Q4 2024 Farmer Bros Co Earnings Call

Operator: Good afternoon, and welcome to the Farmer Brothers fiscal fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this call is being recorded.

Good afternoon, and welcome to the Farmer brothers fiscal fourth quarter and full year 'twenty 'twenty four earnings conference call.

Speaker Change: At this time all participants are in a listen only mode.

Speaker Change: As a reminder, this call is being recorded.

Operator: Earlier today, the company filed its Form 10-K and issued its fourth quarter and full-year earnings results press release, which is available on the Investor Relations section of Farmer Brothers' website at FarmerBros.com. The release is also included as an exhibit on the company's Form 10-K and is available on its website and the Securities and Exchange Commission's website at sec.gov.

Speaker Change: Earlier today, the company filed its Form 10-K and issued its fourth quarter and full year earnings results press release, which is available on the Investor Relations section of farmer Brothers' website at farmer Bros. Dot com.

Speaker Change: The release is also included as an exhibit on the company's Form 10-K and is available on its website and the securities Exchange Commission's website at SEC Gov.

Operator: A replay of this audio-only webcast will also be available on the company's website approximately two hours after the conclusion of this call.

Speaker Change: A replay of this audio only webcast will also be available on the company's website approximately two hours. After the conclusion of this call.

Operator: Before we begin the call, please note that all of the financial information presented is unordered, and various remarks made by management during this call about the company's future expectations, plans, and prospects may constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Federal Securities laws and regulations. These forward-looking statements represent the company's views as of today and should not be relied upon as representing the company's views as of any subsequent date. Results could differ materially from those forward-looking statements. Additional information on factors which could cause actual results and other events to differ materially from those forward-looking statements is available in the company's release and public filings.

Speaker Change: Before we begin the call. Please note all of the financial information presented is unaudited and various remarks made by management. During this call about the company's future expectations plans and prospects may constitute forward looking statements for the purposes of the safe Harbor provisions under the federal Securities laws.

Speaker Change: Regulations.

Speaker Change: These forward looking statements represent the company's views as of today and should not be relied upon as representing the company's views as of any subsequent date.

Speaker Change: Results could differ materially from those forward looking statements additional information on factors, which could cause actual results and other events to differ materially from those forward looking statements is available in the companys release and public filings.

Operator: On today's call, management will also reference certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin, in assessing the company's operating performance. Reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures is also included in the company's release and SEC filings.

Speaker Change: On today's call management will also reference certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin in assessing the company's operating performance reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures is also included in the company's release and SEC filings.

John Moore: I will now turn the call over to Farmer Brothers President and Chief Executive Officer John Moore. Mr. Moore, please go ahead.

Speaker Change: I will now turn the call over to Farmer brothers, President and Chief Executive Officer, John Moore, Mr. Moore. Please go ahead.

John Moore: Good afternoon, everyone, and thank you for joining us.

Speaker Change: Good afternoon, everyone and thank you for joining us.

John Moore: Before we jump into our operational and financial discussion, I would like to take a moment to officially welcome our new Chief Financial Officer, Vance Fisher, who is joining our call for the first time. Vance, whom you will hear from in just a bit, joined Farmer Brothers in June and has quickly been getting up to speed on our operations and DSD transformation efforts. He brings more than 25 years of financial leadership experience and a proven track record of helping organizations grow revenue and profitability. We're incredibly excited to have him on our leadership team.

Speaker Change: Before we jump into our operational and financial discussion I would like to take a moment to officially welcome our new Chief Financial Officer, Vance Fisher, who is joining our call for the first time.

Vance Fisher: That's when you will hear from in just a bit joined farmer brothers in June and has quickly been getting up to speed on our operations and DSD transformation efforts.

Speaker Change: He brings more than 25 years of financial leadership experience and a proven track record of helping organizations grow revenue and profitability. We are incredibly excited to have him on our leadership team.

John Moore: This past year has been a truly transformative one for Farmer Brothers. As you know, we completed the sale of our direct ship business to TreeHouse Foods just prior to the start of fiscal 2024, as we made the decision to focus on our more profitable DSD business. Over the last 12 months, we've been focused on optimizing our value gene, driving operational efficiency, and enhancing our technology capabilities to drive better overall customer service. During this time, we completed our co-manufacturing agreement with TreeHouse, centralized our roasting and production efforts to our Portland, Oregon facility, and optimized our overall physical footprint to drive both cost savings and improvements to our customer service capability.

Speaker Change: This past year has been a truly transformative one for farmer brothers.

