Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vital Farms Incorporated Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. And now I would like to turn the call over to Anthony Bucalo, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Vital Farms second quarter 2024 earnings conference call and webcast. I am Tony Bucalo, VP of Investor Relations. And I'm joining the call today by Russell Diez-Canseco, President and Chief Executive Officer; and Thilo Wrede, Chief Financial Officer. By now, everyone should have access to the company's second quarter 2024 earnings press release issued this morning. This is available on the Investor Relations section of Vital Farms website at investors.vitalfarms.com. Throughout this call, management may make forward-looking statements within the meaning of federal securities laws. These statements are based on management's current expectations and beliefs and do involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release, the company's quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2024, filed with the SEC today as well as our other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note that on today's call, management will refer to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to our earnings release for a reconciliation of adjusted EBITDA and adjusted EBITDA margin to the most comparable measures prepared in accordance with GAAP. With that, I will turn the call over to Russell Diez-Canseco, President and Chief Executive Officer of Vital Farms.

Good morning and thank you for your time today. I'm pleased to announce that our momentum from the first quarter carried into the second. We delivered another great set of top to bottom results. Our performance was driven by growing demand for our premium products and excellent execution from the great people working across Vital Farms. I'd like to thank all of our crew members throughout the organization for these really terrific results. Today, I'll start with our key financial headlines and then shift to new developments. I'll then hand it over to Thilo, and he will provide more detail on our second quarter financials and updated guidance for fiscal year 2024. With our strong start to the year, I'm happy to report that we're in a great position to both raise our guidance and accelerate investment in the long-term success of our business. We continue to expand our farm network, and we're adding a new egg washing and processing facility in Seymour, Indiana. Additionally, we will be stepping up brand marketing investment in the back half of the year, driving our message to consumers as we push to reach 30 million households by 2027. Let's get right to the key financial headlines. We had another excellent top line performance with record second quarter net revenue of $147.4 million, up 38.5%. You might remember that we guided for 300 basis points of tailwind for sales in the quarter. This was due to our lapping some negative product ordering dislocations related to avian influenza last year. We did enjoy some benefit from this comparison. However, we still performed well above our expectations. In the first half of 2024, our sales grew 31% on top of a first half 2023 comparison of 41%. We delivered another strong gross margin performance this quarter.…

Thank you, Russell. Hello, everyone, and thank you for joining us today. I will now review our financial results for the first quarter ended June 30, 2024, and then provide details on our updated guidance for fiscal year 2024. We followed our record first quarter results with another great performance in the second quarter. Our net revenue rose to $147.4 million, up 38.5% versus last year. We posted 35.8% volume growth and modest price mix benefits. Consistent with our performance from the first quarter, volume growth was driven by strong consumer demand and expansion at both new and existing retailers. This volume performance was in line with our mostly volume-driven growth plans for this year. Gross profit for the second quarter of 2024 rose to $57.7 million or 39.1% of net revenue compared with $37.8 million or 35.5% of net revenue in the second quarter of 2023. Gross profit was boosted by revenue growth, scale benefits and operational efficiencies. These factors, along with price mix benefits and lower conventional commodity and diesel costs also contributed to higher margins. This was partially offset by an increase in the promotional rate and an increase in labor and overhead costs to keep up with our growth. SG&A expenses for the second quarter of 2024 were $33.3 million or 22.6% of net revenue compared to $23.9 million or 22.5% of net revenue in the second quarter of last year. The increase in SG&A this quarter was driven primarily by higher professional service expenses, employee-related costs, including stock-based compensation and overall increase in employee headcount, brokerage and marketing expenses and technology in software-related expenses. These costs all reflected the expansion of the business. Shipping and distribution costs rose in absolute terms, but declined as a percentage of sales. Shipping and distribution expenses in the second…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Brian Holland of D.A. Davidson. Please go ahead.

Yes, thanks. Good morning. I wanted to ask first about the implied step down in margin in the second half and the first half, which looks like it's going from high teens to high single digits. Obviously, Thilo, I think you laid out a lot of it. But just maybe want to get a better sense for how much the marketing investment is going to be up maybe in the year and in the second half and kind of where that would put you on a relative basis to sales on an annualized basis? And maybe where do you see that going forward versus where you've kind of been historically?

