Good day, thank you for standing by. Welcome to the Vital Farms first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during your session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand over the conference to your speaker today, Matt Siler, Vice President of investor relations. Matt, please go ahead. Thank you. Good morning, welcome to Vital Farms first quarter 2023 earnings conference call and webcast. I'm joined on today's call by Russell Diez-Canseco, President and Chief Executive Officer, Thilo Wrede, Chief Financial Officer, and Kathryn McKeon, our Chief Marketing Officer. By now, everyone should have access to the company's first-quarter 2023 earnings press release issued this morning. This is available on the investor relations section of Vital Farms' website at investors.vitalfarms.com. Through the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and 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 and to the company's quarterly report on Form 10-Q for the fiscal quarter ended March 26th, 2023, which will be filed with the SEC today, and 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 respective most comparable measures prepared in accordance with GAAP. Now I'd like to turn the call over to Russell Diez-Canseco, President and Chief Executive Officer of Vital Farms. Thanks, Matt. Good morning. Thanks everyone for your time today. I'm going to start by sharing updates on how we delivered on our commitments to all of our stakeholders during the first quarter. Kathryn will provide an update on how our brand continues to resonate with consumers. Finally, I'm happy to introduce our new Chief Financial Officer, Thilo Wrede, who will provide more depth on our quarterly results and our annual guidance before we take your questions. It was a great first quarter. We achieved $119.2 million in net revenue, which represents the highest quarterly result in the history of Vital Farms. It reflects a 54.7% increase from the prior year period and was driven by volume growth of 26%. Our sales and marketing teams continued their efficient execution despite the dislocations in the marketplace. Our gross margin expanded by over 700 basis points to almost 36%, which is a testament to the work of each stakeholder throughout our supply chain. We had a record adjusted EBITDA of about $14 million, up significantly versus last year, and we achieved an adjusted EBITDA margin of 11.6%. I think it would be helpful to provide some context on the egg industry as we continue to deal with the ramifications of avian influenza in the marketplace. The industry is still experiencing significant price inflation, which is illustrated in the data. Looking at the 13 weeks ended March 26th, 2023, the egg category saw retail dollar growth of about 65%, due mostly to price inflation of conventional eggs. Retail volume in the category saw a 6% decline, which accelerated relative to the flat performance the industry experienced over the prior two quarters. As to an update on avian influenza, the size of the laying flock in the U.S. has begun its recovery, as we had expected, but remained below its average size in recent years during the first quarter. We continue to operate with the assumption that the egg supply in the U.S. will continue to expand as the year progresses as the size of the U.S. laying flock recovers, barring another outbreak. In terms of our performance, our retail volume grew at over 12% during the 13 weeks ended March 26th, 2023, which was well ahead of the category decline. Our volume share expanded by over 50 basis points compared to the same period last year. The elasticities we experienced at retail during the first quarter were in line with our expectations. Demand for Vital Farms products remains robust. We are reiterating our fiscal year 2023 guidance, as Tilo will expand upon shortly, which we think is appropriate at this early stage in what will certainly be a dynamic year in the marketplace. Our focus will remain grounded in driving long-term positive outcomes for each of our stakeholders. We've been intentional about the choices we've made over the past several years to build our business with this as our primary goal. We believe the many decisions we make each day fully consider each of our stakeholders, which contributes to our enduring success. We will maintain our balanced long-term stakeholder focus regardless of what is going on in the external environment. We've demonstrated that we can grow through and following the pandemic. On an annual basis, our net revenue CAGR is 37%, dating all the way back to my arrival in 2014, without a negative year-over-year revenue growth rate as a public company in any quarter. We've guided for at least 25% net revenue growth again this year on top of close to 40% net revenue growth in 2022, and we expect volume growth to play a meaningful part in addition to the impact of price increases. We have multiple proof points that demonstrate our ability to effectively manage our business through changes in pricing and inflationary volatility. We have worked with our farmers to help them navigate a more challenging operating environment and are paying them more for the hard work they do daily. Despite the higher cost to Vital Farms, we're planning on better gross margin performance in 2023 compared to 2022. We have improved our processes around both inbound and outbound freight. Over the past year, we were able to leverage the external operational capabilities of our third-party logistics providers to deliver significant value in terms of cost and service. The effort of our crew members to manage