Speaker Change: You know we completed the sale of our direct ship business to Treehouse foods, just prior to the start of fiscal 2024, as we made the decision to focus on our more profitable DSD business.

Speaker Change: Over the last 12 months, we have been focused on optimizing our value chain driving operational efficiency and enhancing our technology capabilities to drive better overall customer service.

Speaker Change: During this time, we completed our co manufacturing agreement with Treehouse centralized our roasting and production efforts to our Portland, Oregon facility and optimize our overall physical footprint to drive both cost savings and improvements to our customer service capabilities.

John Moore: 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.

Speaker Change: This included the move of our headquarters and exited a 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 'twenty to 'twenty five.

John Moore: We expect these strategic adjustments to deliver meaningful savings in fiscal 2025. We have a transformative skewer rationalization and brand pyramid initiative to ensure we have the right products in the right place at the right time and at the right value proposition to meet our customers' needs no matter how unique or vast they may be. Overall, our focus on DSD has given us a stronger and more flexible foundation for future growth and has better positioned us to protect margins through market fluctuations, including the record recent highs we have seen in coffee pricing. Furthermore, the value proposition offered within each of the traditional premium and specialty coffee tiers within our brand pyramid will allow us to give customers options to participate at the price structure that were spent for them on a nationwide scale.

Speaker Change: From an operational standpoint, we have built a stronger foundation for growth over the past year, we implemented a new structure within our sales organization took important steps to address our out of stock capabilities and began a transformative SKU rationalization and brand pyramid initiatives to ensure we have the right products in the right place at the right time and.

Speaker Change: At the right value proposition to meet our customers' needs no matter how unique our vast they may be.

Speaker Change: Overall, our focus on DSD has given us a stronger and more flexible foundation for future growth is better positioned us to protect margins through market fluctuations, including the record recent highs we have seen in coffee pricing.

Speaker Change: Furthermore, the value proposition offered within each of the traditional premium and specialty coffee tiers within our brand pyramid will allow us to give customers options to participate at the price structure that works best for them on a nationwide scale.

John Moore: While we are proud of the significant progress we have made, change of this magnitude takes time. Over the last year, we have gained greater visibility into what is working and identified additional areas where we can make further adjustments, as highlighted in our fourth quarter results. This includes further enhancing our operational capability, continuing to right size our overall cost structure, and aggressively focusing on customer growth and retention efforts as we look to drive greater performance across the organization.

While we are proud of the significant progress we've made change of this magnitude takes time.

Speaker Change: Over the last year, we have gained greater visibility into what is working and identified additional areas, where we can make further adjustments as highlighted in our fourth quarter results.

This includes further enhancing our operational capability continuing to rightsize, our overall cost structure and aggressively focusing on customer growth and retention efforts as we look to drive greater performance across the organization with that I'll turn it over to Vince to discuss our financials in more detail Dennis.

John Moore: With that, I will turn it over to Vance to discuss our financials in more detail.

Vance Fisher: Vance?

Vance Fisher: Thanks, John, and hello everyone. It is a pleasure to be here, and I appreciate the opportunity to speak with you all today. This is an exciting time to have joined the company. I have a real passion for helping companies grow and grow in a profitable and sustainable way, and I saw that opportunity here at Farmer Brothers. Since joining the company in June, I have been immersing myself in getting up to speed with the business operations and gaining a better understanding of the challenges and opportunities that lie ahead. I have also been assessing how I can best support the organization and help drive significant value creation for our shareholders.

Vince: Thanks, John and Hello, everyone, it's a pleasure to be here and I appreciate the opportunity to speak with you all today.

Vince: This is an exciting time to join the company I have a real passion for helping companies grow and grow in a profitable and sustainable way and I saw that opportunity here at farmer brothers.

Vince: Since joining the company in June I've been immersing myself in getting up to speed with the business operations and gaining a better understanding of the challenges and opportunities that lie ahead.

Vince: I've also been assessing how I can best support the organization it helped drive significant value creation for our shareholders.

Vance Fisher: I am encouraged by what I have seen in my first 90 days, and I am excited about partnering with John and the rest of the leadership team and team members on this journey to put Farmer Brothers on a winning path.

Speaker Change: I'm encouraged by what I've seen in my first 90 days and I'm excited about partnering with John and the rest of the leadership team and team members on this journey to pit farmer brothers on a winning path.