Yes. Great question, Brian. Good morning. The marketing investments, last year, we did something similar where we concentrated marketing investments in the second half of the year. This year, we are planning an even bigger spending on marketing investments in second half of the year as a percent of net sales. And it's simply driven by the fact that we have this upside in the first half versus our own plans. So we are -- we have with better profitability first half than what we had expected when we plan for the year. And while we are happy to let some of that flow to the bottom line, we also want to make sure that we make the appropriate investments where we can to ensure that the growth continues and we continue delivering the upside that we have. And Russell had mentioned on the call that we have started this new advertising program around women's sports, how it connects the female farmers that we work with. There's a huge opportunity for us there. I think the viewership of women sports is up meaningfully over time. And given the profit upside from the first half, we just figure there, there's an opportunity for us here to continue building awareness and going up for the health of penetration that we have. Last year, we spent roughly 5% of our net sales on marketing spending. I would expect a small increase relative to that level this year. And long term, I think the 5% to 6% range is probably the right range for us right now, but we'll continue to evaluate that as we continue to grow.

Appreciate the color. And then just switching gears to the new egg washing facility. Can you just, for investors and Russell appreciated the update on Springfield going from $700 million to $800 million. But just within the context of a $1 billion revenue target by 2027, just help us understand the bridge from onboarding that facility and ramping that up. What -- how that plays into the $1 billion if -- what other considerations or flexibility do you have to make sure that you're from a distribution capacity standpoint supporting that? And then maybe, Thilo, just in that context, just any thoughts on kind of the CapEx component between now and starting up that facility.

Thanks, Brian. Good to be with you today. So as you have learned over time, we're very intentional and plan very well in advance to make sure that we don't face the common constraints on growth here at a fast-growing company. For example, we started the site selection for this plant about two years ago and made this announcement just in the last quarter, and that's well in advance of us opening the facility. Now we believe that we will have that facility up and running by the end of 2026 or the beginning of 2027 and that that will be well timed with our -- hitting our capacity in Springfield and needing to add capacity. There are other levers that we can pull for short periods of time. In case, for example, we have a big upside surprise in volume. There's more space in Springfield that we could potentially leverage to temporarily add capacity if that became necessary. But we've been very deliberate in our growth, and we feel pretty confident about the projections we're using that led us to the timing of Seymour.

Brian, on your CapEx question, so the cost for the new Springfield facility, we haven't fully talked about it. I think we've talked about the revenue capacity that the new Seymour facility brings us and that we think for every dollar of CapEx that we put in, we get $5 of revenue out of it. That CapEx will be spent in 2025 and 2026%, the vast majority of it, simply, we start breaking ground in the first half next year, and that's when the spending really starts. Russell on the prepared remarks had talked about these starter farms that we are now starting to plan for as well with our clients on that there. There will be additional CapEx that goes into those starter farms as well. I think in the 10-Q, we talked about $20 million to $30 million of CapEx over the next 12 months. And we'll probably continue to make progress on these starter farms beyond those next 12 months. So for the next two years, we'll have elevated CapEx spend elevated compared to our guidance for this year as well. But right now, we feel very good that we can fund all of that out of operating cash flow. And don't forget we have $153 million of cash on the balance sheet. So we have a very, very healthy cash cushion right now.

Great. We'll leave it there. Thank you.

Your next question comes from the line of Rob Dickerson of Jefferies. Please go ahead.

Great. Thanks so much. Good morning guys. I guess just first question is, let's say, what's the primary – or what was the primary driver, the nice volume performance in the quarter even relative to your solid expectations coming out of Q1, right? It seems like there was this bump. So clearly, the question now is as well as there's increased distribution, the velocities are great and demand is driving distribution, distribution is driving demand, then why couldn't we see a little bit more of that kind of all going upside as we get through at least Q3. Thanks.

Yes. Great question, Bob. Good morning. Let me – I think on the first quarter call, three months ago, we had talked about how first quarter was just humming on all cylinders ECS was operating really well. Consumer demand was strong. And I think in the second quarter, we saw a continuation of that theme. This virtuous cycle that Russell had mentioned in the prepared remarks about distribution driving demand and demand driving distribution that continues, ECS continue to operate really well. So it's really this virtuous cycle that we've talked about it. It continues to manifest itself. For the back half of the year, we assume that at some point, in terms of ECS operating efficiency, we will regress to a mean, this very smooth operation that we had in the first half of the year. We don't necessarily expect that to continue in perpetuity. At some point, the machine will break down unexpectedly. And then we'll have to fix it and do some maintenance outside of the planned cycle. And so our guidance reflects that ECS at some point, we'll probably run into some hiccup that we just didn't see in the first half. And so we just want to make sure we don't get ahead of our skis there. Consumer demand for us continues to be strong, right? You publish Nielsen reports every two weeks. You see the scanner data that continues to be strong. But it is more our own cautiousness to make sure that that we don't run into the situation where we promise something and then we run into an unforeseen issue at ECS that will prevent us from delivering on that.

