Farmer Bros. (FARM) 9 May 242024 Q3 Earnings call transcript

Good afternoon, and welcome to the Farmer Bros. Fiscal Third Quarter 2024 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 Bros.' 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.

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

regulations. we plans by of provisions management all this call for please presented Before purposes company's the and may during call, under future constitute the securities financial statements expectations, unaudited made harbor the laws prospects the information note remarks various about the begin and safe and of federal forward-looking

statements company's upon and representing of the forward-looking forward-looking should not could the as statements. today These as of those Results represent views views materially date. be as any from differ relied subsequent company's

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

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

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

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

efforts continue course direct store our gains delivery based to Over quarter, optimize transformation and made a of becoming to see our our utilization operations. to metrics. positive third of ongoing we the We versus momentum as the key newly see of we year-over-year many progress rightsized in in organization

headquarters business which aligns current better a needs. new Texas, corporate with We in lease Worth, Fort executed our

at production packaging facility. to Oregon continue also We roasting, Portland, and consolidate our

create customers. pyramid approach. and organization coffee SKU defined our streamline rationalization our to efficiencies and operational and well our in cost will for as will inventory overall for offerings catalog. sales the lines traditional redundancies brand This initiatives, strides premium provide It significant also as designs additional pyramid simplify remove brand our made specialty we and addition, our product change within and SKU clearly to In

We have the previous this relation milestone and new project we as catalog. now SKUs achieved our more to those offerings in our during a of than coffee to related inventory third quarter tiered

We delivery our seeing be production increases and already in-stock encouraged scheduling improvements, leading capabilities. in to are to and

initiative to expect of fiscal end this complete quarter by the the We XXXX. first of

in key also beginning focused these enhance that retention process of upgrades on our management, and field time, growth. improve remain This handheld are enhancements, We to and continuing our invoicing will efforts through take to fruit. route value bear operations which initiatives growth are ensure service support customer in to our our efforts. improve sales for an and is initiatives completed inventory device investments common and profitable we representatives management, upgrade will theme devices our customer simplify improving technology recently The and elements but of overall proposition

we there's have quarter We reached so we trends improved retention customer Overall, our transformation, we to year. be achieved proud strides an inflection point and and work still far compared during the have early done. to year stabilized as prior of the to wins the this much made DSD are the of decline but our related rate

success. time foundational changes we we magnitude deliberate to for the as be this linear before, implement results and not to Change As our expect continue of do said have we takes necessary quarter-to-quarter. long-term patience

the associated transitional our continues and growth delivering focus services on structure, our customer and penetration ship sale. completing on-trend for driving cost increasing margin improvement, the attention following: with new products be improving Our direct to incremental market

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

everyone. hello, and John, Thanks,

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

maintained a compared a year-over-year Overall, flat of profitability. XXXX have the million in prior basis were by sales positive gains sales, higher Overall, sales unit million pricing. we're on in offset third gross total pleased to and at Net relatively were margin period. $XX.X fiscal impacted $XX.X to in year-over-year the for net by year reduction were which made the quarter we adjusted EBITDA have

a third During on XXX increase driven the from million gross quarter during gross Gross $XX.X in compared in improvements pricing This costs. to XX.X% basis. in XX.X%, million XX% underlying moving margin commodities quarter, a of the XXXX, increased points basis decrease to or fiscal profit quarter the primarily by margins year-over-year to respectively. $X.X and increased was

assets million expenses $X.X million in of in by $XX.X and third XXXX. selling result associated expenses and with prior million million period to the and a slightly expenses. and other property from in gains a $XXX,XXX a $X.X offset increase increase Operating during fiscal the year was $XX.X administrative improvement was increase sales general decreased of This in net quarter a

primarily expense period, quarter to partially a vehicle more year by loss than a decrease offset of costs expense, prior of care million related of advertising-related in million. improvement rental to of moved compared $X.X a loss additional $XXX,XXX from the health during a Net operations $X.X increase during both selling was The continuing expenses. to an result the and income benefits

flat in quarter million fiscal $X.X anticipate In capital Our $XX we were expenditures between at capital expense. million million. on $XX XXXX, for year-over-year and total a basis the

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

second remained positive to prior year for loss the $XXX,XXX. compares in EBITDA $XXX,XXX consecutive period. quarter Adjusted quarter for of a at This the third the

Looking sheet. the at balance

Farmer and supplement, utilized under our outstanding had facility. million the XX, cash letters million unrestricted $X.X of equivalents restricted $XXX,XXX million, $X.X of cash. XXXX, $XX.X cash credit As and in credit of million borrowings Bros. of of March $XX.X had had of revolver We availability

and early 'XX. positive to operations finance capitalized We achieve our our free flow be to to expect believe fiscal we in goal are cash adequately

not and are we we do gains growth be in building have linear value to quarter-to-quarter, a with the foundation results we profitable confident expect fiscal we made are and pleased to support creation. far long-term so are Although XXXX

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

John?