Vance Fisher: With that, I will turn to our fourth quarter and four year fiscal 24 financial results. A quick reminder: these results in the prior year are reported on a continuing operation spaces, reflecting our performance of our DST business in the respective periods. Please refer to our Form 10-K, which was filed with the SEC today for further information regarding the respective performance of our discontinued and continuing operations. Our results for both the fourth quarter and fiscal year reflect the progress which has been made in optimizing our operations and capturing efficiencies, as John mentioned. However, they also reflect areas we will continue to focus on as we work to drive renewed sustainable growth and profitability going forward.

Speaker Change: With that I'll turn to our fourth quarter and full year fiscal 'twenty four financial results.

Speaker Change: A quick reminder, these results in the prior year are reported on a continuing operations basis, reflecting our performance of our DSD business in the respective periods.

Speaker Change: I used to refer to our Form 10-K, which was filed with the SEC today for further information regarding the respective performance of our discontinued and continuing operations.

Our results for both the fourth quarter and fiscal year reflect the progress, which has been made and optimizing our operations and capturing efficiencies as John mentioned.

Speaker Change: However, they also reflect areas, we will continue to focus on as we work to drive renewed sustainable growth and profitability going forward.

Vance Fisher: Nest sales for the fourth quarter of fiscal 24 decreased slightly by 1% compared to the prior year to 84.4 million. The decrease was driven by a decline in sales volume. For our full fiscal year 24, we achieved net sales of 341.1 million, which was a 1.1 million increase compared to 340 million in fiscal 23. This increase was primarily due to stronger pricing, partially offset by decline in sales volume. During the fourth quarter, gross margins increased to 38.8%, a 630 basis point improvement compared to the prior year period of 32.5%. Gross profit for the quarter was 32.8 million, which was a $5 million improvement compared to 27.8 million in the fourth quarter of fiscal 23.

Speaker Change: Net sales for the fourth quarter of fiscal 'twenty, four decreased slightly by 1% compared to the prior year to $84 4 million.

The decrease was driven by a decline in sales volume.

Speaker Change: For our full fiscal year 'twenty four we achieved net sales of 341.1 million, which was a 1.1 million increase compared to $340 million in fiscal 'twenty three.

Speaker Change: This increase was primarily due to stronger pricing, partially offset by a decline in sales volume.

Speaker Change: During the fourth quarter gross margins increased to 38, 8%, a 630 basis point improvement compared to the prior year period, a 32, 5%.

Speaker Change: Gross profit for the quarter was $32 8 million, which was a $5 million improvement compared to $27 8 million in the fourth quarter of fiscal 'twenty three.

Vance Fisher: Gross margins for the full fiscal year increased 560 basis points to 39.3%, compared to 33.7% in fiscal 23. Gross profit during the year increased 19.3 million or 17% to 133.9 million compared to 114.6 million in fiscal 23. This increase in gross margin was primarily due to our pricing optimization efforts during the year. Operating expenses decreased by 1 million in the fourth quarter compared to the prior year period due to a 3.6 million increase in gains related to the sale of branch properties and other assets and a 700,000 decrease in general and administrative expenses, but was mostly offset by a 3.3 million increase in selling expenses.

Speaker Change: Gross margins for the full fiscal year increased 560 basis points to 39, 3% compared to 33, 7% in fiscal 'twenty three.

Speaker Change: Gross profit during the year increased $19 3 million or 17% to $133 9 million compared to $114 6 million in fiscal 'twenty three.

Speaker Change: This increase in gross margin was primarily due to our pricing optimization efforts during the year.

Speaker Change: Operating expenses decreased by $1 million in the fourth quarter compared to the prior year period due to a 3.6 million increase in gains related to the sale of branch properties and other assets and a 700000 decrease in general and administrative expenses, but.

Speaker Change: But it was mostly offset by a $3 3 million increase in selling expenses.

Vance Fisher: The increase in selling expenses during the quarter was primarily driven by additional cost related to facility rent and healthcare benefits. The decrease in GNA was primarily a result of a decrease in personal cost. For the full fiscal year, operating expenses increased by 600,000 compared to fiscal 23. This was a result of an 8.2 million increase in selling expenses and a 4.1 million increase in GNA expenses, which was mostly offset by 11.7 million increase in gains related to the sale of branch properties and other assets. The increase in selling expenses during the year was primarily driven by additional costs related to facility rent and healthcare benefits.

Speaker Change: The increase in selling expenses during the quarter was primarily driven by additional costs related to facility rent and health care benefits.

Speaker Change: The decrease in G&A was primarily a result of a decrease in personnel costs.

