Vita Coco Company Inc

Previous wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Current wording

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

Previous wording

The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023, respectively:

Current wording

The following table summarizes our results of operations for the three and nine months ended September 30, 2024 and 2023, respectively:

Previous wording

For the three months ended June 30, 2024, the primary driver of the consolidated net sales increase of 3.2% was a 4.4% net sales increase in Vita Coco Coconut Water resulting from a case equivalents ("CE") volume increase of 1.9% coupled with net pricing benefits. For the six months ended June 30, 2024, the net sales increase of 2.6%, was driven by Vita Coco Coconut Water which had a 2.8% net sales increase due to net pricing actions and changes in promotion timing compared to prior year, partially offset by a CE volume decrease of 0.7%.

Current wording

For the three months ended September 30, 2024, the primary driver of the consolidated net sales decrease of 3.7% was a 36.8% decrease in private label net sales, which was in part due to the transition out of private label coconut oil sales to a key customer, coupled with lower private label coconut water volumes, which were impacted by supply constraints. Vita Coco Coconut Water net sales increased 7.8% with a case equivalents ("CE") volume increase of 6.3%. For the nine months ended September 30, 2024, the net sales increase of 0.3%, was driven by Vita Coco Coconut Water, which had a 4.5% net sales increase, partially offset by private label net sales decrease of 13.1%.

Previous wording

The following table provides a comparative summary of the percentage change in our volume in CE for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, by operating segment and product category:

Current wording

The following table provides a comparative summary of the percentage change in our volume in CE for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, by operating segment and product category:

Previous wording

Vita Coco Coconut Water net sales increased by $3.5 million, or 3.7%, to $98.5 million for the three months ended June 30, 2024, from $95.0 million for the three months ended June 30, 2023. The increase was the result of CE volume growth of 1.3% coupled with net pricing benefits. Vita Coco Coconut Water net sales increased by $3.9 million, or 2.4%, to $168.0 million for the six months ended June 30, 2024. The increase was primarily driven by net pricing benefits due to the timing of pricing promotions, partially offset by a CE volume decrease of 0.6%.

Current wording

Vita Coco Coconut Water net sales increased by $4.3 million, or 4.8%, to $94.0 million for the three months ended September 30, 2024, from $89.7 million for the three months ended September 30, 2023. The increase was the result of CE volume growth of 2.9% coupled with net pricing benefits. Vita Coco Coconut Water net sales increased by $8.2 million, or 3.2%, to $262.0 million for the nine months ended September 30, 2024. The increase was primarily driven by net pricing benefits due to the timing of pricing promotions with a CE volume increase of 0.6%.

Previous wording

Private label net sales decreased by $0.9 million, or 3.8%, to $23.1 million for the three months ended June 30, 2024, from $24.1 million for the three months ended June 30, 2023, due to the expected decrease in the private label oil business, partially offset by CE volume growth of 10.6%. Private label net sales decreased by $1.7 million, or 3.5% to $47.4 million for the six months ended June 30, 2024, due to the expected private label oil decrease, partially offset by CE volume growth of 7.1%.

Current wording

Private label net sales decreased by $11.8 million, or 41.6%, to $16.5 million for the three months ended September 30, 2024, from $28.3 million for the three months ended September 30, 2023, due to the expected decrease in the private label oil business and supply constraints driving CE volume decline of 32.1%. Private label net sales decreased by $13.5 million, or 17.4%, to $63.9 million for the nine months ended September 30, 2024, due to the expected private label oil decrease in addition to supply constraints, with a CE volume decline of 7.6%.

Previous wording

Vita Coco Coconut Water net sales increased by $1.2 million, or 9.7%, to $14.0 million for the three months ended June 30, 2024, from $12.7 million for the three months ended June 30, 2023. The increase was driven primarily by Europe, which had strong volume and net sales performance, partially offset by lower volumes in the Asia Pacific region. Vita Coco Coconut Water net sales increased by $1.3 million, or 6.0%, to $23.6 million for the six months ended June 30, 2024 from $22.3 million for the six months ended June 30, 2023. The increase was primarily driven by strong growth in Europe partially offset by lower volumes in the Asia Pacific region.

