FARM - Earnings call transcript Q2 2025

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Operator

Good afternoon, and welcome to the Farmer Brothers Fiscal Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Earlier today, the company filed its Form 10-Q and issued its second quarter results press release, which are available on the Investor Relations section of Farmer Brothers' website at farmerbros.com. The release is also included as an exhibit on the company's Form 10-Q and is available on its website and the Securities and Exchange Commission's website at sec.gov. A replay of this audio-only webcast will also be available on the company's website approximately 2 hours after the conclusion of this call.

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

measures available those in cause could company's is included actual to company's forward-looking Reconciliation which filings. I statements now filings. factors John from is and and certain the of non-GAAP will public go management on also information and adjusted SEC non-GAAP financial Additional Moore, call, release measures, margin Officer, EBITDA Executive performance. the President the will Moore. the Farmer to in Brothers' these Mr. adjusted to reference differ release GAAP please call their Chief company's over turn results today's including materially measures in On and operating comparable assessing EBITDA also financial most directly ahead.

John Moore

thank for everyone, and you afternoon, joining us. Good

The quarter market quarter. Sales compared $XX up second Farmer on one strong straight gross for up slightly and year-over-year million. of first margins environment. this a maintained basis year to second were We the despite the quarter X% was XX% the Bros. a challenging for to above

and also expenses continued G&A selling decline. Our to

adjusted of free we time performance addition, many cash first In the positive $X.X EBITDA for in million our quarter straight generated flow second at and positive realized years.

serving This to a program business we blends on DSD partnership featuring to has designed consumer our have for backdrop. that with new underscore operations ethically announced impact workplace. week, significantly XX months. structure in against develop made on partnership white Overall, the tough On focus volume specifically driving factor changes over value improved, their results with glove the a core last positive us. we us these last proposition just eco-friendly believe service key but growth sourced and focused Europe the the decision our a We and as model highlights front, with customer remain a optimize the cost to our premium coffee of work DSD

of of We senior to also the who Bauer, both driving Brian business previously announced led within and DSD our has leading the President January. Sales. will as to DSD transitioned Miller helping and He sales operations, organizations has where team processes. record our Field the track to head capital in leader a route Vice and is our continue Tom as results-oriented efforts organization working and our the our as addition teams, efforts company Chief a Brian up well of leadership to sector. joins optimization proven Vice Operations be who development coffee refine focused operational DSD he our Tom role systems of President further Officer. and will on

both We will efforts. area significant of focus within driving our retention of which and have leadership top now will believe customer benefits business, each enhancements a a growth and singular in as leaders the these these role of strengthening vital play provide line experienced

focus completed our announce pyramid comprehensive final and new both the SKU I will phase, third projects end our we launching to few will The to am this addition, already the customers rationalization select in quarter. be of specialty And of been has be fully completed, Early In weeks. executing. can pleased and brand brand tier initiative the positive. rolled fiscal out by coffee on addition has with a feedback

go-to-market continue Brothers, of which overall simplify XXXX approach. back to efficiencies helped and we expect from significant created benefits operational half through have have These realize Farmer to our projects for the

and our customers most meet believe Our with however, related us customer to updated during quarter, for customer prices, X% foot coffee volumes. volumes traffic coffee simplified pressure sense our customer attrition to brand make to and efforts. lower are this overall and at primarily experience them. where pyramid customer and our We some degradation, and consumer a growth is retention our were straightforward basis. levels across which do, base. provide continue decreased options counts We and the the year-over-year them they and second result saw down will a on enhance to further customer We engage allows also spending overall the of This approach count

Brian focus the team be year will of for All a area these for this key remainder his of and beyond. of and

coffee our margins more individual and stock help making existing to gross our creating protect environments continue products, volatile value allied spices, of items include additional a other products, half market extension These of offerings, our within make our our us sales. route total up each and said, accounts. that during by culinary approximately are and teas, mixes beverages, With which which various natural profitable

Our is they more expertise, coffee a us Together, creating benefits our sell more and coffee base, differentiator allied additional and for customer Brothers. our Farmer greater with goods market for ultimately loyalty customer both coupled products. opportunities helping allied provide and

Looking continue high volatility at the in and environment, the we to commodity see prices macroeconomic markets.

year. response doing months in to proactive our Farmer in few a price do we coming seeing number result, XXXX was have so in early As of adjustment to this, marketplace. in in the what the the have a peers were fiscal or in Brothers plans last a making announced taken price

course, but adjust as positioned feel customer we and we'll, protect an perspective to remain of such, line and As we and necessary. from top monitor continue to inventory well proactively pricing base, our

the note I'd our export key of initiated paying for and risk coffee to some we of with markets heightened products. close attention trade allied are also actions

us it volatility into the While this this progress Wrapping at performance are the making. quarter feel we directly the introduce good up, risk impacted hasn't layer another of commodity does juncture, we and markets. this about

and doing we're remain do, setting it Farmer and success. more market up in longer-term We Bros. for executing to a down have environment. We on challenging a lot heads

turn over detail. financials to now Vance it I'll discuss more in to our Vance?

