Executive Summary
Farmer Bros Co reported a flat top-line in Q3 FY2024 (quarter ended 2024-03-31) with net sales of $85.4 million, vs. $85.7 million in the prior-year period, as pricing gains offset lower unit volumes. The quarter delivered a meaningful margin expansion, with gross margin up 660 basis points to 40.1% and gross profit of $34.2 million, driven by improved pricing and lower commodity costs. Despite the revenue mix shift, operating expenses declined modestly to $34.7 million, aided by higher net gains from asset sales, yielding a positive Adjusted EBITDA of $0.271 million for the quarter. However, net income from continuing operations remained negative at $0.682 million, reflecting ongoing restructuring costs and capital investments. Management reiterates a multi-quarter DSD transformation and SKU rationalization program intended to simplify the portfolio, increase in-stock accuracy, and improve route execution. They expect to complete the SKU rationalization by the end of FY2025 Q1 and project free cash flow positivity in early FY2025, supported by a targeted capital plan of $12â$15 million for FY2024. The company remains focused on expanding high-value growth through SHOTT and Boyd's, strengthening pricing discipline via an AI-driven engine, and increasing route density with a more efficient Portland footprint. Growth remains contingent on completing operational improvements and sustaining favorable input-cost dynamics.
Key Performance Indicators
QoQ: -4.58% | YoY:-31.29%
QoQ: -177.04% | YoY:66.36%
QoQ: -125.22% | YoY:94.03%
QoQ: -124.85% | YoY:94.33%
Key Insights
Revenue: $85.358 million in Q3 FY2024, YoY -31.3%, QoQ -4.6%. Gross Profit: $34.257 million, Gross Margin 40.13%, YoY +19.5%, QoQ -5.1%. Operating Income: -$3.429 million, Margin -4.02%, YoY improvement vs prior year. EBITDA: -$0.767 million, EBITDA Margin ~-0.9%. Net Income: -$0.682 million, Net Margin ~-0.80%, EPS -$0.0323. Cash Flow: Net cash from operating activities -$2.296 million; Free cash flow -$5.71 million. Capital expenditures: $3.414 million in the quarter. Balance sheet: Total asse...
Financial Highlights
Revenue: $85.358 million in Q3 FY2024, YoY -31.3%, QoQ -4.6%. Gross Profit: $34.257 million, Gross Margin 40.13%, YoY +19.5%, QoQ -5.1%. Operating Income: -$3.429 million, Margin -4.02%, YoY improvement vs prior year. EBITDA: -$0.767 million, EBITDA Margin ~-0.9%. Net Income: -$0.682 million, Net Margin ~-0.80%, EPS -$0.0323. Cash Flow: Net cash from operating activities -$2.296 million; Free cash flow -$5.71 million. Capital expenditures: $3.414 million in the quarter. Balance sheet: Total assets $179.101 million; total debt $135.956 million; cash $5.699 million; revolver availability $30.5 million. Current ratio 1.423, quick ratio 0.654, cash ratio 0.0806. DSO 31.5 days; DIO 95.8 days; DPO 75.5 days; CCC 51.8 days. Leverage: Debt to capitalization 0.561; Debt to equity 1.277. Valuation metrics indicate negative earnings outlook with P/E and many cash-flow-based multiples not meaningful in the near term.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
85.36M |
-31.29% |
-4.58% |
| Gross Profit |
34.26M |
19.48% |
-5.13% |
| Operating Income |
-3.43M |
66.36% |
-177.04% |
| Net Income |
-682.00K |
94.03% |
-125.22% |
| EPS |
-0.03 |
94.33% |
-124.85% |
Key Financial Ratios
operatingProfitMargin
-4.02%
operatingCashFlowPerShare
$-0.11
freeCashFlowPerShare
$-0.27
priceEarningsRatio
-27.85
Management Commentary
Key management themes from the Q3 earnings call include: (1) DSD transformation progress and capacity discipline aimed at improving delivery and customer service; (2) SKU rationalization leadership, brand tiering (Farmer Brothers traditional, Boyd's premium, with specialty to follow), and inventory progress showing more new-tier SKUs in stock than legacy catalog; (3) margin expansion and profitability improvements driven by pricing actions and lower commodity costs, with Adjusted EBITDA turning positive for the second consecutive quarter; (4) ongoing technology investments under 'Project Symphony' to enhance CRM, risk procurement, and field operations, with Phase 1 CRM completed and Phase 2 underway; (5) a measured expectation that results will not be linear quarter-to-quarter, but the company remains confident in long-term value creation.
We reached an inflection point during the quarter, as retention trends stabilized and our rate of customer decline improved, compared to the prior year.
â John Moore
Adjusted EBITDA for the third quarter remained positive for the second consecutive quarter at $271,000.
â Brad Bollner
Forward Guidance
Management projects total FY2024 capex of $12â$15 million, to be financed by ongoing cash flow and revolver borrowings, with an aspiration to achieve free cash flow positivity in early FY2025. They expect to complete SKU rationalization by end of Q1 FY2025 and continue to leverage pricing, inventory, and route optimization to drive margin and top-line growth. Key monitoring factors include: progress of DSD transformation and inventory stocking levels of new SKUs, realization of cost savings from Portland consolidation, pace of customer retention stabilization, and the ability to convert adjusted EBITDA gains into sustained free cash flow.