Earnings call transcript Q3 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Farmer Brothers Fiscal Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded.

Joining me today are Deverl Maserang, President and Chief Executive Officer; and Scott Drake, Chief Financial Officer.

issued Investor shareholder Brothers Relations www.farmerbros.com. company available which website the the on section today, its letter, quarterly is at Earlier of Farmer shareholder at company's website exhibit on the as X-K The Exchange is and also Commission's and company's website and the the Form an on available Securities is letter www.sec.gov. to included

on link two the also conclusion of the A its webcast audio-only after will replay website. replay will call. company's hours to The of be audio available be available approximately the this

we the call, federal please views These various relied Before provisions subsequent financial Safe of company's and constitute securities represent during the company's of that information regulation. by may company's only statements be date. that should prospects forward-looking the could this not materially forward-looking made laws the the statements note as and views Harbor representing from forward-looking as and future for those the begin today and of all expectations, differ statements. call any about Results presented of is as under remarks plans upon management unaudited purposes the

in from Additional and other materially actual information cause statements and those filings. shareholder company's results forward-looking factors is differ to on letter events that available public the could

On GAAP directly EBITDA company's the Reconciliation today's of most non-GAAP also financial and call, these letter. assessing their non-GAAP management company's is adjusted will comparable performance. operating also measures included adjusted including shareholder in measures, reference certain the EBITDA margin, measures financial in to

Deverl. please ahead. over to call the turn Deverl, I'll Now, go

Deverl Maserang

for you joining thank us. and afternoon, Good

we before third some discuss highlights Scott opportunity our like I'd this questions. to discusses and financials, take take quarter, will to from

or not should toward our this results are slight our tough restoring our and macro on Progress outside targeted pricing rebuilding XX% did quarter, been a been in back we in costs what inflationary make some margins volatility growth environment. and impacts sales progress investors gross While expect. our level terms of part to This coffee challenging. in in control due has issues has of we

to that foundation. quarter, year. implementing believe head to efficiencies critical stronger to execute better we the we frankly, enhancements, us know and These But are on better. need put which we pivoted beginning in efforts will pricing production a drive end, we To capture optimization process opportunities fiscal into long-term position and pricing the XXXX us we third as

However, these changes, there including short-term to are quarter. impacted which third near-term implementing inventory in disruptions our some costs planning,

structures new engine, to As is part us of our expansion. these and data, facilitate our toward already goals enabling launched optimize we with pricing which AI-based pricing improved, customers actionable efforts, providing margin

tool coffee fourth fact, the have in In quarter. data using fiscal a from we already this early increasing implemented price our

customer plan Production effort for better key more items approach. also our while structure. holding wise, creating process, time including implemented meet to customer involves we ordering lead This longer efficiencies and benefit cost for ordering our strategic that a will to goods finished fluctuating adopting changes manufacture demand

availability margins recent are our ordering per and The benefits targeted flow, to and this pound, cash lower product through realizing better production weeks appear facilities and record-setting already lower in all serving better generating customers quality. cost new delivering improvements include pound. per at price while beginning with processes improved our additional The of

initiatives. on third future in are focusing also on we growth While efficiencies executing in the quarter,

about. services innovative new an business and syrup national quarter, unit, successfully very concentrates, excited which we SHOTT, line securing real growth accounts launched several from saw fruit of we're shelf-stable, premium the During tremendous REVIVE our

from experiencing solid our limited Coast are releases West already demand its on and availability. the are working expand We to

are At very share operational delivering alternatives in management operating the and Board and results strategic on our will capital more our our and allocation shareholders, on working execution for to achieving future. enhancement focused goals. and Together, remain and financial, To near we strategic is firmly capital Board expeditiously close, improving we time, to potential committed same on to our the and the structure. have both Committee

I to turn Scott? will it now Scott.

Scott Drake

Thanks, Deverl.

quarter of to fiscal the $XXX.X $X.X increases the million, XXXX in X% of reflected The compared increase to or an third million were prior-year growth revenue date. sales Net pricing period.