Speaker Change: For the full fiscal year operating expenses increased by 600000 compared to fiscal 'twenty three.

This was a result of an $8 2 million increase in selling expenses and a $4 1 million increase in G&A expenses, which was mostly offset by $11 7 million increase in gains related to the sale of branch properties and other assets.

Speaker Change: The increase in selling expenses during the year was primarily driven by additional costs related to facility rent and health care benefits. The increase in G&A was primarily a result of any of an increase in severance costs and other personnel related costs and facilities right.

Vance Fisher: The increase in GNA was primarily a result of an increase in severance cost and other personal related costs and facilities rent. Our net loss from continuing operations moved to a loss of 4.6 million for the fourth quarter compared to a loss of 16.9 million last year. For the full fiscal year, net loss improved to 3.9 million compared to a loss of 34 million during the prior year period, and improvement of more than 30.1 million on a year-over-year basis. In addition, our adjusted EBITDA loss for the quarter improved by 5.6 million to a loss of 1.6 million.

Speaker Change: Our net loss from continuing operations moved to a loss of $4 6 million for the fourth quarter compared to a loss of $16 9 million last year.

Speaker Change: For the full fiscal year net loss improved to $3 9 million compared to a loss of $34 million during the prior year period.

Speaker Change: An improvement of more than $30 1 million on a year over year basis.

Speaker Change: In addition, our adjusted EBIT loss for the quarter improved by $5 6 million to a loss of $1 6 million.

Vance Fisher: For the full fiscal year, adjusted EBITDA was positive at 558,000 compared to a 14.2 million loss in fiscal 23 and almost 15 million improvement.

For the full fiscal year adjusted EBITDA was positive at 558000 compared to a $14 2 million loss in fiscal 'twenty, three and almost $15 million improvement.

Speaker Change: Okay.

Vance Fisher: Looking at the balance sheet as of June 30, 2024, we had 5.8 million of unrestricted cash and cash equivalents and 23.3 million in outstanding borrowings under our revolving credit facility, with 27.8 million of additional borrowing capacity. Lee. We believe we are adequately capitalized to finance our operations in fiscal 25 as we progress towards our target of positive free cash flow. The significant gross margin and adjusted EBIT improvements we have achieved over the past year underscore our confidence that we are building a strong foundation to support long-term value creation.

Speaker Change: Looking at the balance sheet as of June 32024, we had $5 8 million of unrestricted cash and cash equivalents and $23 3 million in outstanding borrowings under our revolving credit facility with $27 8 million of additional borrowing capacity.

Speaker Change: We believe we are adequately capitalized to finance our operations in fiscal 'twenty five as we progress towards our target of positive free cash flow.

Speaker Change: These significant gross margin and adjusted EBIT improvements, we have achieved over the past year underscore our confidence that we are building a strong foundation to support long term value creation.

John Moore: With that, I'll turn it back to John. John?

John Moore: With that I'll turn it back to John John.

John Moore: Thanks, Vance. As you have heard, we were able to make significant progress toward enhancing our operations in fiscal 2024 by upgrading our technology, improving our out-of-stock capabilities, reducing skewer redundancies, and realigning our cost structure. While these efforts are already bearing fruit, as is evident in our gross margin and adjusted EBIT results, we believe there is considerable opportunity to further drive growth and create value as we continue to optimize processes, streamline production, and take full advantage of our industry-leading nationwide DSD network.

Vance Fisher: Thanks Vance.

John: As you've heard we were able to make significant progress toward enhancing our operations in fiscal 'twenty 'twenty four by upgrading our technology, improving our out of stock capabilities, reducing SKU redundancies and realigning our cost structure.

John: While these efforts are already bearing fruit as is evidenced in our gross margin and adjusted EBITDA results.

John: We believe there is considerable opportunity to further drive growth and create value as we continue to optimize processes streamline production and take full advantage of our industry, leading nationwide DSD network.

John Moore: Overall, we remain focused on driving top-line growth by providing high-quality coffee and on-trend products to meet current customer demands. These efforts will help drive product penetration within our existing customer base, while also attracting new profitable customers to Farmer Brothers. Furthermore, the recent launch of Farmer Brothers and Boyd's rebrand, and the upcoming launch of specialty tier coffee brand later this calendar year, clearly identifies and defines our value proposition and allows us to meet potential customers wherever they may be. We believe there are early indications the initiatives and actions we have taken over the past year are having a positive impact.