Okay, very clear prudence. Good. And then I guess, just another kind of more technical P&L question. Q1, the gross margin was great. Q2, the gross margin was great. And I think kind of as you put up at least the Q1 number, right, there is kind of walking everybody back a little bit just with respect to kind of go-forward run rate, but you've never really spoken to the business kind of getting into the high 30% gross margin and totally understand that. And I totally understand a lot of the stars have aligned in the first half. All that said I feel like part of the kind of conservatism as you got where you think through the year was also just around fee cost and input costs. And where we sit today, they're actually better than they were a few months ago, if I'm taking more corn soybeans. So maybe just a couple of comments as to why you couldn't potentially do a gross margin even Q3 that's similar to Q2 maybe? That's all. Thanks guys.

Yes. No, fair question. Look, the -- when we look at commodity costs in my estimation, Q2 was probably the biggest year-over-year benefit in fall of commodity costs. So the margin benefit that we get from that probably peaked in Q2. And look, I'm not in the business of forecasting commodity costs, right? If they keep moving around, who knows what happens the rest of the year. We have visibility into the cost that we have in Q3. We have a bit of visibility into Q4. Based on that, I would assume that Q2 was the best year-over-year comparison. We talked in the prepared remarks about the butter business starting to grow again, that will put pressure on gross margin. We – there's a bit of maintenance that we need to do at ECS that will flow through COGS that will hit gross margin. So that is why we are saying that we still assume that for the year we'll be -- for the back half of the year we'll be about our long-term guidance, just not to the same degree that we have in the first half of the year.

Okay, sounds great. Good job guys.

Thanks.

Your next question comes from the line of Ben Klieve from Lake Street. Please go ahead.

Hi, thanks for taking my questions. Congratulations on another nice quarter here. A question about the initiative you have around Seymour also you talked about purchasing land for kind of R&D farms. And it sounds like a bit as a BD tool. I'm curious if one you could comment on the degree to which the $3 million you've invested into this initiative so far represents the bulk of this initiative or if that's going to expand in any material fashion. And then if you could kind of characterize this initiative between this kind of R&D farm versus kind of a longer-term business development tool? I would be curious about both of those thoughts.

Good morning, Ben. Thanks for being with us, and I appreciate the questions. Yes, I'm really excited about this initiative. So I'll talk a little bit about the purpose and the goals and then Thilo can talk about kind of the capital expenditure, the roadmap. As we said in the remarks, there are two things that I believe will be meaningful to Vital Farms and all of our stakeholders coming out of this initiative. The first is that we still have a lot of innovation to try and to incorporate. We've been traveling to Europe almost annually for 10 years. And they've been doing things the way we do it for a lot longer. And every time we go there, we learn and we get new ideas, and we hear from them what's working, and you can't do everything at once. We want to start to implement more of what we've seen work so well over there, and we want to be able to prove to our network of small family farmers the impact on them, on the health of their birds and on their bottom lines before we ask them to sort of make that investment themselves. We're not in the habit of forcing additional CapEx on our farmers within the course of our working relationship. So that's one, which is we get to test and learn. And then the other is, as you well know, adding a farm is a long lead time exercise. It takes as much as a year to go from deciding we want more eggs a year from now and actually having a new farmer with a farm that's operating and actually producing those eggs. And sometimes the year is one issue. But there's also variability, which is another issue because a lot of the upfront work of finding the right piece of land, getting financing from the bank, finding the right contractor to build the born, getting in line for the import of equipment with sometimes disrupted ocean freight, et cetera, can create variability. And one of the really exciting things about having a handful of these farms right where we want them in Indiana near Seymour, is that when we're ready to have farmers producing eggs in Indiana, we have 10 says more or less farms ready to go, which frankly just puts a lot more accuracy on our estimate of the timeframe. So I think this is an exciting benefit for us and an exciting benefit for the farmers and, frankly, for the chickens.

Yes. Thanks, Russell. That was really helpful. Yes. And then Thilo, any input on the level of investment beyond the $3 million would be great.