Thanks, Brad.

As of the you market the efficiencies we're DSD it is but progress line. now up shareholder joining as call nowhere realized is cost believe growth. in Thank us sustainable well for a potential firmly and to for view as the top in questions. significant It transformation to generate We to making open we line near value. all there you will amount that on upside in our Operator, today. farmers have finish be operational our are and still heard, and significant of

Our will [Operator Sweeney Gerry Instructions] come first question from Capital. with ROTH

talked of sort Are further. we dig a out flipped start from about secondarily, want quarter. negative customer to the wanted sounded a your retention and in It to from script, customer One, are left. just sounded bit -- that stabilizing. that customers I in an retention positive? you that I on it things have was a were has that as sort during different down, some revenue But inflection little X the of quarter point retention. though was because like on revenues to down pulling

John. Gerry, this is

was. happening, retention, decrease than to it's last customers are customer cadence the And much, -- we're were it if facing we come in stabilized the that it's that what the the much of at and terms seeing better neutral. year anything, was In is numbers which

the So think at to and last focusing refine relative a execution that I seeing field on it's and in starting is of how bear to performance going positive fruit. to we year. that we're huge market itself the to continue And as we're level,

talked we've see in fulfilling right with allowing on and and capability, comes place product invest capability, operational as the value in our that past, to the about us to to up that's the at fruit. right the on right our infrastructure, manufacturing proposition at when beginning better of it starting the fulfill service time proposition, customers, basically building systems we to showing in So we're the procurement bear at excellence right price planning the we're the and

or positive the again, turning that week approaching ad for starting little an at positive to bit situation see neutral, counts moment. the to customer And even that's a neutral we're extremely And us are week. from

it. Got

there. -- getting week-to-week, we're positive. we're improving. neutral of getting summation. if a to We're is We're it and not It's at sort looking getting So there Got put it.

roasting, And remains? the that on in then planning, secondarily, where with section scheduled what side -- early early, like consolidating still in on opportunity in would inning we're reduced here, honest everything SKUs, to be of how the you. operational much It sounds you're Portland, say process? you that, And

would we're innings. Yes. early mid to say the I in

haven't yet. in reliever our We first brought

at and change the production, that is that The we puzzle to the be level. that realized other weeks to in takes for planning it initiate piece field a when

cadence. can on And marked improvement. tell from today, I We're there's planning there you is improvement. rates, significant rates, February that and a look tracking branch through weekly been of way to of ability track we're exponential course, not level in only then all in daily. our to production the fulfillment this to improvement I from If been There has a sight but the level. the fulfillment in our line also the manufacturing

matters following sight route been it even in about to customer. the difficulty the know to may heard establishing for branch line I we the have the to And where And past, of us while. a in really talked you've beyond you level

in get meaningful our assets, changes that in into all infrastructure, a from of and building the the that operatives even new manufacturing of matches the procurement, redeploying cadence need manufacturing I to communication planning the back we've customer. And we made think to through piece of branch integrating substantive so systems those way level the

beginning new months. fulfillment the developed that But to meaningful early would I innings. branch couple that is that, we we're are in we've level. say the we're somewhat regard, in -- that the in last capability see at a of And

on having [indiscernible]? products you're Does mean the right that trucks the

That's correct.

happen we're say at about right right in place in though general, would place. as we manufacturing just them Today, getting the the to better the in in right products be the much So right felt time. we system past, I to they had wrong that the getting products the and the

regard, in QX that this the impact. see see inflection early in an we we innings, are with And in that's but And to customer beginning the innings, we we're things having rates, impact. though the one immediate as that's middle feel of the

on of that we're level representatives way, the field of by customers this, changes same artificial on intelligence side, goods told engine. the by other -- which also reinforced making sight of finished substantive that's and line again, the the And our us, inventory the piece

the with downstream. of other coffee the and placement equipment equation speed and brew The that customers actually was customers so getting further equipment the that could to their piece market service

used often at changes, there's made the speed that we've that most substantive market get again, level, sure field adequate equipment so there, inventory their making can And the an allocation. and to equipment that in they the of with is branch placement

their were those. both of So made that to as through were the with retention the get on around we're that, telling customers purchasing we've and purchasing, issues and there traction now cadence, we sides though changes, pieces beginning substantive feel us