Vance Fisher

Thanks, everyone. afternoon, John, and good

market despite consecutive with margin in expenses a for current As EBITDA Farmer second performance the gross solid improvements quarter. operating second challenges John stated, strong and and Brothers continued quarter had adjusted

EBITDA second $X.X million quarter compared was million, our of sequentially Overall, compared last year. of the increase quarter $X.X quarter the for to adjusted was million a increase year-over-year the first 'XX. $X.X a This to of fiscal also

Our supported quarter for adjusted margins. healthy by again the EBITDA gross was

was increase the For second XX.X%, XX.X% quarter, margin basis our last of the compared second of points year-over-year year. XXX in to a gross quarter

early pricing price the past get the results the margin our efforts year actions over year to of in coffee fiscal markets. primarily taken optimization gross reflect rising ahead Our well as as

Sequentially, do, cost to target due higher gross due prices. will to margins goods coffee to starting believe deliver pricing current were We we through our the our and margins last quarters compared over to to margins inventory above as proactive continue higher-cost rising actions coming over down market have the through coming This on and XX% to sell sold. management despite however, inventory our work of positioned inventory put continue quarters pressure us conditions. slightly quarter some cost

for This to were improvement sequential of with quarter, or seasonality, the second I sales close normal $XX compared the $XX.X at in year. up net same actions represents along the were last $X million first mentioned net the previously compared million further X% year-over-year pricing For million relatively flat to flow-through quarter. Sequentially, first quarter. to sales taken period the

of rightsizing for million year. this the $X.X second were sales operating million the or expenses and us net year our quarter of the $X.X XX.X% sales reflecting points compared million $X.X or net $XX.X our going asset sales quarter or to of gains in for year-over-year sales, net was fiscal as quarter Net as expenses fiscal the branch net were progress adjusted of second in a million sales, second cost When of decrease to over in Operating $X.X structure XX% on million increase forward. driven 'XX. The last second sales positioning income by net was there declined a compared the of past basis the asset in $XX.X by during well percentage XXX no quarter quarter million year-over-year in year.

related year loss there quarter were related included million no net $X.X gains as disposals the last sales branch disposals, asset note, million asset to while included a $X.X this should of quarter. net You to during

the balance sheet. at Looking

borrowing we $X.X of $XX.X capacity. million $XX.X of of this. XXXX, sale free had strengthen direct with and $X.X unrestricted been million stronger value Driving under have million towards million in and XX, facility December ship working been financial cash equivalents, cash additional of restricted for and the growth our has XXXX, operations future of creation Since shareholders. cash positive our hard borrowings credit cash element in a we As create and in our key flow a for our outstanding foundation to position

by solid consecutive X improved X of making progress positive front been operating We've including quarters on of as cash consecutive flow. our cash operations, flow from demonstrated this quarters

second compared second million an last to quarter, the of the operating $X.X from cash was For of activities $X.X increase flow year. million, quarter

million an achieving an for of flow year flow the was the compared million cash by milestone the quarter, $X.X reached $X.X for also important We free improvement quarter. period. cash positive Free to prior

Brothers Farmer operating flow free expenditures. cash less as cash reminder, a defines As activities capital flow from

much demonstrate, the the execution. the remain coffee And Overall, our unprecedented to markets believe We over pressure recent quarter glimpse challenges. coming our we these demonstrate stronger results we a will as provide are on made potential. results a we with significant our are in and our put ahead, second results progress they likely long-term manage and Looking on focused position pleased have of quarters.

turn over With John? that, it John. I'll to back

John Moore

Thanks, Vance.

a years. hard the strong the in second team and the year-to-date Our work past testament to of over X.X our is quarter improvement