those stakeholder relationships resulted in better truckload utilization and lower contracted shipping rates. We completed in April 2022 an expansion of Egg Central Station, our world-class egg washing and packing facility on time and on budget, and are now in a position to support over $700 million in annual revenue from egg sales. We have maintained our commitments to stakeholders, even in the context of serious industry disruptors like avian influenza. We have purposefully built a network of over 300 family farms that provides resilience against these types of constraints. As a result, avian influenza has had a minimal impact on our business to date. I wanna reiterate my confidence in our ability to operate efficiently throughout this ever-changing environment. Our guidance reflects a reasonable set of assumptions about what may unfold across the economy in the second half of the year. We are in a position of strength with respect to our plans for the remainder of 2023. I'll now turn the call over to Kathryn to provide an update on our brand. Thank you, Russell. As I have said in the past, I consider it a genuine privilege to tell the Vital Farms story alongside the incredible group of people on the marketing team. Our brand is an extension of Vital Farms' purpose. Our consumers choose us because they believe we're backing up our commitment to improve the lives of people, animals, and the planet through food. We have a strategic focus on raising awareness and increasing household penetration that is driving results. I'm going to focus today on three ways we're adding new capabilities that enable us to build lasting relationships with our growing consumer base in service of that strategy. First, we are joining culturally relevant conversations that are directly relevant to our business, our purpose, and our consumers. We're doing this to meet our consumers where they are, build trust, and raise awareness. Our most recent campaign was for Valentine's Day, which created a playful entry point into two topics that resonated with our consumers: egg prices and inflation. We built a fully integrated campaign in less than a week that drove over 70 million impressions. We continue to develop this quick turn capability, we're encouraged by the return on this initial effort. Second, we are beginning a new relationship with a world-class breakthrough advertising creative agency named GUT. They approach advertising with bravery, courage, transparency, and intuition, which we believe will fuel the growth of our brands. Over the past several years, we have effectively leveraged great brand campaigns to drive consumer awareness, including our award-winning Hens Behind the Lens campaign and our most recent campaign that's running now titled Keeping It Bullshit Free. GUT has a reputation for working with bold brands like ours to break through with consumers. They're particularly effective at driving the kind of quick-turn, culturally relevant work that we're looking to do more of, and their first campaign with us was a successful Valentine's Day activation. Finally, we continue looking for new ways to get our message in front of consumers and stay on the leading edge of advertising trends. The most recent example is working with HBO Max on a new feature for advertisers, which not only drove exposure with our target growth consumer during programs like Succession, it also generated press coverage for being a first of its kind collaboration with HBO Max. The marketing team continues to set ambitious goals, push for bold creative work, and deliver. I look forward to continuing this discussion on future earnings calls. Thanks everyone for your time today. I'll now turn over to Thilo. Thank you, Kathryn McKeon. Hello, everyone, and thank you for joining us today. I'm honored to serve as Vital Farms' Chief Financial Officer, and while I'm quite early in my tenure, I am impressed with the quality of the team at Vital Farms and excited about the opportunity that lies ahead for this company. With that in mind, I want to thank Bo Meissner for leaving me a house in very good order. Following, I will review our financial results for the first quarter ended March 26, 2023. I will then provide some additional color on our guidance for fiscal year 2023. As Russell Diez-Canseco mentioned earlier, we had another record quarter with net revenue of $119.2 million, an increase of 54.7% compared to the prior year period. This was driven by volume growth of 26% based on strong volume increases across both new and existing retail customers. Gross profit for the first quarter of 2023 was $42.7 million, or 35.8% of net revenue, compared to $21.7 million or 28.2% of net revenue for the first quarter of 2022. The change in gross profit was primarily driven by higher sales. The 760 basis point gross margin gain benefited from increased pricing across our portfolio, partially offset by a few headwinds, including higher input costs that includes higher commodity prices across our shell egg and butter businesses and higher packaging costs. SG&A expenses for the first quarter were $23.9 million, or 20.1% of net revenue, compared to $17.6 million or 22.9% of net revenue in the first quarter last year. The increase in SG&A was primarily driven by higher employee-related costs as we grew headcount to support our continued growth and higher marketing expenses. Shipping and distribution expenses in the first quarter were $7.8 million, or 6.6% of net revenue, relative to $8.2 million or 10.6% of net revenue in the first quarter of 2022. The decrease in shipping and distribution expenses was driven by