Farmer Bros. (FARM) 8 Feb 242024 Q2 Earnings call transcript

Good afternoon, and welcome to the Farmer Brothers Fiscal Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

Earlier today, the company issued its quarterly shareholder letter available on the Investor Relations section of Farmer Brothers website at farmerbros.com. The shareholder letter 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 be available on the company's website approximately 2 hours after the conclusion of this call.

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

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

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

President call I Executive will the Moore. turn ahead. Officer, now Farmer over and Moore, go John Chief Mr. please Brothers to

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

Board get the like Executive appointment President It to privilege Chief we started, honor and lead Brothers an Directors for and to is I coffee to and entire thank a such the storied Officer. would organization the Before Farmer of company.

just sole on direct focus the are transition direct a to from over into we X months our store Today, business the sale ship of delivery.

both financial an beginning and on are positive operational momentum We to see front.

sustainable in our efficient adjusting to and the return support structure first fiscal operationally profitability. more During business, our becoming made of we to rightsizing half XXXX, cost strides a

trend show lines. Our some results positive second quarter

our for favorable basis, in and basis XX% points margin first with Boosted adjusted a revenue XXX by more prior and our the improved expanded on the were margin and year-over-year a we meaningful year saw improvements than on coffee gross gross year. While gains versus above modest EBITDA. rose pricing position costs, a time

margin, time to upside we our the opportunities believe know positioned in metric made is now We margin through on have improve older, the we this forward. we progress sustainable gross going cost excess over to have as company now we of gross of higher the gross margin generate inventory. We with Even XX%. have majority sold still additional anticipate

our Similarly, at adjusted the while top to by we quarter, encouraged improve as line have in improvement well. know our leverage the Enhancing better in opportunities will time are we have structure. second product right drive EBITDA right sales cost the there place ability the our right we to to

counts roasting in complexity roasting we reduce brand SKU reduction as margins. will and our only initiatives amplified facility. consolidate Portland will in consolidation overhead better be improve operations and The our and of Significant efficiency impact for these reduce

customer improvement success our retention focus brewing of and the a growth. these every Brothers. execution purpose our they through equipment common share goal: we in fastest better for service, All and most is what giving chain, need our in our on know Farmer customers and of path Whether to step efforts supply

working to also our better Through and what processes improve technology. are Project Symphony, experience dubbed we customer internally we have with

know profitability our enhancing be are recently won't flow. enough customer and have efficient the being customer retention. free of reinforcing more management point-of-sale achieve are We cash as management These relationship tools launched system, a critical new theme we to and cutting sustainable and advances costs simply

and includes customer on-trend adding equation product growth existing products within continued innovative, sales our our of Part base. penetration

quarter our free is second are with and positive saw firmly In the by positive the to in we summary, cash flow during XXXX path believe early we pleased momentum fiscal view.

more Brad? discuss our to Brad detail. in to over it turn I'll that, With financials

everyone. and John, hello, Thanks,

refer discontinued to business prospective of further continuing for prior reflecting DSD performance with our in a on periods. information XX-Q, reported the Form for was operations continuing second results reminder, year of performance our 'XX Please and regarding which and are today, our a As the basis, operations. fiscal the filed quarter SEC respective

uptick Overall, margin gross were in adjusted of sales pleased coffee highlighted we sales and the million, were to profitability. period. by EBITDA $XX.X $XX.X year $XXX,XXX are to impacted by Net quarter volumes. for report increase meaningful by fiscal second second lower positively strong but prior in pricing compared of fiscal were a quarter offset 'XX the an million a Net higher

margin points along compared to a pricing, costs, of on basis enabled by fiscal in with Higher 'XX. profit basis year-over-year XX.X% the expansion to our favorable XX.X% quarter of commodity gross XXX second

incentive to the million second Operating in 'XX $X.X lower and in included driven in This in a from and costs increase a expenses in $X.X decreased $X.X health year reduction. the of care prior prior million fiscal expense increase compensation expense same by driven increased by fiscal quarter the million 'XX. year the of million $XX.X G&A selling expenses $XX.X million incentive quarter second

was expense from loss the million $XX.X a $X.X increase $X.X of million and 'XX, from moved to Net by second and of a properties driven gains net Our the branch assets other of $X.X million. gain the fiscal improvement million during during from period sale overall year of in operations continuing an a in operating of quarter. the quarter improvement income prior

compared were between in year capital million we million $X.X expenditures period. $X.X in quarter capital $XX prior anticipate to $XX million and Our 'XX, In for expense. fiscal the the million

expect cash our finance facility. from and We under credit to flow through these expenditures borrowings operations

a support healthy which increase done the to $X.X the million, business net for significant year EBITDA rightsize DSD to in was quarter same million a $X.X the of $X.X compared of swing, have This a highlights we loss growth. an to period the work million Adjusted ago. is

Turning balance to the sheet.

be facility. free in fiscal to our cash goal cash million, capitalized adequately fiscal had of equivalents. are early we sublimit of million of 'XX unrestricted finance credit achieve positive outstanding we of XXXX, We We million and of $XX.X availability XX, cash December to $X.X letters of expect by the flow under and $X.X As million $XX.X had had believe our to borrowings utilized and credit 'XX. operations