Yes, as I said before, in the Q, I think we mentioned that for the next 12 months, we plan to spend $20 million to $30 million on this. The $3 million so far was for the land purchase. Now we need to actually construct the barns and put the equipment into the barns and so on. I would assume that we'll continue to invest in this approach past, the next 12 months. And so there will be continued CapEx spend here. But as Russell said, right, it's another way for us to ensure that we have the egg supply. We did mention in the prepared remarks that we are now working with 350 family farms, so since the beginning of the year we have grown that by about 50 farms. We continue to have a very good pipeline of farmers, but we're also expanding into a new part of the country, right? There aren't -- we don't have any farms in Indiana right now, and this will allow us to basically find the pump in Indiana for farms that we want to construct there. And so from our viewpoint, it's a great view. It's a great way to ensure that the supply for Seymour once we need it will actually be in place already.

Got it. Very good. All right. Well, I appreciate you both elaborating on that. Congratulations again on the great quarter, and I'll get back in queue.

Thanks.

Thanks, Ben.

Your next question comes from the line of Rob Moskow from TD Cowen. Please go ahead.

Hi, thanks. Congratulations again. Russell and Thilo, I wanted to ask a little bit more for some color on how you're expanding the talent pool of the organization to handle all of this growth? What kind of headcount increases are you putting in for things like sales, supply chain, logistics, marketing, like running a $1 billion business is a lot different than running a $400 million business. So I wanted to hear about how you're prepping for that? And then secondly, for the new facility in Seymour, is it pretty much like cut and paste, like is the facility in Missouri, like what you've learned from that one? Is it pretty -- is it going to be like very easy to set up a similar process in Indiana like because I've seen in start-up companies that sometimes opening up a new production line could be kind of tricky based on all kinds of things that you didn't anticipate. So that's the question.

Thanks, Rob. Good morning. Great question because I think it is so common for companies at our stage of growth, still in hyper growth mode and looking ahead to $1 billion and beyond. It's so common for their top line to get ahead of their ability to service that top line. And you've known us for years now, and hopefully, you've gotten used to my refrain about planning for our capacity and capability expansion well in advance of the need so that we don't run into those somewhat predictable roadblocks that I believe predictable is preventable. So for example, we've talked about the digital transformation effort that is currently underway to make sure that we have the right systems in place to scale from our current revenue level to $1 billion and beyond. When it comes to adding talent, one of the really cool things about Vital Farms is we really do have -- I know a lot of people say it, we really do have a pretty darn distinct culture, and we attract really outstanding crew numbers in every function. And in my experience, other great people like to work with teams of great people. And so we are -- we don't struggle to hire, and we're very thoughtful in the short and long run about making sure we have a talent roadmap in order to make sure that we're well ahead of the demands of the business. As for the actual numbers that we're planning, I don't think we've sort of guided to that, and maybe Thilo has some insights that he wants to share. But my commitment to you is that, frankly, a big part of my job is simply after setting the strategy is ensuring that we have all the resources we need to execute really well.

Okay. Thanks. And just in terms of like the facility itself that you're building like is every egg washing facility the same? Or are their differences I put this one in place?

Oh, no. If you've seen our facility, you'll know not every egg washing facility is the same.

Okay.

But what was cool about Seymour is it is advantaged because it benefits from the learnings of working for seven years in Springfield. And so yes, the basic operation, the washing, inspecting and packing of eggs is the same. The machine will be from the same manufacturer, we're well familiar with it. We've got the advantage of the ability to train up the entire new crew in our currently operating facility over time. And our Vice President of Operations, who's deeply embedded in Springfield today is also the person overseeing the construction and standing up of the new facility. So we feel great about continuity. We feel great about our understanding how to run one of these places really well. And of course, the start-up never goes perfectly as planned. But this is about as close to what we're already doing, as I can imagine.

Okay, great. All right, thank you.

Thanks.

Your next question comes from the line of Jon Andersen of William Blair. Please go ahead.

Hi, good morning everybody. Congratulations.

Thank you.

My question, just one, but I guess a two-parter. One of the questions I get asked most frequently is kind of sustainable competitive advantage or moat in the egg business. I think investors, some investors have a hard time getting their arms around that. And what I'd love to hear your kind of refreshes on is thinking around both your brand and supply chain? Because it seems to me that the brand and your relationships with retailers and perhaps ability to have a greater influence and inform out of the shelf in this category is part of the barrier of the moat and then the supply chain in terms of your relationships with farmers, the farmer economics. But if you could tell us a little bit from your perspective at what constitutes the moat that would be very helpful.

