Oct. 31, 2023 (GLOBE NEWSWIRE) -- The Vita Coco Company, Inc. (NASDAQ: COCO) (“Vita Coco” or the "Company”), a leading high-growth platform of better-for-you beverage brands, today announced financial results for the third quarter ended September 30, 2023.

Third Quarter 2023 Highlights Compared to Prior-Year Period

  • Net sales grew by 11% to $138 million driven by strong 8% net sales growth and 5% volume growth of Vita Coco Coconut Water which continues to be the largest contributor to growth on a consolidated basis.
  • Gross profit was $56 million, or 41% of net sales, an increase of $24 million as compared to 26% of net sales in the prior-year period with the improvement driven by lower year-over-year transportation costs, net sales growth and higher Vita Coco Coconut Water pricing.
  • Net income was $15 million, or $0.26 per diluted share, compared to $7 million, or $0.13 per diluted share. Net income benefited from strong net sales growth and gross margin improvement resulting primarily from decreased transportation costs, partially offset by increased investments in sales, general and administrative ("SG&A") and a mark-to-market adjustment in foreign currency hedges.
  • Non-GAAP Adjusted EBITDA1 was $27 million, compared to $12 million in the prior-year period, up $15 million due to improvements in gross profit partially offset by increased SG&A spending.

2023 Year-To-Date Highlights Compared to Prior-Year Period

  • Net sales grew 15% to $387 million driven by strong 16% net sales growth and 13% volume growth of Vita Coco Coconut Water which continues to be the largest contributor to growth on a consolidated basis.
  • Gross profit was $141 million, or 36% of net sales, an increase of $60 million as compared to 24% of net sales in the prior-year period, with the increase driven primarily by lower year-over-year transportation costs, net sales growth and increased Vita Coco Coconut Water pricing.
  • Net income was $40 million, or $0.68 per diluted share, compared to $11 million, or $0.19 per diluted share, in the prior-year period with the increase driven by strong net sales growth and gross margin improvement resulting primarily from decreased transportation costs, partially offset by increased investments in SG&A, a mark-to-market adjustment in foreign currency hedges, and increased tax expense.
  • Non-GAAP Adjusted EBITDA1 was $60 million, compared to $16 million in the prior-year period due to improvements in gross profit partially offset by increased SG&A spending.

Michael Kirban, the Company's Co-Founder and Executive Chairman, stated, "I am very proud of our team and its continued strong performance this year. We have delivered another strong quarter and we believe that our focus on expanding consumption occasions for coconut water is contributing to strong volume performance for our flagship Vita Coco Coconut Water brand. The organization's ability to drive incredible volume growth while continuing to improve profitability and cash generation at the same time is something that every member of the team should be proud of."

Martin Roper, the Company’s Chief Executive Officer, said, "We are extremely pleased with this quarter's results with 11% net sales growth and Adjusted EBITDA1 of $27 million. Gross margins for the quarter exceeded our expectations due to better than expected price realization across our business, and the stabilization of our transportation costs. We are raising our full year net sales and Adjusted EBITDA1 guidance based on the strong third quarter and an updated view on fourth quarter shipments and product mix. We remain focused on investments to support the health of our brands and drive sustainable long term growth."

Third Quarter 2023 Consolidated Results

Net sales increased $14 million, or 11%, to $138 million for the third quarter ended September 30, 2023, compared to $124 million for the third quarter ended September 30, 2022. The increase in net sales was driven by increased case equivalent ("CE") volumes coupled with some benefits from net pricing actions on branded products partially offset by price/mix of private label products.

Improved gross margins and gross profit versus prior-year resulted from the reduction of transportation costs coupled with increased branded pricing and increased sales volumes. Gross profit was $56 million for the third quarter of 2023, which was an increase of $24 million compared to the same prior-year period. Gross margin of 41% in the third quarter represented a sequential improvement of over 400 basis points from the second quarter of 2023, and an increase of greater than 1400 basis points from 26% in the same prior-year period.

SG&A expenses in the third quarter of 2023 were $33 million, compared to $24 million in the prior-year period. The increase was largely due to investments in marketing expenses and higher personnel related expenses.

Net income was $15 million, or $0.26 per diluted share, for the third quarter of 2023, compared to $7 million, or $0.13 per diluted share in the third quarter of 2022. Net income benefited from strong gross profit, partially offset by increased SG&A investments, a non-cash mark-to-market loss in the fair value of foreign currency hedges of $4 million versus a gain of $1 million last year and by an increase in tax expense of $2 million.

Non- GAAP Adjusted EBITDA1 for the third quarter of 2023 was $27 million, compared to $12 million in the prior-year period. The increase in Adjusted EBITDA1 was primarily driven by strong net sales growth and gross margin improvement resulting primarily from decreased transportation costs and improved branded pricing, partially offset by increased investments in SG&A.