We in The efforts. strides are gross initiatives positive internal relation EBITDA the These more so to to seen significant we cash success and far operating of to is though, and improvements proud of incremental of and line, believe at There financial and while pounds still organization in long-term customer done, focus adjusted time is efficiency expenses, realize our is the terms we in margins, work underline additional this operating potential of core flow. have operations. continuing the top coffee growth optimize counts efficiencies. be there gains driving to

and it protecting adjust we the years, growth. industry. Brothers customer driving these headwinds our challenging our said, for macroeconomic focus address is been as environment the on in to be term, to to In continues our than as That will near and proactively base better continue needed remains prior top-line positioned has Farmer

traction. gain addition our strategy across and focus our the This, further development on top-line these existing team, business implementation our Brian capabilities. sales strategy Head of simplified our With pyramid drive brand paired customer of penetration shoring results to help as and base of initiatives product up our as we the driving with are should

In Tom add role, our his able operational existing his and enhancing we on routes. DSD across to continue expertise fully density also be logistics will focus optimize extending as new our work now and to and capabilities to

our is the recent As progress performance, we by organization challenges. to are across evident market despite current improvements make continuing and significant

return, are conditions to and well growth significant With market when these long-term profitability. we stable improvements, will drive confident be gains we more positive positioned and realize

will for questions. us thank want I you on for joining up open now call to the we all today. it Operator,

Operator

Instructions] first Sweeney with comes [Operator from Today's question Gerard ROTH.

Gerard Sweeney

second, results. line. you're the did to Obviously, in start seeing We're to obviously, want top well. to a that very I -- touch it going and on I Congratulations. I'm did the in on, want executing but

bit focuses is Bringing sales line strategic either Is As thought your board, some surprise process. growth I'm if could? of top said, -- et maybe looks cetera, or light just up the think Is that you on on a you're there if those a taking -- one the making of front. on process what fronts, forward. like opportunity you step there. along tighten rework, forward? your this I what's to little steps could it's revamp curious big Brian is going here, the you in shed No

John Moore

breathing and Jerry. extremely DSD coffee comes in energy a he's development Miller really new and join business charged And our in decades-plus the Sure, We're excited efforts. with specifically experience, He life both Brian space. to the organization. have into with

Tom And simultaneously the drive going tremendous of of the the size and sales job think here resources the forward. development opportunity both optimization organization and efforts, us going has and the last I think, various team through we've Bauer sets think while sides to done dedicated restructuring results the about at the operational over Farmer the efforts, building having Brothers, on about year. a issues that business KPI infrastructure, scale I DSD I it's really working the that to both that the yield challenge exciting talked that for equation some are building of

Gerard Sweeney

on roles, alluding gears, terms as was as obviously, You've splitting in, you I well good is you -- We're really gains? it think Or much what the are operational of still important there platform? then items see optimizing seeing but articulate bit just didn't to operational some side, is as probably gains. Switching chunkier going as tackling maybe the do some it. inning what are side. the and curious to as is remaining? and Got there more sales and and are how And to made maybe in some numbers, more blocking in out a little we incremental the any

John Moore

question, great Jerry. a That's

were I characterize we're think I would if it I say to that early way. to in mid-innings, in

really customer question there's we opportunities past, resolved can challenges on completely brand think an focused value existing were development or the piece. new core of think I that I out-of-stock customer. the the customer no we're think into some that that were getting remains the We've that have our And we tremendous promise Brian fulfillment now of that do excited I exclusively buttoned glove still and and There's of remain. facing to of fulfill the existing potential the we're that untapped. availability all focused I white the equipment value our on now rationalization challenges. the see really have base the in whether we in acknowledged Tom to to proposition, on extent, dig challenges up handle the and SKU of it one a base street-level things pyramid opportunities, we service we've

things. taken think those great I we've resolving strides of in some

when lens basis customer really customer-by-customer in, on how footprint we per value if put the customer. we per to we because return strengthen a relationship product and ultimately, penetration, more contribution how the now with we that's that going we can And increase it our line realize do to dollar turn investment that drive stop top do drive will equipment and that on that expand

So I think great to to And it's where we more start to our opportunity space going that forward. of we're that in think be now we initiatives have strategic lot to yet a there can realized. a turn like lens

Operator

The Lauriers comes Des Eric next question Craig-Hallum. with from

Eric Des Lauriers

are Congrats around on strong specialty profitability tier first brand. this the My quarter. Great questions execution.