John: Overall, we remain focused on driving top line growth by providing high quality coffee and on trend products to meet current customer demands. These efforts will help drive product penetration within our existing customer base, while also attracting new profitable customers to farmer brothers.

Speaker Change: Furthermore, the recent launch of farmer brothers, and Boyds rebrand and the upcoming launch of our specialty tea or coffee brand. Later this calendar year, clearly identifies and defines our value proposition and allows us to meet potential customers wherever they may be.

Speaker Change: We believe there are early indications the initiatives and actions we have taken over the past year are having a positive impact.

John Moore: We anticipate improved growth margin and that profitability over the quarters ahead. We are, however, working to manage future headwinds given commodity markets and other macro factors that could impact our financial performance.

Speaker Change: We anticipate improved gross margin and net profitability over the quarters ahead. We are however, working to manage future headwinds given commodity markets and other macro factors that could impact our financial performance.

John Moore: Before we open it up for questions, I would like to take a moment to thank our teams across the company. Making large-scale change in any organization is challenging, and this is especially true from more than century-old industry leaders such as Farmer Brothers. I'm very proud of the strength and resiliency of our teams in response to our new initiatives, and we would not be where we are today without their hard work and continued dedication. So thank you.

Speaker Change: Before we open it up for questions I would like to take a moment to thank our teams across the company.

Speaker Change: Making large scale change in any organization is challenging and this is especially true for our more than century old industry leaders such as farmer brothers.

Speaker Change: I'm very proud of the strength and resiliency of our teams in response to our new initiatives and we would not be where we are today without their hard work and continued dedication. So thank you.

John Moore: With that, I want to thank you all for joining us on the call today.

Speaker Change: With that I want to thank you all for joining us on the call today.

Operator: Operator, we will now open it up for questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.

Speaker Change: Operator, we will now open it up for questions.

Speaker Change: We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question. Please press Star then two.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Eric DeLaurier: The first question is from Eric DeLaurier with Craig Hallam Group. Please go ahead.

Speaker Change: The first question is from Eric Deloria. It was Craig Hallum Group. Please go ahead.

Eric DeLaurier: Great. Thank you for taking my questions. First one for me, just look at for an update on your fulfillment rates. I know you saw significant improvements there in the first three quarters of the year. I think last quarter you said you're kind of early to mid-anings in those improvements. How did fulfillment rates trend in Q4 and perhaps in the most sense?

Speaker Change: Great. Thank you for taking my questions.

Eric Deloria: First one for me.

Eric Deloria: Just looking for an update on your fulfillment rates.

Speaker Change: I know you saw significant improvements there in the first three quarters of the year I think last quarter. You said you are kind of early to mid innings in those improvements.

Speaker Change: How did fulfillment rates trend in Q4 and perhaps.

Speaker Change: <unk> sense.

John Moore: Hello, Eric. How are you? It's great to have you. Thank you for joining the call. I think what you're seeing is that we're continuing on the trend that you had noted in the first part of the fiscal year last year: that was general improvement in the fulfillment rates. We're definitely seeing that we've early on identified an appropriate reason for some of the degradation and attrition that we were facing. It was specifically linked according to our time in the field and then reinforced by the data and the analytics that we had done. It was linked specifically to those fulfillment rates, not only in roasted finish goods and allied products but also in the equipment side.

Speaker Change: Hello, Eric how are you great. Thank you great to have you. Thank you for joining the call.

Speaker Change: What youre, saying is that we're continuing on the trend that you had noted in.

Speaker Change: In the first part of the.

Speaker Change: The fiscal year last year, there was general improvement in the fulfillment rates.

We're definitely seeing that that we.

Speaker Change: You know early on identified an appropriate reason for some of the degradation in attrition that we were facing it was specifically linked according to our time in the field.

Speaker Change: And then reinforced by the data and the analytics that we had done.

Speaker Change: It was specifically to those fulfillment rates not only in our roasted finished goods and allied products, but also in the equipment side right and we've spoken to that in the past.

John Moore: We've spoken to that in the past. I'm very happy to say that we've made tremendous progress in that over the course of the last year. At the moment, we're running at almost, I would say, a completely resolved state. That meaning we now have identified pretty much demand planning. To the extent we feel we need to be accurate in extending those finished good product deliveries all the way from roasting, manufacturing, sourcing through to the distribution centers, through to the 80 plus branches in the network, and then out ultimately to the routes and the customers. At the same time, we've achieved that with the finished goods inventory.

I'm very happy to say that.

Speaker Change: <unk> made tremendous progress on that over the course of the last year and at the moment, we are running at a.

