Vita Coco Company, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 14, 2023. The company sells branded and private-label beverages, led by Vita Coco coconut water, across the Americas and International segments. More than 91% of revenue came from coconut water. The company uses an asset-light model with third-party manufacturers, co-packers and logistics providers.
Key financial metrics
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Net sales | $427.8 million | $379.5 million |
| Gross profit / margin | $103.4 million / 24.2% | $113.1 million / 29.8% |
| Income from operations | $3.1 million | $24.6 million |
| Net income attributable to common stockholders | $7.8 million; $0.14 diluted EPS | $19.0 million; $0.35 diluted EPS |
| Adjusted EBITDA | $20.3 million | $36.9 million |
| Cash from operating activities | $(10.9) million | $(16.2) million |
| Cash and cash equivalents at year-end | $19.6 million | $28.7 million |
Net cash used in investing activities was $1.0 million and financing activities provided $3.0 million. Total assets were $197.8 million and stockholders’ equity was $141.1 million at year-end. The company had no revolving-facility borrowings, with $60 million undrawn and available; vehicle loans were less than $0.1 million. Management said cash, expected operating cash flow and facility availability should cover anticipated needs for at least 12 months. No dividend is anticipated in the foreseeable future.
Changes versus the prior comparable period
- FY net sales rose 12.7%, primarily on 10.5% higher case-equivalent volume, reduced promotions, price increases and favorable branded-product mix.
- Americas sales grew 15.4% to $373.6 million, while International sales fell 2.6% to $54.2 million; stronger International volume was offset by unfavorable foreign exchange, particularly the stronger U.S. dollar against the British pound.
- Cost of goods sold increased 21.8%, outpacing revenue growth. Management estimated approximately $30 million of incremental rate/mix cost pressure, primarily from ocean freight and domestic logistics. Gross margin declined 5.7 percentage points.
- SG&A rose 13.3% to $100.3 million, reflecting higher people costs, a full year of public-company costs and a Runa-related impairment, partly offset by nonrecurring 2021 IPO-readiness expenses. Operating income fell 87.6%.
- Cash used in operations improved by $5.2 million, principally due to a $10 million working-capital improvement, but remained negative. Year-end inventory increased to $84.1 million from $75.4 million.
Quarterly performance and outlook
In Q4 2022, net sales were $92 million, up 6% year over year; gross profit was $22 million and gross margin was 24%, versus 25% in Q4 2021. Net loss was $3 million in both periods. Adjusted EBITDA was $4 million, compared with $1 million.
The filing provides no quantified FY 2023 revenue, earnings or margin guidance. Management planned to continue multipack and product-expansion initiatives, expand PWR LIFT into Texas and launch Vita Coco Spiked with Captain Morgan nationally in 2023 through Diageo. It expected some supply-chain cost pressures to ease, but identified continued uncertainty, including significantly higher U.S. warehouse costs and reduced warehouse availability. Sales are seasonal, typically strongest in Q2 and Q3.
Risks, contingencies and unusual items
- Customer concentration: Two customers represented approximately 54% of FY 2022 net sales; the largest retail-direct customer and largest distributor represented about 30% and 24%, respectively. Two customers also represented 39% of year-end receivables. The filing says the company had not experienced credit issues with these customers.
- Supply and input risks: Reliance on third-party manufacturers and logistics, a concentrated packaging supply base (including Tetra Pak), coconut and ingredient availability, freight, labor, inflation and climate-related disruptions could affect cost, supply and sales.
- Runa impairment: The company recorded a $6.7 million noncash impairment of Runa trade names and distributor relationships; all amortizable intangible assets were impaired by year-end. Goodwill impairment was not recorded.
- Other asset charge: A $0.6 million impairment was recorded on an Ecuador farm asset group held for sale, which supplied guayusa leaves. The company said it can source guayusa through alternatives.
- Reported earnings included valuation effects: FY 2022 other income included $6.6 million of unrealized derivative gains and $1.4 million of foreign-currency gains. These are not equivalent to recurring operating earnings.
- Contingencies: Runa contingent consideration was zero after revenue milestones were not achieved and the measurement period ended in December 2022. The company reported no material pending legal proceedings and no recorded legal-settlement liabilities at year-end.
- Governance and oversight: The company is a Delaware public benefit corporation and a certified B Corporation. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not provide an ICFR attestation because the company was an emerging growth company. A new CFO was appointed in March 2023 to succeed the interim CFO.
Investor verification priorities
- Check whether volume growth and pricing can offset freight, warehouse, packaging and other cost pressures, and whether gross margins recover.
- Track operating cash flow, inventory levels, receivables and the increased allowance for doubtful accounts, as well as the conversion of reported earnings into cash.
- Monitor sales dependence on coconut water and the two major customers, including customer support, order patterns and receivable collection.
- Assess the performance and investment needs of newer brands and the implications of the Runa impairment and asset sale.
- Review 2023 results for execution of planned product launches and expansion; the filing does not provide quantified guidance against which to measure them.