Balance Sheet

As of September 30, 2023, the Company had cash and cash equivalents of $95 million and no debt under its revolving credit facility, compared to $20 million and no debt, as of December 31, 2022. The increase in net cash was driven by improved net income performance and reductions in working capital. On September 30, 2023, there were 56,756,005 shares of common stock outstanding.

On October 30, 2023, the Company's Board of Directors approved a share repurchase program ("Program") authorizing the Company to repurchase up to $40 million of the Company's common stock. Shares of common stock may be repurchased under the Program from time to time through open market purchases, block trades, private transactions or accelerated or other structured share repurchase programs.

Fiscal Year 2023 Full Year Outlook

The Company is updating its previously communicated full year 2023 guidance:

  • Expect net sales growth of approximately 13-15% compared to fiscal year 2022 [previously 10-12%], based on mid teens Vita Coco Coconut Water growth and strength in private label resulting from expanded distribution with new and existing customers, plus our revised expectation of retaining the majority of a key customer's private label coconut water business.
  • Full year gross margins in the range of 35% to 37% [no change] benefiting from improved transportation costs and branded pricing, partially offset by expected private label price/mix impacts.
  • Forecast Adjusted EBITDA2 in the range of $64-67 million [previously $56-60 million] reflecting full year net sales growth and gross margin improvement offset by increased investment in SG&A to support the long term growth of the company.

Management to provide an update on its private label business and outlook during the earnings conference call later today.

Footnotes:

(1) Adjusted EBITDA represents earnings before interest, taxes, depreciation, and amortization, as adjusted for certain items as set forth in the reconciliation table of U.S. GAAP to non-GAAP information and is a measure calculated and presented on the basis of methodologies other than in accordance with GAAP. Please refer to the Use of Non-GAAP Financial Information herein for further discussion and reconciliation of this measure to GAAP measures.
(2) GAAP Net Income 2023 outlook is not provided due to the inherent difficulty in quantifying certain amounts due to a variety of factors, including the unpredictability in the movement in foreign currency rates, as well as future charges or reversals outside of the normal course of business.

Conference Call and Webcast Details

The Vita Coco Company will host a conference call and webcast at 8:30 a.m. ET today to discuss these results. To participate in the live earnings call and question and answer session, please register at https://register.vevent.com/register/BI1c04615dffc74402a2b94fb894e2f2b6 and dial-in information will be provided directly to you. A slide presentation to support the webcast, and the live audio webcast will be accessible in the “Events” section of the Company’s Investor Relations website at https://investors.thevitacococompany.com. An archived replay of the webcast will be available shortly after the live event has concluded.

About The Vita Coco Company

The Vita Coco Company was co-founded in 2004 by Chairman Michael Kirban and Ira Liran. Pioneers in the functional beverage category, The Vita Coco Company’s brands include the leading coconut water, Vita Coco; clean energy drink, Runa; sustainable enhanced water, Ever & Ever; and protein-infused water, PWR LIFT. With its ability to harness the power of people and plants, and balance purpose and profit, The Vita Coco Company has created a modern beverage platform built for current and future generations.

The company is a Public Benefit Corporation in Delaware and is a Certified B Corporation.™

Contacts
Investor Relations:

ICR, Inc.
investors@thevitacococompany.com

Non-GAAP Financial Measures

In addition to disclosing results determined in accordance with U.S. GAAP, the Company also discloses certain non-GAAP results of operations, including, but not limited to, Adjusted EBITDA, that include certain adjustments or exclude certain charges and gains that are described in the reconciliation table of U.S. GAAP to non-GAAP information provided at the end of this release. These non-GAAP measures are a key metric used by management and our board of directors to assess our financial performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance and because we believe it is useful for investors to see the measures that management uses to evaluate the Company. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparisons of results as the items described below in the reconciliation tables do not reflect ongoing operating performance.

These measures are not in accordance with, or an alternative to, U.S. GAAP, and may be different from non-GAAP measures used by other companies. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces its usefulness as a comparative measure. Investors should not rely on any single financial measure when evaluating our business. This information should be considered as supplemental in nature and is not meant as a substitute for our operating results in accordance with U.S. GAAP. We recommend investors review the U.S. GAAP financial measures included in this earnings release. When viewed in conjunction with our U.S. GAAP results and the accompanying reconciliations, we believe these non-GAAP measures provide greater transparency and a more complete understanding of factors affecting our business than U.S. GAAP measures alone.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including but not limited to, statements regarding our future financial and operating performance, including our GAAP and non-GAAP guidance, our strategy, projected costs, prospects, expectations, plans, objectives of management, supply chain predictions, customer and supplier relationships and expected net sales and category share growth.