Speaker Change: Almost I would say.

Speaker Change: A completely resolved state so that meaning we now have identified.

Speaker Change: Pretty much demand planning.

Speaker Change: We feel we need to be accurate.

Speaker Change: And extending those finished good product deliveries all the way from Rosebery manufacturing sourcing through to the distribution centers through to the.

Speaker Change: 80, plus branches in the network and then ultimately to the routes on the customers at the same time, we've achieved that with the finished goods inventory. We're also seeing that measures that you've taken on the equipment side has been extremely effective so we.

John Moore: We're also seeing that measures we've taken on the equipment side have been extremely effective. We did redeploy some resources. We made sure that we had equipment inventories at the branch level ready to deploy out to the field to accelerate our speed to market. That again has been very successful. I'm very happy to report that we've made tremendous progress on both fronts.

Speaker Change: We did redeploy some resources, we made sure that we had equipment inventory at the branch level ready to deploy out to the field to accelerate our speed to market.

Speaker Change: And that again has been very successful so I'm very happy to report that we've made tremendous progress on both fronts.

Eric DeLaurier: It's great news.

Speaker Change: Yeah, that's great news great to hear.

John Moore: In terms of your brand pyramid, I know you were partially completed in that sort of overhaul. Could you provide an update there on maybe where you are now and perhaps what remains to sort of complete that transition? Sure, that's a great question. Again, very happy to report we're on schedule. We've completed the Farmer Brothers and Boys rebrand efforts. Both of those skewsets have been transitioned almost completely. As with any transition, you always have a tail with some finished goods inventory associated with now somewhat obsolete skewsets. But happy to report again that transition is pretty much on schedule.

Speaker Change: In terms of your brand pyramid I know you were sort of partially completed in that Ah and Nash.

Speaker Change: Sort of overhaul could you just provide an update there on maybe.

Speaker Change: Where you are now and perhaps.

Speaker Change: What remains to sort of complete that.

Speaker Change: Transition.

Speaker Change: Sure that's a great question.

Speaker Change: Again very happy to report we're on schedule, we completed the farmer brothers and Boyds rebrand efforts.

Speaker Change: Both of those SKU sets have been transaction almost completely.

As with any transition you always have a tail.

Speaker Change: Some finished goods inventory associated with now somewhat absolutely excuse us, but happy to report again that transition is pretty much on schedule. Even the last remaining skus that are left over from the transition period are now being worked through and we really don't see a need to have any kind of reserve activity.

John Moore: Even the last remaining skews that are left over from the transition period are now being worked through. We really don't see a need to have any reserve activity or other concerns about working through that inventory over the next couple of months. So on the Farmer Brothers side and the traditional tier as we've identified it, we see pretty much completion and adoption of the new skewsets. We see that having been distributed all the way through the network to the route level. When we talk about the Boyd skewsets similarly, we see a successful transition from the other products that we were selling into the Boyd's brand that, again, has been successfully distributed down to the route level.

Speaker Change: Are there concerns about working through that inventory over the next couple of months. So on the farmer brothers side than the traditional tier as we've identified it.

Speaker Change: We see pretty much completion and adoption of the new SKU sets, we see that havent been distributed all the way through the network to the right level. When we talk about the Boyd's skus that similarly, we see a successful transition from the other products that we're selling into the boys.

Speaker Change: Brand that again has been successfully distributed down to the route level on what's especially exciting for US is the is the launch of the specialty brands and the collapsing of the various other sub brands that we had into it and that is on schedule and we're looking forward to launching that at the tail end of the calendar year.

John Moore: On what's especially exciting for us is the launch of the specialty brand and the collapsing of the various other sub-brands that we had into it. And that is on schedule, and we're looking forward to launching that at the tail end of the calendar year.

Eric DeLaurier: Great to hear as well.

Speaker Change: That's great to hear as well.

John Moore: I guess just last one for me here. Could you provide an update on how your innovative products like shot and liquid ambient coffee are sort of being accepted in the market, just how those are progressing? It would be great. Thank you. Sure. No, I think, you know, we're always looking to provide our customer base with new, interesting products. These represent two of many that are part of the portfolio. On the shot side with the shot syrups, again, non-GMO, all natural products, shelf stable ambient, incredible quality. We're excited about what's going on with shot. We have some new customers that have recently adopted shots.

Speaker Change: I guess just last one for me here could.

Speaker Change: Could you provide an update.

Speaker Change: On how your innovative products like shot in liquid ambien coffee are sort of being accepted in the in the market just how those are progressing would be great. Thank you.