Current wording

Vita Coco Coconut Water net sales increased by $3.5 million, or 31.1%, to $14.9 million for the three months ended September 30, 2024, from $11.3 million for the three months ended September 30, 2023. The increase was driven by both Europe and the Asia Pacific region which both had strong net sales and volume performance. Vita Coco Coconut Water net sales increased by $4.9 million, or 14.5%, to $38.5 million for the nine months ended September 30, 2024 from $33.6 million for the nine months ended September 30, 2023. The increase was primarily driven by strong growth in Europe partially offset by lower volumes in the Asia Pacific region.

Previous wording

Private label net sales decreased by $0.2 million, or 4.7%, to $4.8 million for the three months ended June 30, 2024 from $5.1 million for the three months ended June 30, 2023. The decrease was driven primarily by the expected decrease in private label coconut oil which offset private label coconut water CE volume growth in Europe from new distribution. Private label net sales increased by $2.2 million, or 29.1%, to $10.0 million for the six months ended June 30, 2024 from $7.7 million for the six months ended June 30, 2023. The increase was driven primarily by Europe which had strong volume driven by new distribution, partially offset by the private label coconut oil decrease.

Current wording

Private label net sales decreased by $0.6 million, or 11.5%, to $4.8 million for the three months ended September 30, 2024 from $5.4 million for the three months ended September 30, 2023. The decrease was driven primarily by supply constraints along with some impact from the expected decrease in private label coconut oil. Private label net sales increased by $1.6 million, or 12.4%, to $14.8 million for the nine months ended September 30, 2024, from $13.1 million for the nine months ended September 30, 2023. The increase was driven primarily by Europe, which had strong volume driven by new distribution, partially offset by the private label coconut oil decrease.

Previous wording

On a consolidated basis, cost of goods sold decreased by $3.2 million, or 3.6%, to $85.4 million for the three months ended June 30, 2024, from $88.6 million for the three months ended June 30, 2023. On a consolidated and segment basis, the decrease was primarily related to lower finished goods and transportation costs and mix impacts from Private Label, which were partially offset by volume CE growth. Cost of goods sold decreased by $14.7 million, or 9.0%, to $149.9 million for the six months ended June 30, 2024. On a consolidated basis, the decrease was primarily related to lower finished goods and transportation costs, and mix impacts from Private Label, which were partially offset by volume CE growth.

Current wording

On a consolidated basis, cost of goods sold decreased by $0.5 million, or 0.7%, to $81.3 million for the three months ended September 30, 2024, from $81.9 million for the three months ended September 30, 2023. On a consolidated and segment basis, the decrease was primarily related to the overall lower CE volume and lower finished goods costs which were partly offset by transportation cost increases. Cost of goods sold decreased by $15.3 million, or 6.2%, to $231.2 million for the nine months ended September 30, 2024. On a consolidated basis, the decrease was primarily related to lower finished goods costs, which were partially offset by volume CE growth and higher transportation costs.

Previous wording

On a consolidated basis, gross profit increased by $7.6 million, or 15.0%, to $58.7 million for the three months ended June 30, 2024, from $51.1 million for the three months ended June 30, 2023. Gross margin increased approximately 4.2% percentage points to 40.8% for the three months ended June 30, 2024, as compared to 36.6% for the three months ended June 30, 2023. The increase in gross profit resulted from lower finished goods and domestic transportation costs, and improvements primarily in Vita Coco Coconut Water pricing along with mix effects of private label products. Gross profit increased by $21.2 million, or 25.0%, to $105.9 million for the six months ended June 30, 2024. This increase resulted from lower finished goods and transportation costs, improvements in Vita Coco Coconut Water pricing, volume CE growth, cost of goods mix benefits, partly offset by Private Label net sales mix impacts.

Current wording

On a consolidated basis, gross profit decreased by $4.6 million, or 8.2%, to $51.6 million for the three months ended September 30, 2024, from $56.2 million for the three months ended September 30, 2023. Gross margin decreased approximately 1.9% percentage points to 38.8% for the three months ended September 30, 2024, as compared to 40.7% for the three months ended September 30, 2023. The decrease in gross profit resulted from the lower CE volume and consequent net sales, along with higher transportation costs, which were partially offset by lower finished goods costs and improved net pricing on Vita Coco Coconut Water. Gross profit increased by $16.6 million, or 11.7%, to $157.5 million for the nine months ended September 30, 2024. The increase resulted from volume CE growth and lower finished goods costs, partly offset by higher transportation costs.

