Saturday 02 March 2024
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Farmer Brothers reports second quarter fiscal 2024 net sales of $89.5 million

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NORTHLAKE, Texas, USA – Farmer Brothers reported its second quarter fiscal 2024 financial results for the period ended Dec. 31, 2023. The company filed its Form 10-Q and published its quarterly shareholder letter, which contains additional details regarding the results. Both of those documents can be found on the Investor Relations section of the company’s website.

“As we continue to transition our company to focus solely on what we have always done best – direct store delivery (DSD), we are pleased to see early momentum in several of our operational and financial metrics,” said President and Chief Executive Officer John Moore.

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“We delivered meaningful improvements in gross margin and adjusted EBITDA during the quarter, with our gross margin rising above 40% for the first time in more than a year. Although we do not expect our progress to be linear, we believe we will continue to see long-term improvement and are well on our way to being free cash flow¹ positive by early fiscal 2025.”

Farmer Brothers: Second quarter financial results

Second quarter fiscal 2024 net sales increased $600,000 to $89.5 million compared to $88.9 million in the second quarter of fiscal 2023. Overall, net sales were positively impacted by higher pricing compared to prior periods, but were offset by a decrease in coffee and allied products volume.

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Gross margin increased 550 basis points on a year-over-year basis to 40.4% compared to 34.9% for the second quarter of fiscal 2023. Gross profit during the quarter increased $5.1 million to $36.1 million, or 16% on a year-over-year basis, compared to $31 million for the second quarter of fiscal 2023. The increase in gross margin was primarily due to improved pricing and a decrease in underlying commodity cost compared to the prior year.

Operating expenses decreased $2.6 million from $34.3 million in the second quarter of fiscal 2023 to $31.7 million in the second quarter of fiscal 2024. We saw a $1.1 million increase in general and administrative (G&A) expense and a $2.5 million increase in selling expense, which was offset by a $6.2 million increase in net gains from the sale of branch properties and other assets during the quarter.

The selling expense increase was primarily due to additional costs related to healthcare benefits, rent and a year-over-year increase in incentive compensation expense, partially offset by a decrease in advertising-related expense. The increase in G&A expense was also driven by an increase in incentive compensation expense and severance-related costs, partially offset by a decrease in IT and consulting related costs compared to the prior year.

Net income from continuing operations was $2.7 million in the second quarter of fiscal 2024, an increase of $11.4 million compared to a net loss of $8.7 million during the prior year period.

The company’s capital expenditures for the quarter were $3.3 million compared to $4.7 million in the prior year period. In fiscal 2024, Farmer Brothers anticipates between $12 and $15 million in capital expenditures. It expects to finance these expenditures through cash flow from operations and borrowings under its credit facility.

Adjusted EBITDA² for the second quarter of fiscal 2024 was $2.3 million, an increase of $4.5 million compared to a loss of $2.2 million in the second quarter of fiscal 2023.

As of Dec. 31, 2023, Farmer Brothers had $6.9 million of unrestricted cash and cash equivalents. The company had outstanding borrowings of $23.3 million, utilized $4.6 million of the letters of credit sub-limit and had $24.5 million of availability under its credit facility. The company believes it is adequately capitalized to finance its operations in fiscal 2024 and remains confident it is well on its way to being free cash flow positive by early fiscal 2025.

¹ Free cash flow is a non-GAAP measure defined as net cash (used in) provided by operating activities less capital expenditures.
² Adjusted EBITDA is a non-GAAP measure. Please refer to “Non-GAAP Financial Measures” below for an explanation and reconciliation of Adjusted EBITDA and other related non-GAAP measures to comparable GAAP measures.

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