second Gross for results $XX.X a million was This basis a the slight for in on quarter-over-quarter gross profit quarter. improvement in margin quarter. the consecutive

to a first third to benefit the we product the the expect coffee trend month to average increase not prior per did quarter from. three cost fiscal pound marked where period, period The continue recent compared

significant $X.X of Brothers Farmer over quarter EBITDA loss. adjusted quarter's XXXX, the in a improvement third the fiscal million reported an previous $XXX,XXX loss of

balance million XXXX. $X.X XX, as Our XX, decreased million March June of to from unrestricted cash as of by XXXX $X.X $X.X million

increase an had of increased recent increases. reflecting in pricing realization DSD We revenues,

had new we wins better lower customers, pound Additionally, customer volumes for coffee churn customer DSD costs, lower a and rate. several

shifted to a make-to-order a customers, In planning digit delivered our year-over-year disruptions primarily our near-term from mentioned previously we a focus. direct we process mid-single ship due decrease, production as to make-to-stock sales

year. operating We most and of resulting full the of paused at this are now end the fiscal before anticipate sales capacity recovering

quarter structure, are remain which Overall, for as have the of our margins, work lot we we deliver near-term healthier the are sustainable results a we long-term do and continue growth. the to third than to delivering. company capital to focused noted, our we a business position Deverl objectives, expanding have exited on committed to We improve though, entered our it,

open We questions. up for will now Operator?

Operator

you. Thank

Instructions] you. We will question-and-answer Thank the session. [Operator now begin

comes ROTH Please Our MKM. first Brandon with from ahead. question go Rogers

Gerry Sweeney

Scott. apologies. Deverl for Sweeney. good so It's me, registered Hey, actually so Brandon under up and it came my Gerry name, morning, But... his

Deverl Maserang

Gerry. morning, Good

Gerry Sweeney

low the lot with and it's a you're want XX%-s I still that's the in -- margins, low range. high right? a targeting eventually XX% and have into down focus, XX%-s, of So, obviously start to I

you and knew then also but made QX. we that progressing structure make-for-stock. As to you were margins this supposed believe -- roll off pricing impact contractual investments have the were changes, short are QX, headwinds some we year, through I we the some maybe had in that term, then

and at how the under looking contractual the changes was quarters? and take appreciate I a maybe to we're it's stock, parts just I bit onion And could maybe a pricing, next couple through hoping of that's this, through a lot make and pricing margins. at it going that at bit investments but back of it. the lot shot here question, how aspects versus impact you you there know it, that to peel would work of if little work how of look a unpack and going over that's then, I system? structure a the And there's a could to So, moving it's little messy

Scott Drake

Gerry. morning, You bet. Good

at I I it you're increases it's at not try talked it's and want contractual we needs to start, it, point. changes, right, minimal where there's lot to obviously we it most to there's way I highest just say to it be, where And the to level make -- in having for you're think look obviously. right, think But to that about if there. impact look it are a the not you part, price to that components digestible is would this that those be,

on of of ship then on our their some seen those because we for and decline to the cost now. and coffee. out But timing both business, side direct peak to little costs they're a have and seen the different coffee the So pricing our to way of starting those both bit we've over peak have customers that's DSD where you flip handle

really margins. it's priced through So, that the and balance lower selling can so just on sheet, to higher this get better is coffee we us coffee that price

still really you'll that to are timing just that, drivers to other point. see absolutely wanted recovery we a forward, see that margin this primary we two coming, issue response sure at the Another go we as it's be

on continue margin here equation. So, calendar we gain expect rest the the to for the of year to

fix. coffee, of and rely coffee on a efficiencies going for longer investment it and the efficiencies the made we changes to how to production could really for efficient our really time investments both a handling and we've and short-term was almost kind that really, the versus longer get The of have in of a about term production the period we're of

bit cost operations. per in did equation, we a a setting and that little pound up are pause So cost but for the better pricing long-term absolutely the

we outside in action is adjust we And news fallen analytics $X.XXs, have thing. insights go and better $X.XXs, and we're much, now. With we're it's really with having parties pricing due the the in the much And better appropriate just That's much still did not well. we're the note coffee at and that other working good then and taking more finally, pricing. the tools as looking to to

with long-term we forward really that from near-term another have again. we're the better as well well where as can it's going now So help actions we pricing really will us one as that as get really, think taking refinement margins benefits

Gerry Sweeney

sounded it. mentioned, as DSD And pricing follow-up up just to that also customers. though were the volumes you and you Got on want some it

not increases through have through passed those So, passed only customers successfully or you're as winning -- to still price well. you're customers, being to been customers

am reading So, I correctly? that

Scott Drake

in -- definitely pounds improved. the year-over-year we've DSD the Yes, seen margins sorry,

but pound into manufacturers you unpack because did changes, little again, that in But customer ship, February it bit, again call wins. Now, there volume impact we're better March, and I direct impacted of the we primarily seeing increases a some going those softer we a if say January. kind a much quarter would DSD was in and April, yes, to look at little have and with January

momentum DSD. within definitely So,

Gerry Sweeney

that And a your I that cetera, I it. know that just then -- or that risk benefits at stock in any et certainly switching versus that to with curious as just aspect, to are if make want customers customer gears the more -- will to Got that don't is? standard bulk volumes? that procedure longer The ship. I reaction direct and industry how the to there comfortable don't is or runs, customers reduce understand process efficiencies is --