a guess, it touched early I then as rollout specialty -- is could feedback And top-line specialty you overall, full a or helping is customer optimization rollout guys the percentage a the any I of if do wondering efficiency of have sales, on Just of the expand executing the smaller typically know you the that positive continued you of that Or brand enhancer been but that on. on? your see drive more driver? potential margin you

John Moore

That's question. great a

in begin in end would former latter. it think I the and the

as exotic you into see to and flavor look Gen specialty exciting term more and the data as the can one get consumption viable things picture, gravitation that if particularly when a you that trends And those that's lot beverages with Alpha amongst consumers, a you So really it longer profiles about at you of entire group matures look aligns and at and around the Gen really consumer a is into of patterns coffee opportunity, specialty Z, consumers. generational set. style bigger

coffee They're and Eurest transparency. distinguishes still a The they much early too looking been consumer you with so on that's some in ability But been in that in there, discussed very press. putting can the our to our that first-person They're I to Farmer engineer something value looking with ideology sip call that. evidenced And you into have results as do. not that more seed is to spoke can the relationship products with They're days a that we've we to We're capability the to see conscientious of sustainability. color positive. early looking from the out what for that really that do reverse more for think around a Brothers have chain buy. relationship

the to work think us our be phases, of set. and an ability optimization in piece. Brothers really it I in do high-quality The Farmer sourcing initial peer somewhat And production differentiates of will

the are multiple into one. optimizing through of collapsing those brands We

upward has over You're brand strategy seeing of and materials XX% aggregate to a consolidation. impact go comes it the the counts XX%. when consolidation of a the consolidation over total about of finished raw been SKUs producing When it's of you think associated these, that's XX% goods, pyramid and SKU into a the that

side In and manufacturing optimizing But that think to I the on will So piece, on top-line this us we're our the longer term, sourcing excited realized organization. a driver. see then generate the the the side meaningful beginning, first through of value that's rest on the optimization operations. for been really

Eric Des Lauriers

and helpful great very question. next And That's touched actually kind on my of color. you

question is this specific I Eurest specialty your this to the Or So tier brands that new is, with guess of are brand? here partnership, Eurest, first with that is sort partnership?

John Moore

I have It's that No, to a manufacturing roasting these are that specific as it and Again, partnership. of a think capabilities. And such, one core are think the others. propositions life Brothers perhaps brands again, do And underappreciated the peer highlights one quality Farmer operation, great capability space. and really sourcing to example. from our of as the great we question. many the things value that And into in that's of I distinguishes a it's breathe brands

needs driven for able high with their looking transparency are with we're environmentally marry team coffee sound, fulfill very able capability, that our that coffee we're consumers And a very, and their types and accomplished having quality. of flagship on sustainability very, all under their efforts all brand. X curators very socioeconomically -- also program. eco-friendly, Again, of those to to

Eric Des Lauriers

a be? obviously, How great. could partnership they're customer. Eurest I mean, good-sized That's material Yes. that

be? you about can material then that just question guess, out of yes, could there? So first of these kind that how similar opportunities And the landscape on I are talk

John Moore

looking roaster partner also many are that scale. significant service. And there space manufacturer, are necessarily of don't a can in the for there provide many but Yes, of are kind are that that that

would meaningful it's say a I So opportunity.

not us. space, come core that bear is in and to that capability but Our right can when now to focus is to fair, we prospects customers bring it be a

growing and we that Our capability have a is on -- really core brands. in down-the-street offer. customers, our our that this core that own business, that our and remains food we business focus is can accounts we our the with on do, then our DSD But and beverage space today

Eric Des Lauriers

That's question helpful. And then last here. me for

also you that I the you've So that thinking recently in you share press saw launched. about Can or you platform plans any how a this direct-to-consumer offering? have e-commerce are here direct-to-consumer just

John Moore

Sure.

So in no we've they've the that of brand the of had expressions between disparate years, of sense many actuality, in we've the had spoken there brands the and any familial over was of affiliation brands. past,

and the rollout. kind with refresh it's as the line existing the was branding one well and brand So make brand down sites, all well in them the of of corporate them of pair consistent kind pyramid new pyramid as did, we align as strategy things these with of

we web-based A driving for that was us critical such, was exciting focus go that the this will was element was involved because in that as And platform technology of that enabled live what's the process in QX in BXB upgrading ordering e-commerce. year. the really that

new we fruit, the ability Really, I that line in our with them BXB provides convenience of did the brand customers that, to our few and in the that enjoying early corporate e-commerce at we them into expand will our with exciting service the orders other the platform fulfillment launch and with first here months' history glove own to will go place ordering white enable refresh. while DSD think, So still provide that a and low-hanging time although because the sites that existing a products opportunity for was web-based is will sight really their the our And their sell. time. of live the stages refresh align it the the pyramid

promotional and penetration the product that loyalty drive develop And that been again enable portal. enables to we've will programming also through will about. and value drive programming, adoption us which creation that it talking It

we're So our the see really life second end fiscal come to to in of the calendar that quarter. at year excited tail here

