• Adjusted EBITA: Positive at $1.4 million, an improvement of $1.9 million year over year.
• Gross Margin: Increased 630 basis points year over year to 43.9%.
• Net Sales: Increased to $85.1 million, a nearly 4% increase compared to the first quarter of last year.
• Gross Profit: Increased by $6.5 million to $37.3 million for the quarter.
• Operating Expenses: $40.1 million or 47.2% of net sales, compared to $32.9 million or 40.1% of net sales last year.
• Net Loss: $5 million compared to a net loss of $1.6 million in the first quarter of last year.
• Cash Flow from Operating Activities: Improved to positive $2.5 million, a $9.6 million improvement year over year.
• Unrestricted Cash and Cash Equivalents: $3.3 million as of September 30, 2024.
• Outstanding Borrowings: $23.3 million under the credit facility with $27.1 million of additional borrowing capacity.

• Warning! GuruFocus has detected 3 Warning Signs with FARM.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Farmer Bros Co (NASDAQ:FARM) reported solid sales growth and meaningful gains in both gross margin and adjusted EBITA on a year-over-year and quarter-over-quarter basis.
• The company achieved a milestone with the refresh of its premium Boyd's coffee brand, expanding it from a predominantly West Coast brand to a nationwide offering.
• Efforts to optimize and add density to existing DSD routes have contributed to improved customer retention and service.
• The company has been proactive in navigating coffee market volatility and changes in consumer behavior through nimble commodity purchasing and inventory management.
• Farmer Bros Co (NASDAQ:FARM) reported a positive adjusted EBITA of $1.4 million, marking a significant improvement from previous quarters.

Negative Points

• Operating expenses increased to $40.1 million or 47.2% of net sales, compared to $32.9 million or 40.1% of net sales in the first quarter of last year.
• The company reported a net loss of $5 million for the quarter, compared to a net loss of $1.6 million in the first quarter of last year.
• There were no asset sales during the first quarter of this fiscal year, contributing to the increase in operating expenses.
• The company acknowledges that financial results may not be linear quarter to quarter due to current volatility in coffee commodity markets and the macroeconomic environment.
• Farmer Bros Co (NASDAQ:FARM) recognizes that they are not yet seeing the top-line results needed for significant scale and long-term growth.

Q & A Highlights

Q: Can you discuss the growth and density in your routes, and how churn is being managed? A: John Moore, President and CEO, explained that churn is stabilizing better than expected despite industry headwinds. The company is focusing on customer service and optimizing routes rather than adding new ones. They aim to increase product penetration within existing accounts to unlock potential value.

Q: How will the new specialty coffee brand impact financials, particularly revenue? A: John Moore stated that initially, the focus will be on transitioning existing specialty volume to the new brand. Over time, they plan to roll it out nationally, which could lead to incremental revenue as specialty coffee is a fast-growing segment.

Q: Are there opportunities for the Boyd's brand as it expands nationally? A: John Moore noted that Boyd's, traditionally a West Coast brand, has potential for growth in other regions. It performs well in certain channels like C-stores and healthcare, and the national rollout could bring incremental opportunities.

Q: Can you elaborate on the gross margin improvements and the role of price optimization? A: Vance Fisher, CFO, highlighted that price optimization efforts were in response to rising commodity markets. The company is ensuring they are not falling behind on pricing, which is reflected in the improved gross margins.

Q: Are there plans for further asset disposals? A: John Moore mentioned that asset disposals are not part of the ongoing business strategy but are considered opportunistically. They may sell branches that no longer meet their needs due to changes in urban centers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.