Previous wording

During the three months ended June 30, 2024, SG&A decreased by $1.5 million, or 4.9%, versus the three months ended June 30, 2023. The decrease was primarily driven by reduced marketing expense of $2.7 million largely timing related, partially offset by an increase of $1.1 million in personnel related expenses for the three months ended June 30, 2024 versus the prior year comparable period. During the six months ended June 30, 2024, SG&A decreased by $0.2 million, or 0.4%, versus the six months ended June 30, 2023. The decrease was primarily driven lower marketing expense of $2.8 million and reduced bad debt expense of $0.4 million, partially offset by increased personnel related expenses of $3.0 million.

Current wording

During the three months ended September 30, 2024, SG&A decreased by $1.7 million, or 5.2%, versus the three months ended September 30, 2023. The decrease was primarily driven by reduced marketing expense of $1.8 million due to reduced spending in light of product supply constraints. During the nine months ended September 30, 2024, SG&A decreased by $1.9 million, or 2.1%, versus the nine months ended September 30, 2023. The decrease was primarily driven lower marketing expense of $4.6 million and reduced bad debt expense of $0.9 million, partially offset by increased personnel related expenses of $3.6 million.

Previous wording

For the three months ended June 30, 2024 and 2023, we recorded losses of $6.0 million and gains of $1.0 million, respectively, for the mark-to-market changes in fair value on the outstanding derivative instruments for forward foreign currency exchange contracts, with the largest loss for the three months ended June 30, 2024 related to the contracts hedging the BRL. For the six months ended June 30, 2024 and 2023, we recorded losses of $8.5 million and gains of $2.2 million, respectively, for the mark-to-market changes in fair value on the outstanding derivative instruments for forward foreign currency exchange contracts, with the largest loss for the six months ended June 30, 2024 related to the contracts hedging the BRL and THB, partially offset by gains on GBP, CAD and EUR hedges.

Current wording

For the three months ended September 30, 2024 and 2023, we recorded gains of $2.6 million and losses of $4.0 million, respectively, for the mark-to-market changes in fair value on the outstanding derivative instruments for forward foreign currency exchange contracts, with the largest gain for the three months ended September 30, 2024 related to the contracts hedging the BRL and THB. For the nine months ended September 30, 2024 and 2023, we recorded losses of $5.9 million and losses of $1.8 million, respectively, for the mark-to-market changes in fair value on the outstanding derivative instruments for forward foreign currency exchange contracts, with the largest loss for the nine months ended September 30, 2024 related to the contracts hedging the BRL, partially offset by gains on THB, GBP, and CAD hedges.

Previous wording

For the three months ended June 30, 2024, the change in foreign currency loss was $0.3 million as compared to June 30, 2023. For the six months ended June 30, 2024, the change in foreign currency loss was $0.9 million as compared to June 30, 2023. The change in all periods was a result of movements in various foreign currency exchange rates related to transactions denominated in currencies other than the functional currency.

Current wording

For the three months ended September 30, 2024, the change in foreign currency gain was $1.8 million as compared to September 30, 2023. For the nine months ended September 30, 2024, the change in foreign currency gain was $0.9 million as compared to September 30, 2023. The change in all periods was a result of movements in various foreign currency exchange rates related to transactions denominated in currencies other than the functional currency.

Previous wording

For the three months ended June 30, 2024, the increase in interest income was $1.4 million as compared to June 30, 2023. The increase was primarily due to higher levels of cash invested with financial institutions during the second quarter of 2024 compared to the second quarter of 2023. For the six months ended June 30, 2024, the change in interest income was $2.9 million as compared to the same period ending June 30, 2023. The increase in interest income period over period was due to the cash investment program that began in April 2023, in addition to higher levels of cash invested with financial institutions compared to prior year.

Current wording

For the three months ended September 30, 2024, the increase in interest income was $1.1 million as compared to September 30, 2023. The increase was primarily due to higher levels of cash invested with financial institutions during the third quarter of 2024 compared to the third quarter of 2023. For the nine months ended September 30, 2024, the change in interest income was $3.9 million as compared to the same period ending September 30, 2023. The increase in interest income period over period was due to the cash investment program that began in April 2023, in addition to higher levels of cash invested with financial institutions compared to prior year.

