Farmer Bros. Co. Q1 FY2025 earnings call

• Brand pyramid and SKU rationalization initiatives, inventory management enhancements, proactive pricing updates, and sales team realignments contributed to results.
• Completed refresh of premium Boyd's Coffee brand, which will be the premier premium nationwide coffee offering, with new specialty tier brand to be announced soon.
• Optimized and added density to existing DSD routes to ensure right products in right place at right time.
• Proactively navigating coffee market volatility and consumer behavior changes, piloted customer-focused sales incentive with positive results.
• Focused on selling additional products to existing customers to drive growth and retention.

In the first quarter, net sales increased to $85.1 million, a $3.2 million or nearly 4% increase compared to the first quarter of last year. Adjusted EBITDA for the quarter was 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% compared to 37.6% in the first quarter of last year and increased 510 basis points sequentially compared to 38.8% last quarter. Cash flow from operating activities improved to positive $2.5 million in the first quarter of this year, representing a $9.6 million improvement compared to negative $7.1 million in the first quarter of last year and a $3.5 million improvement compared to negative $1 million last quarter.

• Focus in fiscal 2025 on customer growth, adding density across existing DSD routes, and selling additional products to existing customers to generate revenue and protect margins.
• Recognize the need to improve topline results for significant scale and long-term growth.

• Volatility in coffee commodity markets.
• Macroeconomic environment uncertainties.

Q: Wondering if we could start with the growth and density in the routes. And it was something that I paid particular attention to, but wanted to understand churn, how that's coming along and some of the growth initiatives and how they've taken place.

A: John Moore mentioned continued positive trend in retention despite industry headwinds, focusing on optimizing routes, better product penetration in existing accounts.

Q: Congrats on the strong quarter here. My first question is in regards to getting back into specialty coffee with this new brand that's to be announced in the coming months here. How should we think about that impacting financials?

A: John Moore said transitioning existing specialty volume to new brand, seeing incremental revenue opportunity in specialty coffee which is fastest-growing segment; Boyd's Coffee has incremental opportunities as it's been West Coast brand with untapped potential in other regions.