a decline in line haul rates and better truckload utilization, which was partially offset by higher volumes. Adjusted EBITDA for the first quarter was $13.9 million or 11.6% of net revenue, compared to $0.5 million or 0.7% of net revenue for the first quarter of 2022. An update on our capital structure. As of March 26th, 2023, we had total cash equivalents and marketable securities of $83.1 million. We had no debt outstanding. For the full fiscal year 2023, we are maintaining our guidance of net revenue of more than $450 million and adjusted EBITDA of more than $30 million. As previously guided, we continue to expect stronger year-over-year net revenue growth in the first half of the year, primarily due to the carryover of our May 2022 pricing increase. Furthermore, we continue to expect gross margin in the first half of the year to be stronger than the second half, primarily due to fewer promotions on premium eggs and stronger breaker prices during the first quarter. Additionally, we assume egg industry supply and demand will get closer to more balanced levels later in the year. We're also planning slower volume growth in the back half due to tougher comparisons because of industry shortages in Q4 2022. Within SG&A, we continue to anticipate higher marketing spending in the second half of the year compared to the first half. Lastly, we're still planning for fiscal year 2023 capital expenditures of between $25 million and $30 million, assuming no unanticipated supply chain challenges. Thanks for your time today and interest in Vital Farms. We will now be happy to take your questions. Thank you. At this time, we'll conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Adam Samuelson at Goldman Sachs. yes, thank you. Good morning, everyone. Hey, Adam. Hey, Adam. Hi. I appreciate the in the quarter, the end market strength and kinda the tailwinds that you had from price increases and still a tight constrained egg price environment. I know it's been only a couple weeks, but there's been a pretty dramatic change in the wholesale egg market since Easter. Starting to see some of that on shelves, but it's still early days. Russell, Thilo, any kinda color you can provide about how you think about the stickiness of your pricing, kinda consumer switching back into lower priced conventional eggs as those prices fall and changes in sales velocity in, if we don't have this high-priced egg shortage environment that we saw for much of the second half of 2023 or 2022? Yeah, appreciate that, Adam. Yeah, appreciate that, Adam. Great question. Great question. I'm gonna let Thilo dig in. I'm gonna let Thilo dig into some of the details as he's become very well-versed in some of the dynamics here. The headline is, as you well know, you know, we're not competing in the commodity egg market. Our experience is that our consumers aren't typically cross-shopping the most expensive eggs in the shelf with the least expensive eggs on the shelf. That said, we certainly have predicted and are seeing what you're seeing in terms of a return to a more typical supply balance in the rest of the market. That's not a surprise to us, and I don't think it changes in any way our sense of how the rest of the year can play out. Thilo, do you wanna add some color there? Yeah, maybe just to reiterate, right? We provided the guidance at the beginning of the year that we thought first half of the year would be stronger than second half of the year, that growth rates would be stronger first half of the year than second half. That reflects that we expect the environment to normalize a bit. We had a very strong first quarter, obviously. As we go through the year, the environment will likely change and that's reflected in our guidance. But as Russell said, our consumer tends to be a bit more immune to price gaps, a bit more, makes decisions not based on price, but makes the purchase decisions based on what the brand stands for, what the brand value is. And with that, we feel confident about the environment. Okay. No, that's all very helpful. Maybe if I could ask it a different way. As you think about where you sit today versus a year ago, and especially as we think about where the second half looks to be versus second half last year, how much can you frame the gains and distribution that you have in terms of the stores, the number of placements, the items per door, just to think about some of the built-in kinda growth from distribution expansion that you might have kind of locked in incremental in 2023 versus 2022? In the first quarter, we had 26% volume growth. New distribution was the smaller part of that volume growth. The growth really comes from getting new SKUs on shelf with existing customers, increasing the velocity with existing consumers. That is where the majority of our growth came from. Distribution is obviously part of our growth story, and will continue to be part of the growth story for this year and for years to come. I think there's still plenty of white space for us to go after. I think the pricing environment will not change that outlook, right? We're gaining new doors not because we are competitively priced. We're gaining new doors because the brand stands for something. And it delivers value to consumers and delivers value to retailers. Okay. That's all, very helpful, Thilo. I'll pass it on. Thank you. Please hold for our next question. Thank you, Adam. Our next question comes from Pamela Kaufman at Morgan Stanley. Hi, good morning, and congrats on the quarter. Hey, Pam. Thank you. Just given the strong results in Q1, I was hoping you could explain why you're maintaining your top line and EBITDA outlook for the year. Your revenue in Q1, the growth is close to half of the implied growth for the year, and EBITDA is also close to half of your full year EBITDA guidance. Is your guidance just conservative, or are there factors making you more cautious on the balance of the year? Pamela, thanks for the question. It's, I would say there are really two factors to us maintaining the guidance. 