Vital Farms says control deficiencies constitute material weakness

In a regulatory filing, Vital Farms (VITL) said that its management conducted an evaluation of the effectiveness of its internal control over financial reporting as of December 29, 2024, based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, management, including Chief Executive Officer and Chief Financial Officer, concluded that, as of December 29, 2024, thte company’s internal control over financial reporting was not effective because of a material weakness. Management identified that it did not effectively design, implement or operate certain process-level control activities related to the revenue process. Specifically, there were ineffective controls to ensure the accuracy of the inputs in the sales order entry and invoicing processes impacting revenue and accounts receivable. Management concluded that this material weakness resulted primarily from the company’s ineffective risk assessment related to the selection and development of appropriate control activities in the revenue process due to not having a sufficient number of trained resources with expertise in and responsibility for the design, implementation, operation, and documentation of internal control over financial reporting. While these control deficiencies did not result in a material misstatement of the company’s consolidated financial statements and related notes for the periods presented, there is a reasonable possibility that a material misstatement to the financial statements would not be prevented or detected on a timely basis. Therefore, Vital Farms’ management has determined that such control deficiencies constituted a material weakness in its internal control over financial reporting and our internal control over financial reporting was not effective as of December 29, 2024.