Previous wording

For the six months ended June 30, 2024 and 2023 our effective tax rate was 23.4% and 19.8% respectively. The effective tax rate for the current period is higher than the US statutory rate of 21% primarily as a result of state income taxes for the US company and other nondeductible expenses for tax purposes, and is partially offset by lower statutory tax rates in countries outside the US that we operate in. The change in effective tax rates between the periods is primarily driven by the jurisdictional mix of our pre-tax profits and the impact of higher non-deductible expense this year related to covered employees' compensation in relation to the pre-tax profits.

Current wording

For the nine months ended September 30, 2024 and 2023 our effective tax rate was 23.9% and 20.2%, respectively. The effective tax rate for the current period is higher than the US statutory rate of 21% primarily as a result of state income taxes for the US company and other nondeductible expenses for tax purposes, and is partially offset by lower statutory tax rates in countries outside the US that we operate in. The change in effective tax rates between the periods is primarily driven by the jurisdictional mix of our pre-tax profits and the impact of higher non-deductible expenses this year related to covered employees' compensation in relation to the pre-tax profits.

Previous wording

(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.

Current wording

(a)Non-cash charges related to stock-based compensation, which vary from period to period depending on volume and vesting timing of awards and forfeitures. We adjusted for these charges to facilitate comparison from period to period.

Previous wording

(c)Reflects other non-recurring expenses related to costs associated with two secondary offerings in which Verlinvest Beverages SA sold shares of the Company in an underwritten public offering that closed on May 26, 2023 and a block trade that was executed on November 9, 2023. The amounts for the three and six months ended June 30, 2023 relate to costs for the May 26, 2023 offering. The amounts for the three and six months ended June 30, 2024 relate to an expense waiver of certain costs incurred during the November 9, 2023 block trade. The Company did not receive any proceeds from the sale of the shares. For additional information regarding the expense waiver for the three and six months ended June 30, 2024, see Note 14, Related Party Transactions, in our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Current wording

(c)Reflects other non-recurring expenses related to costs associated with two secondary offerings in which Verlinvest Beverages SA sold shares of the Company in an underwritten public offering that closed on May 26, 2023 and a block trade that was executed on November 9, 2023. The amounts for the three and nine months ended September 30, 2023 relate to costs for the May 26, 2023 offering. The amounts for the three and nine months ended September 30, 2024 relate to an expense waiver of certain costs incurred during the November 9, 2023 block trade. The Company did not receive any proceeds from the sale of the shares. For additional information regarding the expense waiver for the three and nine months ended September 30, 2024, see Note 14, Related Party Transactions, in our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

Since our inception, we have financed our operations primarily through cash generated from our business operations and proceeds on borrowings through our credit facilities and term loans. We had $150.1 million and $132.5 million of cash and cash equivalents as of June 30, 2024 and December 31, 2023, respectively. From time to time, we may supplement our liquidity needs with incremental borrowing capacity under the 2020 Credit Facility.

Current wording

Since our inception, we have financed our operations primarily through cash generated from our business operations and proceeds on borrowings through our credit facilities and term loans. We had $156.7 million and $132.5 million of cash and cash equivalents as of September 30, 2024 and December 31, 2023, respectively. From time to time, we may supplement our liquidity needs with incremental borrowing capacity under the 2020 Credit Facility.

Previous wording

During the six months ended June 30, 2024, cash used in investing activities was $0.4 million as compared to $0.5 million for the six months ended June 30, 2023, due to a minor increase in capital expenditures.

Current wording

During the nine months ended September 30, 2024, cash used in investing activities was $0.8 million as compared to $0.5 million for the nine months ended September 30, 2023, the increase was due to equipment purchases and higher technology related capital expenditures.

Previous wording

During the six months ended June 30, 2024 compared to the six months ended June 30, 2023, net cash used by financing activities was $11.3 million higher primarily driven by share repurchases that occurred in January 2024 and lower proceeds from stock award exercises. See Note 10, Stockholders' Equity, for further discussion on share repurchases.

Current wording

During the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, net cash used by financing activities was $16.3 million higher primarily driven by share repurchases that occurred in 2024 and lower proceeds from stock award exercises. See Note 10, Stockholders' Equity, for further discussion on share repurchases.

Previous wording

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in the Form 10-K and the notes to the unaudited condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q. During the six months ended June 30, 2024, there were no material changes to our critical accounting policies from those discussed in the Form 10-K.

Current wording

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in the Form 10-K and the notes to the unaudited condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q. During the nine months ended September 30, 2024, there were no material changes to our critical accounting policies from those discussed in the Form 10-K.