Operator

from AGP. next with The Aaron Grey Instructions] question comes [Operator

Aaron Grey

need offerings, base you've the there's So the just the just that to to your and you product offerings line making terms out you offerings more the about building for current Do about to spoken make alluded via existing you increasing So you lot you offerings it to customer aware just through feel thinking that? in how from your Do of customer your that you any ticket think your lens a that sure about you yourself, of or the base increase have customer additional potential they're some is the of for of product just of have. acquiring? Or have? either sight products additions the base? any aware offerings need making

John Moore

Thank you to It's Happy question. for joining, great Aaron. Great have to hear a call. the from on you you.

our that right of of that brand making is various think very elements them. that the fractured where our It the in one of we for have. used we mind, be products in customers acquisition. that our I to history, offered the our products aligning offered first strategy in they, pyramid them, was time Keep would a were grew offerings we how the the entire country. So way be all now, such of through available the throughout focus on Again, aware we in

syrup a where next We're line alluded over year. time to Boyd's And that on said the product the about. that's year have was our and base again, exposing innovative and looking quarter, to customer launching core this the space liquid we've expanding over offered that way. looking history portfolio, we've last So time will That's that our been we've X been always portfolio nation last and the all excited we're it ambient a we for the talking first methodology. what to products. the When for consistent that about that We're for on the is are that going. arguably been comes shot country we the our Allied we've been for the unified coffee as working really on throughout throughout focus with of be new the and in in that And existing capability. first products, but tiers

Aaron Grey

secondly, I increases, just brought you the Great. just terms color price that up then not you but for broader Okay. appreciate guys, there. environment. And in of macro

So more coming are year of the it sounds like for those for the category.

the for do some like any terms terms in a you of better and of reaching feel So any you increases to you you hedge available. bottleneck sight looking line is in Are risk potential there you you're in limitation? get volatility seeing have want potential of to of the commodity markets Just have level the might terms of price there? see risk

John Moore

Arabica and can the Sure. price its all-time shattering all-time week. and coffee record hit this high I our mean where speak speak I there's dynamics then all-time some thoughts market we past yesterday an hit Vance record just can an to question, high stand today. of high Robusta to before on no coffee today.

getting to the before up So $XXX.XX. about $XXX closing way at all

argue, put with brand We both the is the of -- goods the beginning the to set us that, ever SKU we the a Swenson supply But rollout at protocols the our And our and think green the more that fiscal choppy pyramid on That, us changes well anything, have it's waters. Matt in And side year side good coupled It's spot. last we green we approach and measures, make nothing and volatility basis, in nimble managing I to pricing side. year really that's this always daily been cost our -- these just plus fiscal have. Matt to team up proactive speak operational our the our we've really in rationalization to capability discussed, these the if finished in place coffee chains, navigate I what pricing his put structures. to I'll year all pretty than So and that in associated us these a rather, last let sourcing managing this forward but new. do. and we source markets of on manage over implemented would

Vance Fisher

Aaron, -- the achieve. covered, that aspect obviously, and pricing for like of of we've pricing say been would felt to were kind past we've John back progress we Yes. our we target comments, that we're in done. we've And pleased already to I we're stated XX-plus we working as the year on And the quarters. made couple the over margins to trying with that past get of what

we're in weather than think I better conditions. positioned market we well to some current the time have quite or

to knowing So I earlier has market year, be the in the being in good proactive position. rising, was going think, us put a

looking the along what need do further that price be year, margins volatile conditions do right I try sure earlier, we right to to John now. in additional reserve to a we we'll But certainly deliver off As think to. this make market closely in get going need the mentioned to at and on continue more very certainly as that much hold can We're need. take if that that fiscal we to as we and we we It's order as possible.

Operator

At the more queue. the as no in the there session conference. lines question-and-answer are This concludes this well time, as

for today's attending Thank presentation. you

You may disconnect now your lines.

Farmer Bros. (FARM) 6 Feb 252025 Q2 Earnings call transcript