The forward-looking statements in this release are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements involve a number of risks, uncertainties or other factors beyond the Company’s control. These factors include, but are not limited to, those discussed under the caption “Risk Factors” in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and our other filings with the U.S. Securities and Exchange Commission ("SEC") as such factors may be updated from time to time and which are accessible on the SEC’s website at www.sec.gov and the Investor Relations page of our website at https://investors.thevitacococompany.com. Any forward-looking statements contained in this press release speak only as of the date hereof and accordingly undue reliance should not be placed on such statements. We disclaim any obligation or undertaking to update or revise any forward-looking statements contained in this press release, whether as a result of new information, future events or otherwise, other than to the extent required by applicable law.

Website Disclosure

We intend to use our websites, vitacoco.com and investors.thevitacococompany.com, as a means for disclosing material non-public information and for complying with the SEC's Regulation FD and other disclosure obligations.


THE VITA COCO COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands, except share data)
 
 September 30,
2023
 December 31,
2022
Assets   
Current assets:   
Cash and cash equivalents$94,885  $19,629 
Accounts receivable, net of allowance of $2,849 at September 30, 2023, and $2,898 at December 31, 2022 79,577   43,350 
Inventory 50,380   84,115 
Supplier advances 1,525   1,534 
Derivative assets 3,147   3,606 
Asset held for sale    503 
Prepaid expenses and other current assets 17,794   22,181 
Total current assets 247,308   174,918 
Property and equipment, net 2,225   2,076 
Goodwill 7,791   7,791 
Supplier advances 3,462   4,360 
Deferred tax assets, net 4,251   4,256 
Right-of-use assets, net 1,718   2,679 
Other assets 1,724   1,677 
Total assets$268,479  $197,757 
Liabilities and Stockholders’ Equity   
Current liabilities:   
Accounts payable 21,411   15,910 
Accrued expenses and other current liabilities 51,242   38,342 
Notes payable, current 15   23 
Derivative liabilities 1,371   71 
Total current liabilities 74,039   54,346 
Notes payable, long-term 15   25 
Other long-term liabilities 1,822   2,293 
Total liabilities 75,876   56,664 
    
Stockholders’ equity:   
Common stock, $0.01 par value; 500,000,000 shares authorized; 62,962,205 and 62,225,250 shares issued at September 30, 2023 and December 31, 2022, respectively; 56,756,005 and 56,019,050 Shares Outstanding at September 30, 2023 and December 31, 2022, respectively. 629   622 
Additional paid-in capital 158,244   145,210 
Retained earnings 93,969   55,183 
Accumulated other comprehensive loss (1,311)  (994)
Treasury stock, 6,206,200 shares at cost as of September 30, 2023, and December 31, 2022. (58,928)  (58,928)
Total stockholders’ equity attributable to The Vita Coco Company, Inc. 192,603   141,093 
Total liabilities and stockholders’ equity$268,479  $197,757 


THE VITA COCO COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except for share and per share data)
 
 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
Net sales$138,064  $124,043  $387,468  $335,796 
Cost of goods sold 81,893   91,467   246,542   254,868 
Gross profit 56,171   32,576   140,926   80,928 
Operating expenses       
Selling, general and administrative 32,649   23,960   89,855   73,018 
Income (Loss) from operations 23,522   8,616   51,071   7,910 
Other income (expense)       
Unrealized gain/(loss) on derivative instruments (3,959)  952   (1,758)  6,416 
Foreign currency gain/(loss) (1,211)  (364)  (430)  (508)
Interest income 824   20   1,105   30 
Interest expense (1)  (130)  (31)  (213)
Total other income (expense) (4,347)  478   (1,114)  5,725 
Income before income taxes 19,175   9,094   49,957   13,635 
Income tax expense (4,011)  (1,836)  (10,101)  (3,011)
Net income$15,164  $7,258  $39,856  $10,624 
Net income per common share       
Basic$0.27  $0.13  $0.71  $0.19 
Diluted$0.26  $0.13  $0.68  $0.19 
Weighted-average number of common shares outstanding       
Basic 56,493,757   55,785,622   56,290,195   55,658,946 
Diluted 59,271,757   56,579,912   58,494,045   56,029,069 