Thanks, Jon, very fair question and one that we're not unfamiliar with. If you'd asked me that question three years ago, I would have somewhat flippantly said, there is no moat. And arguably, there isn't one around the production of eggs. But what there is a moat around is what we think we're really differentiating and that is selling food with a level of transparency and with a level of trust in the way we do that, that's hard to come by in this country. And so -- and the way I would maybe prove that assertion or at least some evidence that I think indicates it is in our top 10 customers, we're not the only brand of pasture-raised eggs on the shelf. And if you believe that's a commodity in need of a moat, interestingly, we have the highest price version of that kind of egg. And yet we're growing the fastest and have the highest market share year after year. And so you have to begin to wonder, are we selling a commodity egg inefficiently or are we perhaps doing something more than that? And you mentioned brand, it is absolutely my assertion that we have a brand that actually creates value for consumers. It's not just a pile of advertising on a commodity. We bring consumers and retailers into what we're doing and how we're doing it in a way that's fun and educational in a confusing segment of the grocery store, but also in a way that helps them understand how thoughtful and careful we are with all the details. So that would be my first thought that the moat is a way of operating and the way that you can maybe quantify that is around the brand and the value of the brand. You…

Great, thank you.

Thanks Jon.

Your next question comes from the line of Matt Smith from Stifel. Please go ahead.

Hi, good morning. Thilo I wanted to come back to the second half expectations. Top line looks like it’s expected to grow about 20%, including the headwind from lapping the extra week. Is there anything you’d call out in terms of the timing of your expectations for distribution gains, shelf resets, promotional events or any unique comparisons to the prior year, we should keep in mind as we phase the growth across the third and fourth quarter?

Good morning, Matt. Yes, good question. Yes, we’ve laid out the puts and takes for the year. I think we talked about it at the beginning of the year. We had a lot more puts and takes first half of the year than second half really for the second half, the biggest piece to keep in mind is the 53rd week that we had last year. Other than that, we mentioned all the TDP gains in the prepared remarks. I think you can – we talked about the items – number of SKUs on shelves in the prepared remarks. So, it’s not so much about there’s going to be a day when [indiscernible] happen and all of a sudden, our TDPs jump up. It’s an ongoing continuous process. Right? I think we have had TDP gains in eggs pretty much every month of the year. If you look at overall scanner data for us, the much will be a bit different because we have year-over-year distribution losses in butter that we are hoping to capture back in the second half of the year. But it’s really an ongoing process that will build on itself month after month rather than on a particular date when everything will change. So, the growth over the second half of the year don’t expect that there is going to be some major inflection point there. It’s really an ongoing process. And the 53rd week is that one big event out there, lapping that one that will reduce fourth quarter growth relative until the third quarter of a property.

Thank you, Thilo. And just as a follow-up, you talked about reinvesting some of the first half upside to sustain and feed the virtuous cycle through increasing marketing even above where you expected it to increase for the year. Are you also leaning more heavily into promotions behind the egg business to drive additional consumer trial and consumer or household penetration? Or is that upside being focused into marketing investments and less so on the promotion side? [Indiscernible] Thank you.

Yes. So, the reinvestment is really into marketing spending and capabilities. We did increase promotions in the first half of the year relative to last year, simply because last year, we didn’t – we really couldn’t spend because of the dislocations on shelf because of ABN influenza, right? There was no point in us subsidizing existing sales. And so, we pulled back on trade promotions. We put that back on first half this year. Second half of the year, trade promotions are, yes, at the previously planned levels, I would say. So, the investment goes to marketing, and it goes to capability building, right? One of your peers had asked a question about investments in headcount, for example. We have the ability to maybe accelerate some headcount growth in order to get capabilities in-house that we have planned for to get them in-house next year. So, we’re bringing them in now because we can. Because we can, we are able to afford it, and it actually allows us to get ahead of our planned growth curve already. This is not about promotion spending, right? Our promotion spend is to drive trial in order to then convert trial into repeat spend or repeat purchases and drive also penetration that way. That’s a plan that we build well in advance, and that’s not something that we change on the dime if we don’t have to. So, it’s really about capability building that.

And one thing I’d add to Thilo’s excellent remarks on that topic, is that we, just in case it wasn’t obvious, we don’t use promotions to rent market share, and I’m stealing that quote from our sales leader, Pete Pappas. That’s not how we grow this business.