Speaker Change: Sure.

Speaker Change: I think you know we're always looking to provide our customer base with new interesting products. These represent two of many that are part of the portfolio on the shop side with the shots Europe's again, non GMO, all natural product shelf stable ambient.

Speaker Change: Incredible quality.

Speaker Change: We're excited about what's going on with shop, we have some some new customers.

Speaker Change: Recently adopted shot we have some new contracts that are buying through that are very exciting for us. So we're seeing some positive growth with shots on positive adoption.

John Moore: We have some new contracts that are going through that are very exciting for us. We're seeing some positive growth with shot, some positive adoption. Similarly, with the boys' liquid ambient side, we're seeing some positive traction growing with the boys' liquid ambient. That's significant for us that we did have some supply chain issues associated with the other skews that we had in that space in the past. This really allows us to own that supply chain 100 percent. We're in control of our own destiny with that product. The quality is outstanding. And again, a significant improvement over the experience for the consumer and that this is not a frozen product.

Speaker Change: And similarly, with the boys book with ambient side.

Speaker Change: We're seeing some positive traction and growing with the board with ambient and that's significant for US as we did have some supply chain issues associated with the other skus that we had in that space in the past and this really allows us to own that supply chain, 100%. We're in control of our own destiny with that product the quality is outstanding.

Speaker Change: Again, a significant improvement over the experience for the consumer and that this is not a frozen product. So there's no slacking required operationally, it's much easier to work with and so we're very excited to see what this will do is is our existing customer base continues to adopt and then we look to expand that into other spaces.

John Moore: So there's no slacking required; operationally, it's much easier to work with. And so we're very excited to see what this will do as our existing customer base continues to adopt. And then we look to expand that into other spaces.

Eric DeLaurier: Great.

Speaker Change: That's great Congrats on all the progress and thank you for taking my questions.

Eric DeLaurier: Congrats on all the progress, and thank you for taking my questions. No, thank you, Eric.

Eric Deloria: Thank you Eric.

Gerard Sweeney: The next question is from Terard Sweeney with Roth. Please go ahead.

Speaker Change: The next question is from Gerard Sweeney with Roth. Please go ahead.

Gerard Sweeney: Good afternoon, guys. Thanks for taking my call. Thank you, Jerry. Thank you for calling. Thank you.

Gerard Sweeney: Good afternoon, guys. Thanks for taking my call.

Speaker Change: Thank you Jerry Thanks for calling today.

John Moore: Vance, welcome aboard to you. I wanted to discuss some of the third quarter calls. It's talked a little bit about customer retention trend. Founded up like you even had a few weeks where you went from negative to positive terms of retention aspect. Can you give us something on how that is progressing, both quarter and into the state just a year? Sure, that's a great question. You know, we've spoken in the past about this. And in 2024, I think we made tremendous progress versus 2023. And we've seen that a tradition where you come into line with industry averages.

Speaker Change: Basketball come aboard.

Speaker Change: Wanted to discuss.

Speaker Change: Third quarter caused you talked a little bit about customer retention churn sounded like Youtube and Hudson a few weeks where.

Speaker Change: You went from negative to positive.

Speaker Change: In terms of a pension asset.

Speaker Change: Can you give us an update on how that is progressing fourth quarter.

Speaker Change: Fiscal year.

Speaker Change: Sure. That's a great question, we we've spoken in the past about this in 2024 I think we've made tremendous progress versus 2023, and we've seen that attrition rate coming into line with industry averages, but at the same time, our total customer counts in the pound associated with them they are still.

John Moore: But at the same time, our total customer count from the pounds associated with them, they are still a little bit down from where we would like. And we see less pounds per customer due to a few different industry trends, like the adoption of the being-to-cub technology really happening at scale now, particularly on the seed store channel where we play and have a significant role. But we also see inflationary pressures coming to bear, pricing fatigue. And consumers kind of tightening the belts and purse strings during a time of relative economic uncertainty. So further downstream, we see sort of less cups being sold per location to an extent.

Speaker Change: A little bit down from where we would like.

Speaker Change: We see less pounds per customer due to a few different industry trends like the adoption of the <unk> technology really happening at scale now, particularly in the C store channel, where we play a.

Speaker Change: Significant role but.

Speaker Change: But we also see inflationary pressures coming to bear a pricing fatigue and consumers kind of tightening the belt and purse strings. During a time of relative economic uncertainty. So further downstream, we see sort of less cups being sold per location to an extent.