1st one is, as we said in the prepared remarks, it's going to be a dynamic environment this year, right? We are seeing the changes in egg prices after the end of the 1st quarter. There's the uncertainty about what the U.S. economy will do. While we remain confident in the strength of our consumer, I think it is prudent for us to not charge out of the gate and aggressively change how we view the rest of the year. So far, the year is playing out similar to what we had planned at the beginning of the year, and we're sticking with that. The other part is, I'm in the seat now for, I think, seven weeks. Before I take up guidance for us or propose to the company that we take up guidance, this is not just my decision. I just want to become a bit more comfortable with how the company operates. I haven't met any investors yet, and so I just wanna give myself a bit more time to understand the business, to understand the dynamics in the business, and buy myself a bit more time before we make a commitment to increase our guidance and deliver a higher number for the year. If we take up guidance, we want to make sure we can deliver it. We are very sure that we can deliver the guidance that we have out right now. Yes, Q1 was a fantastic quarter. We did have some benefits from AI that will probably fall away for the rest of the year. We hope it does, because AI is not good for the industry overall. All that plays into this dynamic environment that we have talked about. We just want to make sure we have a better handle. I personally want to make sure I have a better handle for the full year before we make changes to the guidance. Okay. Yeah, that understood. That makes a lot of sense. Then just a question on sales growth this quarter. Typically, your sales growth matches your retail takeaway pretty closely. I think it was up around 40% in the period. Were there any shipment timing shifts or other dynamics to consider that impacted Q1 and will come out of future periods? Yeah. I think what we've seen, Pamela, is retailers might have stocked up on inventory ahead of Easter, there might have been a bit of timing dislocation there. The other thing to consider is also that the scanner data for us only accounts for part of what we're doing, right? We have a food service business which actually grew rapidly during the quarter. That's volume that you don't see in the scanner data. We had a mix shift, right? Consumers are buying more 18-count cartons rather than 12-count cartons. There's volume growth there that doesn't necessarily show up in unit data that you see in the scanner data. Okay. Thank you. Thanks, Pamela. Please stand by for our next question. Our next question comes from Cody Ross at UBS. Good morning. Thank you for taking our questions. Hey, good morning, Cody. on Pam's question. Hey there. Good morning. I wanna piggyback on Pam's questions a little bit, come at it from a little bit of a different angle. Normally, your 1Q sales dollars are the low point of the year. They build sequentially. You delivered $119 million in the first quarter. If you run rate that, it would suggest at least $480 million in sales. I know you talked about why you wanna hold guidance right now. Can you just help us understand and quantify how much of the 1Q sales growth or sales dollars in the first quarter were transitory in nature? Perhaps maybe give us a little bit of an idea of how to think about the cadence for the rest of the year, because like I said, normally you build throughout the year. Hey, Cody, let me start with the cadence throughout the year. Just a reminder, you know, what we've been saying since the beginning of the year was that we think the first half will be higher growth than the second half. There are really two factors at play there. One is we did have a artificial upside, if you want, from avian influenza in the first quarter. We also had a bit of upside fourth quarter last year, right? So as you think through lapping, we certainly have much more challenging lapping in the second half of the year. We had this boost from avian influenza in the first quarter. The benefit that we think we had from avian influenza first quarter was probably high single digit%, low double digit% volume benefit, plus a few extra percentage points from a pricing environment, that was higher than what we would have normally expected. That's how I would think about it. That's really helpful. Really appreciate it. I just wanna talk about your gross margin and EBITDA, because I think you previously guided your gross margin expansion in the 150-170 basis points for the year. Just given the magnitude of the gross margin in the quarter, how should we think about your expectations for gross margin now for the rest of the year, and how that impacts your thoughts on the EBITDA? Thank you. Yeah, gross margin is similar to the overall revenue growth guidance. Gross margin, we had expected since the beginning of the year to be higher first half than second half of the year. There's probably going to be a step down as we go through the year, and I would not expect that the results that we had first quarter, that they will repeat. As the diesel environment and the supply environment, I