Executive Summary
Farmer Bros Co delivered a solid margin expansion in Q4 2024 amid an ongoing restructuring designed to optimize the value chain and simplify the product portfolio. Net sales for the quarter were $84.4 million, down slightly year over year by 1.0% but with gross margins expanding to 38.8% (vs. 32.5% in the prior-year period), yielding a quarterly gross profit of $32.8 million. Management attributes the gross margin uplift to pricing optimization and a more favorable product mix following the company’s strategic shift to a direct-store-delivery (DSD) model and the centralization of roasting/production activities. Despite the improved gross margin, the company reported a net loss of $4.59 million in Q4 2024, with an EPS of -$0.22, reflecting ongoing fixed-cost absorption and selling expenses associated with the transition and SKU rationalization process.
Over the full year 2024 Farmer Bros posted net sales of $341.1 million, up modestly from $340.0 million in 2023, and achieved gross margins of 39.3% (vs. 33.7% in 2023), driven by pricing actions and a more favorable mix. Full-year adjusted EBITDA turned positive at $0.56 million, a meaningful improvement from a $14.2 million loss in 2023, underscoring the early effectiveness of cost-control and revenue-management initiatives. However, net income remained negative for the year, with continued emphasis on deleveraging and cash-flow generation.
Management highlighted several forward-looking priorities that underpin the recovery path: (1) completing the DSD optimization and footprint optimization to deliver meaningful savings in fiscal 2025, (2) continuing SKU rationalization and brand pyramid consolidation, including the planned specialty tier launch later in 2024/early 2025, (3) advancing product innovation (SHOTT syrups and Boyd’s Liquid Ambient) to broaden addressable markets and strengthen profitability among higher-value customers, and (4) a disciplined focus on working capital and capital expenditure management to reach positive free cash flow. Management emphasized that while the transformation takes time, the gross-margin and adjusted-EBITDA gains already realized point to a sustainable improvement trajectory and a stronger foundation for long-term value creation.
Key Performance Indicators
QoQ: -4.35% | YoY:148.69%
QoQ: -20.94% | YoY:-1 246.43%
QoQ: -573.31% | YoY:90.18%
QoQ: -581.11% | YoY:90.56%
Key Insights
Revenue: Q4 2024 net sales of $84.4 million, down -1.29% YoY and -1.13% QoQ.
Gross Profit: Q4 2024 gross profit of $32.8 million, with a gross margin of 38.82% (+630 bps YoY; +~0.0 QoQ).
Operating Income: Q4 2024 operating income of -$4.15 million, with an operating margin of -4.91% (YoY deterioration largely due to higher selling expenses related to the transition and brand changes).
Net Income: Q4 2024 net income of -$4.59 million, EPS -$0.22; YoY net income data show improvement versus pri...
Financial Highlights
Revenue: Q4 2024 net sales of $84.4 million, down -1.29% YoY and -1.13% QoQ.
Gross Profit: Q4 2024 gross profit of $32.8 million, with a gross margin of 38.82% (+630 bps YoY; +~0.0 QoQ).
Operating Income: Q4 2024 operating income of -$4.15 million, with an operating margin of -4.91% (YoY deterioration largely due to higher selling expenses related to the transition and brand changes).
Net Income: Q4 2024 net income of -$4.59 million, EPS -$0.22; YoY net income data show improvement versus prior-year quarter’s deeper loss, but still negative for the quarter.
Adjusted EBITDA: Q4 2024 adjusted EBITDA of -$1.6 million (improved by $5.6 million YoY). Full-year 2024 adjusted EBITDA was positive at $0.56 million, vs. a $14.2 million loss in 2023.
Full-Year 2024 Performance: Net sales of $341.1 million, up modestly from $340.0 million in 2023; full-year gross margin 39.3% (vs 33.7% in 2023); gross profit $133.9 million (up ~17% or $19.3 million).
Balance Sheet/Liquidity: As of 2024-06-30, cash and equivalents $5.83 million; revolving credit facility borrowings $23.3 million with $27.8 million available; total debt $59.41 million; net debt $53.58 million.