THE VITA COCO COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
 
 Nine Months Ended September 30,
  2023   2022 
Cash flows from operating activities:   
Net income$39,856  $10,624 
Adjustments required to reconcile net income to cash flows from operating activities:   
Depreciation and amortization 503   1,442 
(Gain)/loss on disposal of equipment 19    
Bad debt expense 255   348 
Unrealized (gain)/loss on derivative instruments 1,758   (6,416)
Stock-based compensation 7,126   5,657 
Impairment loss on long-lived asset 363   619 
Noncash lease expense 966   963 
Changes in operating assets and liabilities:   
Accounts receivable (37,234)  (20,696)
Inventory 33,815   (255)
Prepaid expenses, net supplier advances, and other assets 5,215   (4,433)
Accounts payable, accrued expenses, and other liabilities 17,361   (6,034)
Net cash provided by (used in) operating activities 70,003   (18,181)
Cash flows from investing activities:   
Cash paid for property and equipment (533)  (907)
Proceeds from sale of property and equipment 5    
Net cash used in investing activities (528)  (907)
Cash flows from financing activities:   
Proceeds from exercise of stock awards 5,915   2,675 
Borrowings on credit facility    22,000 
Repayments of borrowings on credit facility    (12,500)
Cash received (paid) on notes payable (18)  (22)
Net cash provided by (used in) financing activities 5,897   12,153 
Effects of exchange rate changes on cash and cash equivalents 212   (544)
Net increase/(decrease) in cash and cash equivalents 75,584   (7,479)
Cash and cash equivalents at beginning of the period 19,629   28,690 
Cash, cash equivalents and restricted cash at end of the period (1)$95,213  $21,211 

1Includes $328 and $0 of restricted cash as of September 30, 2023 and 2022, respectively, that were included in other current assets.


RECONCILIATION FROM GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDA
 
 Three Months Ended September 30,Nine Months Ended September 30,
  2023   2022  2023   2022 
(in thousands)      
Net income$15,164  $7,258 $39,856  $10,624 
Depreciation and amortization 163   497  503   1,442 
Interest income (824)  (20) (1,105)  (30)
Interest expense 1   130  31   213 
Income tax expense 4,011   1,836  10,101   3,011 
EBITDA 18,515   9,701  49,386   15,260 
Stock-based compensation (a) 2,862   1,457  7,126   5,657 
Unrealized (gain)/loss on derivative instruments (b) 3,959   (952) 1,758   (6,416)
Foreign currency (gain)/loss (b) 1,211   364  430   508 
Secondary Offering Costs (c)      856    
Other Adjustments (d) 329   1,240  329   1,240 
Adjusted EBITDA$26,876  $11,810 $59,885  $16,249 


(a)Non-cash charges related to stock-based compensation, which vary from period to period depending on volume and vesting timing of awards. We adjusted for these charges to facilitate comparison from period to period.
(b)Unrealized gains or losses on derivative instruments and foreign currency gains or losses are not considered in our evaluation of our ongoing performance.
(c)Reflects other non-recurring expenses related to costs associated with the secondary offering in which Verlinvest Beverages SA sold shares of the Company in an underwritten public offering, which closed on May 26, 2023. The Company did not receive any proceeds from the sale of the shares.
(d)Reflects other charges primarily related to the impairment loss related to assets held for sale in both periods and other non-recurring expenses.


SUPPLEMENTAL INFORMATION
 
 NET SALES
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2023 2022 2023 2022
Americas segment       
Vita Coco Coconut Water$89,683 $82,643 $253,825 $217,934
Private Label 28,257  24,786  77,366  68,413
Other 2,706  1,367  7,490  7,553
Subtotal 120,646  108,796  338,681  293,900
International segment       
Vita Coco Coconut Water 11,350  10,637  33,628  30,110
Private Label 5,421  3,810  13,140  9,521
Other 647  800  2,019  2,265
Subtotal 17,418  15,247  48,787  41,896
Total net sales$138,064 $124,043 $387,468 $335,796


 COST OF GOODS SOLD & GROSS PROFIT
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2023   2022   2023   2022 
Cost of goods sold       
Americas segment$70,437  $78,516  $214,214  $220,615 
International segment 11,456   12,951   32,328   34,253 
Total cost of goods sold$81,893  $91,467  $246,542  $254,868 
Gross profit       
Americas segment 50,208   30,279   124,466   73,285 
International segment 5,963   2,297   16,460   7,643 
Total gross profit$56,171  $32,576  $140,926  $80,928 
Gross margin       
Americas segment 41.6%  27.8%  36.8%  24.9%
International segment 34.2%  15.1%  33.7%  18.2%
Consolidated 40.7%  26.3%  36.4%  24.1%


SUPPLEMENTAL INFORMATION
 
 VOLUME (CE)
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2023 2022 2023 2022
Americas segment       
Vita Coco Coconut Water9,234 8,670 26,511 23,269
Private Label3,185 2,346 8,454 7,213
Other265 200 714 1,092
Subtotal12,684 11,216 35,679 31,574
        
International segment*       
Vita Coco Coconut Water1,504 1,581 4,665 4,412
Private Label725 492 1,766 1,326
Other10 13 46 38
Subtotal2,239 2,086 6,477 5,776
Total volume (CE)14,923 13,302 42,156 37,350

Note: A CE is a standard volume measure used by management which is defined as a case of 12 bottles of 330ml liquid beverages or the same liter volume of oil.

*International Other excludes minor volume that is treated as zero CE