think, gets back to a more normalized balance, there might be some additional costs that we will incur. With that, our gross margin will probably not stay at the current level. Thank you. I'll pass it on. Thanks, Cody. Please stand by for our next question. Our next question comes from Matt McGinley from Needham. Thank you, good morning. My first question is on the shipping and distribution cost. You noted the improvements in inbound freight, but shipping and distro overall had about a four-point improvement in rate. How much of that was driven by network and efficiency improvements relative to, or I should say, compared to declining fuel costs in the quarter? Because I think the one, you know, would clearly be sticky and the other obviously would float with the commodity costs. Yeah, I would say it's a bit of both. Rates certainly helped us out, as our volume grows, we're able to ship more efficiently. We can fill trucks more than we have in the past, that drives benefits. The relationship on both outbound and inbound freight, the new contractual relationships that we have, they just allow us to negotiate better rates and distribute the outbound freight more efficiently than we have in the past. Great. On the distribution gains, maybe this is more of a theoretical one, but for years you've made gains in retail distribution in the number of items that are carried at retail. Compared to the commodity egg, shell egg producers, you took less price over the last year than they would have, which on the margin might have provided less of an incentive for a merchant to take new distribution or to carry more items. As those commodity egg prices begin to drop at retail, are you seeing more opportunity for distribution gains as merchants, you know, try to maintain those category dollars, which I think frankly they will find difficult, you know, difficulty in doing without carrying more branded or premium products like you produce? Like a big picture, I mean, with egg prices coming down, do you feel like there's a more of a opportunity for distribution gains in both, breadth and depth, this year? Yes. Thanks for that. It's Russell. I'd offer a couple thoughts there. you know, we certainly when eggs are short, everybody wants eggs. There were certainly plenty of opportunities for what you might describe as more transactional new distribution opportunities that may or may not have been transitory. We don't make it a practice of taking, you know, taking advantage of those in the same way that we don't take advantage of the opportunity to raise prices above what makes sense for us long term, 'cause we're building this to be a long-term brand. A big part of that is long-term, sort of value-added relationships, consultative relationships with our retail partners. While what you described may in fact be true, the reality is that we have a very intentional multi-year growth strategy with our retail partners that isn't really affected by short-term disruptions or variations in supply or pricing dynamics for the rest of the market. Our goal is to be the right partner to them in good times and in bad, the right partner to them in inflationary times and not, the right partner for them in times of plenty and in times of shortage. We don't expect that to change this year. Great. Thank you very much. Please stand by for our next question. Our next question comes from Robert Dickerson at Jefferies. Great. Thanks so much. Hey, Rob. Maybe this is... Hey, how are you? This one might be for you. Clearly, you know, a lot of questioning here is kind of why is the guidance not being raised? I'm sure, you know, kind of maybe a thought process is, you know, are we kind of feeling peak because you've got all this kind of maybe one-time demand that's come through via avian? I kinda wanna give you an opportunity to maybe talk about, you know, as you think, you know, over the next 12 months, let's say, given the bump that you got in avian, right, which is clearly there's the need for supply, but then there's also flow through on the demand side. You know, how do you kind of tweak the strategy in any way to, you know, potentially be able to now capture more of that trial and repeat, right? 'Cause, you know, as you said before, like, you know, part of the strategy is to increase distribution. I mean, the big strategy is to get trial and repeat going forward to build the brand. Now you've had some temporary lift in trial. Like, as you think through the back half of the year, let's, you know, egg prices come down a little bit. You know, is there an opportunity to maybe, like, promote a little bit more? Like you said, you know, marketing going up in the back half of the year, is there an opportunity to kinda maybe reinvest back, you know, some of the upside that you've already experienced to be able to continue the repeat off of the bump in trial? Put it that way. Great. Thanks so much, Rob. You're, you know us well, there's a lot of great in that question. You know, you're right. If you look at over the last few years, we've been presented with a few time periods where we've had sort of outsized growth, transitory growth that has brought us a bunch of trial that maybe we hadn't planned on or that we didn't drive directly with our great marketing and promotional efforts. We've been pretty darn good at retaining those people who try us for the first time and moving them from, you know, through the continuum from trial to repeat and eventually to loyalty. I... You know, it would certainly be consistent with our pattern that we'd hold on to some of those new households that we picked up, even