Operational Metrics: DSO ~37.5 days; Days of Inventory Outstanding ~99.8 days; CCC ~52.7 days. These indicate working-capital intensity remains elevated as the company progresses through its turnaround.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
84.40M |
-1.29% |
-1.13% |
| Gross Profit |
32.77M |
148.69% |
-4.35% |
| Operating Income |
-4.15M |
-1 246.43% |
-20.94% |
| Net Income |
-4.59M |
90.18% |
-573.31% |
| EPS |
-0.22 |
90.56% |
-581.11% |
Key Financial Ratios
operatingProfitMargin
-4.91%
operatingCashFlowPerShare
$-0.05
freeCashFlowPerShare
$-0.22
Management Commentary
Key themes from management commentary on the earnings call include:
- DSD Transformation and Footprint Optimization: Management discussed consolidating roasting/production at the Portland facility, centralizing operations, and exiting a Dallas distribution center to optimize the network and generate cost savings in fiscal 2025. John Moore noted the strategic adjustments “to deliver meaningful savings in fiscal 2025” and highlighted the improved customer service and cost efficiency as a result of the changes.
- Brand Strategy and SKU Rationalization: The team completed the Farmer Brothers and Boyd’s rebrands, with remaining SKUs transitioning and a planned specialty-brand launch, signaling a simplification of the portfolio and a clearer value proposition across traditional, premium, and specialty tiers.
- Fulfillment and Inventory Optimization: The company reported progress on fulfillment improvements that began in the prior year, with management indicating that the network is now “almost completely resolved” in terms of demand planning and finished-goods inventory, including equipment for rapid deployment.
- Product Innovation and Portfolio Expansion: SHOTT syrups and Boyd’s Liquid Ambient are cited as accelerants of growth with positive customer adoption; the shift toward shelf-stable ambient formats is expected to reduce operational complexity and improve reliability of supply.
- Margin Improvement vs. Costs: Gross margin expansion to 38.8% in Q4 was driven by pricing optimization and mix; however, selling-expense pressure persisted due to facility rent and benefits, offsetting some margin gains. Management expects continued gross-margin improvement and profitability in coming quarters but acknowledged ongoing commodity and macro headwinds.
- Leverage and Liquidity: Management outlined liquidity improvements, including $5.8 million of unrestricted cash and $23.3 million revolver borrowings with $27.8 million capacity, and a stated objective of returning to positive free cash flow while managing working capital and capex needs.
- Management tone on Outlook: John and Vance repeatedly emphasized disciplined execution, continued cost optimization, and a path toward positive cash flow, while acknowledging potential accelerations in attrition and inflationary pressures in the near term. Vance explicitly stated that achieving sustainable positive free cash flow will require renewed sales growth, margin protection, and solid working-capital management, with an anticipated impact into fiscal 2025.
This included the move of our headquarters and exit of Dallas, Fort Worth distribution center during the fourth quarter, which allowed us to optimize our distribution network without eliminating routes. We expect these strategic adjustments to deliver meaningful savings in fiscal 2025.
— John Moore
We are adequately capitalized to finance our operations in fiscal 2025 as we progress towards our target of positive free cash flow.
— Vance Fisher
Forward Guidance
Management signals a constructive reform trajectory for fiscal 2025 anchored on (i) incremental savings from DSD footprint optimization and centralized production, (ii) further SKU rationalization and brand streamlining to reduce cost-to-serve and improve margin resilience, (iii) growth in higher-margin, branded portfolio through SHOTT and Boyd’s, and (iv) disciplined working-capital management to reach sustainable positive free cash flow. Specific targets cited include: (a) meaningful savings in fiscal 2025 from network optimization and co-manufacturing agreements; (b) ongoing margin protection amid volatile coffee commodity prices; (c) achieving positive free cash flow as the overarching objective, aided by higher profitability customers and improved gross margins; and (d) leveraging the nationwide DSD network to drive top-line expansion in existing and new channels. The management’s tone suggests an achievable path, provided the company sustains pricing discipline and volume growth, mitigates inflationary pressure on input costs, and executes the SKU-brand rationalization without undermining demand. Key factors investors should monitor include the pace of cost savings realization in 2025, the trajectory of gross margins as pricing actions take hold, the impact of SKU rationalization on sales mix and cannibalization, working capital development (especially inventory levels and receivables turnover), and the speed of free cash flow normalization as the company scales its DSD operations.