In closing, reiterate John said. I'll what has

confident are progress line the on While we and path about linear we we growth may profitability. top increasingly basis, on to a recognize not sustainable are strive quarter-over-quarter be generate feeling as we

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

Thanks, DSD, Brad. company of growth. long-term our we pivoting are focus the into we solely for the of months foundational business done proud to position on work the Six have to

time, product While a to terms we Farmer be operational work systems. We've of board Brothers in a fronts still an to make across to is product on production and of lineup we the know there short has fresh been industry these to all leader in size, offerings, always remained able of from strides needed structure meaningful service but done. look period

drive During to XXXX, and complete margin our further associated improvements direct customer focus half as the ship growth increase we transitional market fiscal the second services of with improve retention, our structure will and we on-trend cost improvement, drive incremental and penetration continue sales. for products on new

a as want to dedication move to continued I we the through and for to our this thank entire take transition. moment company Farmer commitment team Brothers their

you continued you date their you have posted this to joining improvements We look to progress. Our keeping to for Thank would forward and Brothers. without call for not of on our also Farmer support your been hard of all possible work.

questions. open We will up for it now

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

modestly, bit I'm going customer volumes also DSD just you down little how I a maybe but discuss forward. is assets talked utilization you of well, and retention slightly. mentioned, was if guess, to going discussed You how curious up move -- about revenue can you and maybe obviously, that's

this more sure pricing and bit can we to color our speak, in field, Sure, coupled then AI We've and add one We issue. ground, that one. working the lot a Gerry. through the little over see deliberate we I'm successfully the foremost, that a been the issues year. I to learning the we've issues, that approach help the can we've of Brad where first then technology, of with start been boots they through and last spent on very that from us how utilized same so off, that time to utilization in the

interesting out in messages And the it's same. that the exactly came resounding

acted with down And process boils clear value the of not but that proposition to So And those the simple crystal is challenges a the we've ultimately side. where what actually idea service quickly address be. we is the of DSD since idea very then, are opportunities came very out it in might that to easy.

You the serve systems now on proposition. the value products end at with show the time price back right up right of equip going the winning right consistently and the the all right place up we're better the at forward. to to right at field the is shoring doing have a And customers you what

other the in that scale. rates. like We some realized there. do We're get off an And then the amplifying as of effect improvement that a our on increase, we're seeing gross line the trend positive greater forward, customer see at have should going leveling margin OpEx initiatives

Yes, I can add a little color.

the a we data would gratifying see but data. there. at them. is look what to kind as of driving would corroborated middle it's we that So of we -- was we've customer corroborates our field issue state by really data, what this in say, retention to come been seen, the pros John took say, kind they I corroborate

of been out that price is have have of really taken we increases that losing we benefit it, The customers. seen have coming our predictive not

right the right that product right having turn at we can the our focus time. what we know to So John the stated, in place

about some leveling as customers, to maybe I -- get was off off when off John, that. leveling you're some just and And the talk do leveling with the in when you mean of opposite customer direction? churn on sorry, wanted clarity you accelerating

Gerry. That's exactly right,

beginning is mind new been that the churn that with we place that, to We sales the slowing so. see see we've in leveling or fact down some also And off. X infrastructure substantively. in feet So months seeing their had is our we past been in keep and down them, has now slowing for get what it coupled about let's sales team under is the rate

that We're the expectations seeing in on there actually business standpoint. some exceeding contribution positive being added a signs is

signs off of we're turning that and then leveling around. So some seeing positive

sort volume say it this to growth? leveling in of place, infrastructure of off Is in processes fair driving customer sales reacceleration and place, that's

that's say fair to I'd say.

Talked you sooner? to My thought that service the call the still understanding was a Is will agreement last off. fair I that probably year about, after do SKU runs TreeHouse Or think, from rationalization. able be process? was later this that

defined some as We've we're positive well. we with. Actually, rolling signs are which SKUs forward seeing exactly there

we in are time brands this nationwide. As history all previous the company's in be of the estate the session, that first represented the throughout these mentioned will

We've never in past. as grew really had we the that through before acquisition

like, look us over in estate production And X weeks last of SKU we've out mix tiers give X we our new quite and should of the rolling actually a sets. efficiency the network bit executed with just what training the that streamlining of will that sessions going the So started entire of forward. branch X

So a and of that the the and about of to premium what represents reduction count tiers. traditional we're XX% referring as SKU overall

follow-up. me know for do question we because more One have I a

think, inventories, Just running I $XX.X at million.

as maybe there an side? service could curious once little maybe SKU you agreement more on inventory off. rationalization, runs Just Is unlock from the past to working go past the cash that -- where get bit TreeHouse opportunity to a capital

that take I'll one. Yes,

TBD So amount, unwinding the still TreeHouse we're Gerry, on some point, just interactions. this because of at

as So we through But minimize to that to carry don't as inventory SKUs, bit much a is we understand easy clouded it's lens. need that inventory.

our like for the over this to And gentlemen, turn Moore conference question-and-answer ladies closing and John concludes to Instructions] session. remarks. I'd back [Operator

to again today. joining next to report We'll look Well, certainly a have everyone, more over us with the and lot forward quarter. you months we speaking you ahead appreciate

concludes today's all you thank for presentation. today's This We you. conference call. Thank attending

now day. wonderful disconnect lines, have may and a your You