if the initial trial was generated by a shortage in the market. We saw the exact same thing happen in the stock up period in 2020, when we sold a lot more eggs than we might have otherwise expected to, and we retained a bunch of new households. I think that's a very fair assertion. It wouldn't surprise me to see that happen again this time around. You know, our approach to marketing spend, our approach to promotional spend, again, is very much driven in that long-term strategy of building healthy growth, healthy partnerships with retailers. I wouldn't necessarily think about a short-term tweak to that strategy based on whether we had a great quarter to say, you know, have a different change in our stance toward marketing or promotions. You better believe that we're continuing to focus on attracting and retaining the right households, attracting and retaining the right points of distribution. That strategy seems to be working pretty well for us in good times and bad. Yeah. Maybe just a quick follow-up on that question. I mean, you know, look, egg prices come down. It's just, it's hard for me to imagine that, you know, someone said, "Hey, I was buying traditional eggs. I was buying a store brand, kind of lower value egg." There was some shortage. I mean, for the past year, I walked into a grocery store, it wasn't as if the egg shelf was empty and you were the only option, right? Consumers still had decent options. They just jumped all the way up to the pasture-raised price point. Now egg prices come down, are they gonna jump all the way back down? Like, maybe just a quick comment on kinda how you think kinda consumer behavior could change, you know, as those egg prices come down. Like, some might trade back down, but, you know, so far what you've seen in the data set, like, would you expect there to be, you know, kind of a, you know, a material expected step down due to trade down as you get through the year, or, you know, I mean, assuming the economic backdrop stays the same? A quick follow-up. Yeah, that's a big question, and certainly one that I'm sure is on a lot of people's minds as across lots of categories, right? Well, if the economy's headed to a tough place in the back half of the year, and maybe unemployment's gonna go up and all these headwinds to people buying anything, might they want a cheaper version of that thing? I point out a couple of things with regard to what we experienced in Q1, and then I point more broadly to what we think we would expect in a time of challenged economic environment. With regard to Q1, yeah, I mean, I think we've been pretty clear. Some portion of the growth in Q1, looking, going back to Cody's question about, you know, normally it's this pattern and why are you suggesting it's not gonna be that pattern? Yeah, there was definitely some additional growth in Q1 that was related to a shortage of other kinds of eggs in the shell. That said, it is unhealthy growth in our core business. We feel very good about the growth we saw in addition to that, maybe a little extra that we got in Q1. The first thing I'd say is, it's not like we got to hold on to a bunch of people that bought us in Q1 for the first time because they couldn't find another egg, and if we don't, then we're not going to grow. It's quite the opposite. We feel great about the underlying business. We feel great about the strategy we're running, both in terms of marketing and sales activities in order to continue to build on our long-term goal. If I go back to other times when consumers have been economically challenged, you know, we go back to some data, not necessarily our individual company data, but other data on premium brands during the Great Recession, and more recently as inflation has crept in, what you see is a bunch of trends which add up to actually a still very positive story for us. There's the trend of shifting from away from home to at home. There's the trend of expensive proteins shifting to more affordable proteins. While we're an expensive premium egg, and eggs are a very affordable protein. It's a great food, and it's still super affordable as a, as the core of a healthy meal. The net of all that, we think, and we've experienced historically, is actually a tailwind for us, and we have no reason to think that won't be the case this year. All right. Awesome. fair enough. One last question. again, Russell, you know, I feel like kind of the conversation around other kind of categories and acquisitive potential kind of died down a little bit. I don't necessarily think that's clearly off the table. Maybe any just kind of update or commentary you're willing to provide, just kind of how you're thinking about that in the current environment. Yeah. I appreciate that, Rob. It's a very fair question. You've been with us the whole time, and you know we've been working on this. It's certainly an area of focus for us. What I'd say, as we've said historically, is like everything else we do, we're very intentional with our approach to this. Maybe especially in a time of, you know, as we've been talking about economic uncertainty, as we've been talking about a rising interest rate, rising inflation environment, those are certainly factors in our thinking, both about category and timing and strategy. So look, we're really excited to have a very good focus on a very healthy, high-growth, and strongly performing egg and butter business. The new thing, if and when we have some exciting news to share, will be the product of a very appropriate, thoughtful, appropriately thoughtful process, especially in light of economic uncertainty all around