I'd you're we At through thing -- start old We I selling add reading think, we're more doing with example, flows the to on level has we this, see P&L start though, than the that we're come on see doing out, that's the see called the old on it inventory new is the line, SKUs, one less point, that letter as other that to the P&L, on what as to that you our of we inventory through. higher Gerry, the inventory top in for less lots is SKUs the get trying to and the efficiencies then sold still get at are the looking now, in, more around because level inventory. inventory, line, product inventory. you're new inning way shareholder through bottom you the

through all of sight have business. then and trickles -- a through are things that and line being we to these the the of trickles it progress made, chain this So supply

mind. go we we these as So talk see as along just about points, keep that those inflection things in you'll --

and I but for have several One were And should year. think engine, about of customer the a on, when the pricing were two, retention. I turned question -- better term, And asked were think, there the AI I other this this they you. the pricing Got you lack basket earlier, talked going think, I market and -- was to models.

only not curious customer part they're and if driving Just solution, in they're the if play retention? but sales of

capability. this So call when initial would lose is in of do the that is point. that the what to could we think I that we the key that would certainly I the pricing customer driving It's critical a was most we've thing market tool that at understanding with part of out is we A anticipate part What AI not tool. basket because our might with of engine we're used to pricing. say it.

So also given say we general, pricing the applying on that we're the means towards related us It's price driven good optimized fact we've engine not retain our would but pricing. equipment and feedback more how to has than customers have in I done -- that on focus just us built to our just giving the in-stock them, levels. service intelligence focus on position really

those of customer turnover. predictors found to be We good

the found of gotten on of fruits But So the we're to there. what's leveraging for said, I say pretty basket more yet. we that that's this pound price the driver way valuable than tool just, haven't we hey, lower-hanging coffee. that would

-- but Got free a operational margins step for getting point and system to growth into opportunities. new -- and it. Maybe et is know and just products real maybe seeing some growth coming think The results, that guys new done on to thoughts adding side, efficiencies cash products EBITDA next growth. the target getting in flow. that. where play. the cetera, you're that Obviously, we're I And I seeing some step are is not with your then in new next We're are you

liquid have you Yes, the coffee, I of also beginning both mean, that and you emphasizing great traction. bring we've which in get up point, syrup the our both shot, Boyd's to Gerry. ambient been line extension a portfolio are as we innovative the know,

continue coffee we that traction Shop, and Boyd's fiscal of right we one of probably us year points penetration where us. like question next those for gain driving growth the And in positive talk no bigger the We to of the offering really for focus the some like rest the they both have. as year when line ambient into to the about There's as of top come growth, they maturity, of to products this opportunities that's will liquid and is begin continue to product customers throughout fiscal idea grow see do be signs now.

have an also to we obviously, then And eye the future.

in products beyond state constantly look ahead months state that, shifting new the toward will introductions. We're So next a future what where future toward looking new innovation a like? and we'll be emphasis

routes? there on staying an What And it. Got growth. theme your are with routes this opportunity is optimized? more about there? Or adding Or

There very opportunity there well may be term. longer

right we're adding the them the think we looking think that it's that of for routes There's have, to through value do infrastructure leverage the lot channel a by how I And we what that I still we we to exercise. of have. I opportunity. more And look be channel existing gained are really to have. now, assets think have we're we to at, looking routes, adding out one where we to, get looking as opposed the density things and

at created rankings. density somewhat where And and of look equation. adding the keep but exist. time on routes, to we you of to piece to us already as in completely exist team the through customer we've eye side established are think Bauer's another refer with that culture we leadership the we of moment. fulfillment in the added an would same adding that Tom that internally and grow and -- to new business the to we restructured performance-driven we've than at optimizing completely rather sets, as also the with routes routes mind, we've value Chief the in establishing power see new that capability. And Officer, side KPI sales Commercial -- order So But areas what I a acquisition, We've that's transformed

it. to Got Density is key route-based businesses.