John Moore: And consumers beginning to take a more measured approach to consuming patterns, whether that's consuming a little bit less than they might normally, or consuming a little bit less often than they might typically. On a positive note, we do see that the business development team is outperforming in terms of profitability when they're adding customers. So the size of the account and the eye to the bottom line of the account has improved. But the total number being added isn't quite at the rate that we would hope. And it isn't really enough to offset that attrition number. The other piece is, as we're taking appropriate steps to steward the business through some of the inflationary pressures on our side of supply chain management.

Speaker Change: Consumers beginning to take a more measured approach to consuming patterns, whether that's consuming a little bit less than they might normally are consuming a little bit less often than they might typically on a positive note. We do see that the business development team is outperforming in terms of profitability when theyre, adding customers. So the size of the account and.

Speaker Change: Either the bottom line of the account has improved but the total number being added isn't quite at the rate that we would hope and it doesn't really.

Speaker Change: To offset that attrition number.

Speaker Change: The other pieces is where we're taking appropriate steps to steward the business through some of the inflationary pressures on our side of supply chain management.

John Moore: And we continue to focus on, as we've discussed in previous calls, that customer profitability factor. We do anticipate the possibility of some acceleration and intrusion just as people experience this pricing fatigue and they experience the general inflationary pressures at scale. And overall, we're focused on higher profitability customers, and we're seeing that show up in our gross margin and adjusted EBITDA. So as we continue to look to build through strategic review process and keep this as an acute area of focus for our business, we're cognizant as one of the challenges we face, and we're looking to challenge our business development team and leverage our sales representative network to add value.

Speaker Change: And we continue to focus on as we've discussed in previous calls that customer profitability factor, we do anticipate the possibility of some acceleration of nutrition, just as people experience this pricing fatigue and they experienced the general inflationary pressures upscale.

Speaker Change: And overall, we're focused on higher profitability customers and were shut in we're seeing that show up in our gross margin and adjusted EBITDA. So as we continue to look to build through strategic review process and keep this as an acute area of focus for our business. We're cognizant of the challenges we face and we're looking to challenge our.

Speaker Change: Business development team and leverage our route sales representative network to add value.

Gerard Sweeney: and you know, obviously I think we just mentioned the target of goals being through test for a positive, but I believe this year, can you guess maybe a little bit of a roadmap how you get their time and maybe a potential plan for it?

Speaker Change: Got it and you know obviously I think you just mentioned.

Speaker Change: Our target or goal of being cash flow positive.

I believe this year can you give us maybe a little bit of a road map, how you get there and maybe the time potential timeframe.

Vance Fisher: Hey, Gerard, this is Vance. You know, it's a good question. You know, we've, we have talked about that in the past. I would say that we are making good progress in really putting the business in the right position now to reach that milestone, but achieving it in what I would say a sustainable way is going to require renewed sales growth, continued protection around gross margins, and then, you know, obviously solid working capital management. We're focused on all of these areas, feel pretty good about the trajectory that we're on and the potential, you know, going into fiscal 25 in terms of specific timeline.

Hey, Jerry this is Vance.

Vance Fisher: Yeah. That's a great question you know, we then we have talked about that in the past.

Speaker Change: I would say that we are making good progress and really putting the business in the right <unk>.

Speaker Change: Position now to reach that milestone, but achieving it in but I would say a sustainable way.

Speaker Change: It's going to require a renewed sales growth.

Speaker Change: Continued protection around gross margins.

Speaker Change: And then obviously solid working capital management.

Speaker Change: <unk> focused on all of these areas feel pretty good about the trajectory that we're on and.

Speaker Change: And the potential going into fiscal 'twenty five.

Speaker Change: In terms of specific timeline I think it's.

Vance Fisher: I think it's, it's a little early to provide any specifics around that, but we're continuing to work towards that and feel good about where we're at and the progress that we're making.

Speaker Change: It's a little early to.

To provide any specifics around that.

Speaker Change: But we're continuing to work towards that until good about where we're at and the progress that we're making.

Gerard Sweeney: I appreciate it. I'll jump back in mind, thanks.

Speaker Change: Got it I appreciate it.

Speaker Change: I'll jump back in line thanks, guys.

Operator: This concludes our question and answer session, and the conference has also now concluded. Thank you for attending today's presentation.

Speaker Change: This concludes our question and answer session and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: You may now disconnect.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [noise].

Speaker Change: Yeah.

Speaker Change: [music].

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Speaker Change: Okay.