us. Great. Thanks, Russell. Appreciate it. Thank you, Rob. Please hold for our next question. Our next question comes from Matthew Smith at Stifel. Hi. Good morning. Hey, Matt. I'm gonna ask a follow-up question. Hello? Can you hear me? Yeah. We hear you fine, thanks. Yeah. Sorry about that. Sure. I want to ask a follow-up question, to the AI benefit to distribution, as commodity egg supply was disruption. I wanna approach it from a slightly different angle. Can you talk about if retailers are viewing the profit potential of the egg category differently, given the strong performance from both your brand and overall specialty eggs? The incremental SKU existing retailers has been a significant opportunity for your growth, especially in the conventional channel, and are you in a better position to pursue that today with retailers perhaps more accepting, to give you more facings given the profit you bring to the category overall? Yeah. Great question. You know, I, I think we are, but I wouldn't refer to it as maybe a bounce back or echo from the very recent sort of transitory supply shock that we've seen over the last 6 months. I think what we try to do, and I learned this, you know, from Peter Pappas, especially, our sales leader, is that our goal, our job, is to be the very best partner we can be to our retail customers, to our retail stakeholders. That looks like a lot of different things. That looks like having a fast-growing brand that we're investing meaningfully behind. That looks like having great unit economics for them and helping them achieve their goals. Different retailers have different goals. That looks like delivering, right? That looks like being super transparent in a time of disrupted supply about what we can and can't do, and not going after the distribution that they may support, but we may not be able to supply. Russell, we just lost your audio. Okay. Yeah. I think where Russell was going with this one is, you know, our retail customers, they pick us for more than just unit economics. There's a long-term growth story there. There is a long-term brand story there. The environment during AI, I don't think AI was a reason for us to gain distribution. We are gaining distribution because we have a brand that stands for something. We bring a certain consumer profile generally to the store, and that is the reason why our retail stakeholders work with us. Okay, thank you for that. I'll leave it there and pass it on. Please hold for our next question. Our next question comes from Ben Klieve at Lake Street Capital Markets. All right, thanks for taking my questions and congratulations on a great quarter. My first question. Thilo, you noted strength in the food service category. I'm wondering if you can just comment if food service growth outpaced retail in the quarter. Yeah. Food service is has really been a focus for us for several quarters now, and we have seen very significant gains there. I think where food service is working for us is it allows us to work with specific partners that value the purpose and what the brand stands for. It also allows us to work with partners that have slightly different product needs than what a retail customer has, right? Majority of our eggs in retail, we're selling large eggs. Food service often is an opportunity for us to sell something. Automated voice messaging system. Five, one. Automated voice messaging system. Five, one. Hey, Ben, I hope you're still there. Yeah, that was weird. Sorry. I'm still here. Sorry. Modern technology. Food service allows us to sell some eggs that don't necessarily make it into the retail channel. With this different customer profile, if you want, it has allowed us to grow food service in triple digit numbers. It's been a not insignificant contributor to our growth this quarter. Very helpful. Thank you. One other question kind of around the macro environment that everybody's touched on. I'm wondering if you can comment on, you know, on how the, you know, the stage in the shell egg cycle has affected your relationships with farmer partners, both in your kind of ability to retain those farmer partners here as shell egg prices are coming down. Then also how you're thinking about onboarding additional partners here kind of for the balance of the year. Is that changing at all amid, you know, where we are in the cycle? Great question. I'll see if I can't tackle that. I'd start by saying that we work really hard, not unlike the discussion about retail partnerships, to be the partner of choice with our small family farm partners. That looks like a lot of things, including paying them appropriately for the great work they do, supporting them technically and in other ways. I don't think that the recent changes affect that positively or negatively. That said, when egg prices for commodity eggs are highly elevated, that can certainly be appealing to some farmers who might be considering who they wanna partner with. I'm pleased to say that even when the alternatives looked very appealing in the farming community, we were still a partner of choice to them. I don't see any change in our ability to attract and retain the very best farmer partners in the industry. That certainly shouldn't be an issue for us going forward. Very good. Well, I appreciate the comments on both of those, both those questions. I'll get back in line. Okay. Thank you for your questions. At this time, I would like to turn it over to Matt Siler, VP of Investor Relations for closing remarks. Thanks, everybody, for your time and interest in Vital Farms today. May the fourth be with you. Thank you for your participation in today's