Hallum [Operator from question [ Craig Group. will Delores Our next come Eric Instructions] with ] Capital

Congrats progress progress there. and on bit first the deeply of rationalization rationalization diving SKU here. is kind the into SKU question a that more My

in new you're legacy brands that understand have of SKUs 'XX. of So out by Have all finalized offering? end of be you tiered and I fiscal which included QX the the fully will expecting sort SKUs the to

of sort you those will look like? what built Have fully out tiers

X of terms the tiers in most volume first have, We is. the where of

we've the be So referring what brand tier we the brand established Bros. essentially X then specialty We're the to positioned in And is essentially, tier, in as we're to the Boyd's traditional that on defined space. the But premium will our Farmer tiers. offering. working those tier, the traditional have brand expression space. take still the

presented on pretty side. established be choice for those are Boyd's But the propositions are and the of tiers. and other those defined. now effort the we're brand-building value much And specialty brands brand the The Farmer in well the by X will Bros. essentially,

Got of new I more of sort understand your SKUs. half inventory it. And that than these at is now we're

delay You of of sort the inventory getting then in the mentioned and obvious market. these the SKUs into out

Just out wondering of gone to market tiers have insights been sort of any ascertain customers sort there's if if any early from of these or feedback into newer from the early any and that?

that Farmer Bros. mean in question. Keep the far exposure a past, distilling we've the the that's managed the out other to thread we're essentially brands those market been No, that But products Boyd's I space. have been some great markets, market early into that Boyd's. would the Bros. the comes in may to and even and positioning they new down and have are in to mind had indications Farmer say both out. had needle in thus when I that it

the that, side, side being has and planning are and there resistance not the So definitely the been realized. said Having the manufacturing efficiencies significant. on

that you've you attention had past can need and and procurement, on the comes coffee you focus really the can when you adding So reduced radically in half of value you source there. effort that is got imagine it when SKUs to the to

it the and But the when more even production on the to straightforward. of lines manufacturing is so, comes side, manufacturing more much planning

not line efficiencies changes your as often. over can turning You realize the by

there, gains in so of when And great we've deal the efficiency seen manufacturing Portland. it comes a to

manufacturing the more able we've consolidate fact Portland that the vast itself. the the in Also in has of to that much majority of and efficient been facility made facility

lots advantages there. seeing we're So of

we'll gained into trucks onto much to goes as more and and center future, think that I in efficiencies the stretches continue it we'll chain see ultimately, and through a level distribution into branch the capability. streamlined Where the see the the

So the have improved branch, getting to as we that. things into right and much the truck, producing right as

of to additional and resources. ability the communication, offering been has fact But been, has Part the that improve that reduced. yes, also infrastructure it's set the radically

So we're more going out. see amount single be the need, piece burn. continue we we to amount it efficient space the of we this roll comes the to to puzzle gas as efficiencies when will of Every of

very difference Last to you the Great you gross great here. you color specialty anticipate I it question the see tiers? on as margin and is still sort in among tiers? anticipate margin among meaningful any tiered new progress now, meaningful difference -- hear. you Do But gross a here. of understood that do And any the offering work

No. Honestly, as keep brands in brands mind, And into with as collapsing tiers. we we multiple have anything. existing business much these associated are singular

I to want around to consistency if you that? as been across gross have brands So tiers. Brad, margin maintain positioned. these able gross speak we to margin such, the already have the where data in think brand X we're And

the call out, question, would I definitely. what your is Well, Eric, answer Yes.

our year. end intentional said, will that within a each the of and us I that to back our very boats. think be the on raise to same way the the going allow with simplification of in margin pricing all we're But product is profile offering thinking

to new find move to customers opportunity into inefficiencies where there's in priced system. individual them the So are

an done be year but full, isn't more is that derive to Not strategic potential value. XXX This the basis. an last points. us X basis extent more there's to opportunity ongoing from maintenance going to So the with with over the we've pricing to it on for much

you device then give just the and That's service. And handheld other us the high-level upgrades you're maybe touched inventory the technology Can to on? and helpful. just upgrades on nice there customer the in on upgrades I and know last you're improvement technology technology quarter, on right. a mentioned you All update upgrades, expected on. see you working other focusing there -- or any what CRM upgrade, on an the management update

sort partner seeing siloed essentially, IT Symphony as Sure. because that We is what in suite internally really to every we're an we're Project as refer a not of sort capability And improvements it's doing or I as of touching of our the piece. such, business, isolated think activity. as

comes programming everything risk it and commodities-driven when So purchasing. mitigation we're to from around new implementing software sourcing

it of What street but out. Phase We're technologies, it utilizing We're the CRM we're is now X CRM. and comes as and to both operations We're with complete. the the utilizing to comes have hardware, the it we to X in Phase that when activities also referring level of rolled that handheld terms rollout when into software.

So improvements expected. there be to

not months. let's the we significant upgrades X forget ERP to last over And the had

So a side. great work that deal of on happening

key again, part integration is forward. a the we're IT doing, driving we're the business So what that of seeing

This concludes today's concluded. now our The attending session. has for presentation. you conference Thank question-and-answer

now You disconnect. may