Deverl Maserang

ship you my this. question. of anywhere and trying since four when gone, direct ship to customers. creates ship. kind from We've here zero direct peaks the to in immediate tell making order you're forecasting great last years, direct for Gerry, vary fluctuations demand can growth I'll of the The lot cover those in That for those trough deviation. issues reality XXX% a volume time

and currently within volume post-COVID, the COVID, of America. dramatically In in has has basically chain market resulted shifted. elimination spot That North the supply shift

direct forecasting ship in roast specialty demand just make-to-order for fluctuation So, those longer of service those customers, to in for we couldn't a we and continue said lead certain customers those for time with fashion. that getting profiles challenges customers coffees

build changed by way we to efficiencies. those stock the we're And them. So it's production provided for have that, producing better us more doing

efficiencies months. serve we've in production ever the in better seen. the of cost few last actually on We're setting running couple are records months We to than last

and inventory customers, within beans we have service And the if a actually direct such a overall make have to missing up that to or then amount those secondly, a to inventory. make improving able it it's And we're way ship up week of dramatic ordering. green month we're them then the and have because available, in of some we not

them and making we're U.S., And sure based the order be then, So, the provided and would that's the it'd we those lengthen, and be for of customers weeks recent we've available that pull-through we we on knew the by know in in then witnessed that's beans We green what asked the good lack challenge lead those the beans as success. one overruns. good, as us inventory but because spot and it is months. time, building lengthening the close And didn't some of on their green ramification. to have market

it is some outcome absorbed the in we're increases. quarter that of this And And that now, the quarter. that's coming last kind saw made at the that paying we investment dividends into move and we quarter of cost that so And through of current as and we some that. and it's move out end that of

Gerry Sweeney

it. Got

higher talked security, the sense you there going Just a or obtain little debt but the about that you can was comment you're covenants bit that obtain a a waiver. questions. to June covenants. a any you of more security waiver In forward -- you of couple quick the shareholder not And that -- for sense of or mean had can that confidence level on of what level waiver? I of confidence provides that a letter,

Scott Drake

at priority. a structure obviously fact the details is margin top top capital No But priority and the sure. that time. a that is Yes, this

So with partners. our we've conversations continued banking

supportive We have very it's both feel a directions. relationship. good We

have We working through. case a bit But They of -- take backup we have just we scenario, solutions. have we're that other solutions little worst and time. obviously,

later So, we're this of have fall. be we just testing confident that we'll -- resolve able highly before that any covenant to formal type we

Gerry Sweeney

hand the go have question hand the do you B of some Got Board you're to however of want some moves of then, would a be and we sort to -- or phrase with alternatives in those And Part then, the announce does it? that when it. sort that exploring? alternatives going that is strategic timeline to or And of strategic

Deverl Maserang

have to continued given and business to the of last date, Well, question We're and the pressures and provide very committee. global we've as evaluated a just tight as the end Gerry, all tied of alternatives you formation aggressively meet. They've reviewing, continued year, know, moving considering. to lots and management all of under, that strategic at they're nature the that alternatives timeline stated. asked. To the the economic nature of you we're we, we as them committee of the They're been the have on team, announced

hopeful to actions be committee. will lay some of start of and we back to news have short we'll in that come the the order that out So,

Gerry Sweeney

Got it.

it morning. That's my taking questions Okay. me. I appreciate for this

Deverl Maserang

You you, Thank bet. Gerry.

Operator

concludes This turn to Maserang ahead, to I Please you. for remarks. session. sir. would conference question-and-answer Thank back go Deverl closing the our like any over

Deverl Maserang

operator, today. call our you, and for again joining Thank everyone thanks

have Thank progress achieve weeks We the we with on future an you. forward actions coming work both know direction right emphasize pricing confident upside. point we're and a in moving we to and a the keeping but urgency, operating our we're to sense and to goals, with want the strong of do here and months. to management environment, the Board combined moving We you improving lot and to our look taken, we've posted are in that of

Operator

for now The you Thank conference concluded. presentation. has attending today's

this You your disconnect may lines time. at

Farmer Bros. (FARM) 10 May 232023 Q3 Earnings call transcript