Okay. Your next question comes from the line of Adam Samuelson of Goldman Sachs.

Yes, thank you. Good morning, everyone. So, I guess my first question is maybe kind of back to the gross margins in the second quarter and really the first half. And I want to maybe take it from the lens of kind of the supply planning point that you made earlier, Russell. You have to make your own internal supply decisions or how many eggs you have from your farms a year plus in advance. Your volumes in the first half of the year have been very, very good and above the level at which you’ve kind of, I think, assume long-term revenue growth. So the question is how much – is there a benefit in the first half gross margins from just utilizing more of that kind of surge kind of internal egg production that’s ending up in a pasture-raised brand in form versus having to get sold into other channels, and that’s helped your overall gross margins, some also there is some upside to fixed cost absorption in a central station. And as well, relatedly, how much has kind of increases in elevated commodity egg prices and product prices, especially in the second quarter versus last year. How much, if at all, did that help the results?

Thanks, Adam. Good morning. Great questions. So, the first one related to are we just – I think the question was, are we just doing a better job of selling all of our eggs at maybe the branded shelf price as opposed to selling them into a wholesale channel. As you know, there is a small, call it, low single-digit percent of the eggs that we bring off our farms that do not meet our high-quality standards. And those get sold to a wholesale channel to be broken, pasteurized and used as an ingredient in somebody else’s product. The benefit of higher commodity egg prices shows up there because that higher commodity egg price flows through to the price the breaker plant is willing to pay for that small amount of our eggs. It’s not a profit driver. We’re not actively selling into the wholesale channel. It’s just the place where the ends we don’t want to use go. But we have not, for many years now, spent eggs that could go on the shelf that met our high-quality standards. We haven’t sent measurable quantities of them to the breaker plant. Occasionally, if the mix of different egg sizes is not perfectly in line with the order pattern, for example, in the summer, birds produce more medium eggs. And so, we don’t necessarily – we aren’t necessarily able to sell all of them in line with that change in production in retail. We may have some small transitory amounts of eggs that we sell to the wholesale channel. But no, it actually – the economics of what we’re doing in our gross margin got a little bit of tailwind again from that elevated commodity egg costs. It did not impact our price mix. That’s our own strategy that’s completely separate from what’s going on in the broader market. And we’re not seeing – and historically, we have not seen big changes in the trajectory of our growth or our gross margins relative to what’s going on in the broader commodity category. We don’t respond to commodity price changes in the moment. We took price historically to protect margin, nothing more, nothing less. And we believe that continues to be true this year.

Okay. That’s helpful color. If I could just ask a follow-up on some of the farms you’re building in Indiana, I think, you talked about $20 million to $30 million of CapEx. And I guess I’m trying to square that appreciating you to buy land, but square that with kind of what I perceive to be the cost for new family farms to get their barn set up and get their farms in place to support your production regularly, just the costs seem a lot higher for what you’re building in Indiana versus what I thought your family farmers were actually outlining themselves to join your network.

Yes, it’s a fair question. And I think historically, we’ve seen numbers for a small family farmer in the range of $1.2 million to $1.5 million. Thilo may have a more recent number, but that’s my understanding. And if you did the math as you did on the number of farms we expect to build versus the dollars, we’re planning on spending more. And that doesn’t mean we will. But as I mentioned in the opening comments and in my response to one of your peers’ questions, we’re really excited to try some new things on these forms. And those new things may involve some CapEx beyond what our network of small family farms normally does as part of their contract with us. There is lots of innovation. I won’t bore you with all the details on this call. But some of those things are capital expenditures, and we wanted to make sure very conservatively that we carved out and previewed for you, I would describe it as the maximum spend. One example, and I know there are a lot of ways to finance them, but one example that we’re excited to try is putting solar panels in the field in the pasture because the birds want some shade and they want to windbreak, and solar panels do that, and they also generate electricity. Well, we’re not sure how the financing will work out. So, in our brand of conservatism, we just assume that will be our CapEx. And hopefully, we don’t spend quite as much as we guided. All right.

Okay. Alright, that’s very helpful color. I’ll pass it on. Thank you.

Thanks.

That concludes our Q&A Session. I will now turn the conference back over to Anthony Bucalo for closing remarks.

Thank you again, everyone, for your support of Vital Farms. Have a good day.

This concludes today’s call. You may now disconnect.