Farmer Bros. Co. (FARM) Q2 2026 Earnings Call Prepared Remarks Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights several challenges, including declining net sales, increased costs, and a net loss. While there are strategic initiatives in place, such as leveraging the DSD network and a strategic committee, the persistent pressure on gross margins and macroeconomic headwinds are concerning. Additionally, the lack of discussion on shareholder returns and the absence of clear guidance further contribute to a negative sentiment. The market is likely to react negatively due to these factors, despite some cost management improvements and potential future gross margin recovery.
Key Financial Performance
Gross Margin Remained above 35%, with a specific figure of 36.3% for the quarter. This represents a 680 basis point decline compared to the prior year period. The decline was attributed to the impact of green coffee inflation on the cost of goods sold.
Adjusted EBITDA Approximately $0.5 million (or $484,000) for the quarter, compared to $5.9 million in the prior year period. The decrease was due to higher cost inventory and macroeconomic pressures.
Net Sales $88.9 million for the quarter, down 1% compared to $90 million in the prior year period. The decline was due to the rise in green coffee costs and the decision to hold on further pricing actions.
Coffee Pounds Decreased just under 3% year-over-year. The decline was attributed to downstream consumer behavior and pressure on purchasing power.
Operating Costs Decreased $1.4 million to $36.4 million (40.9% of net sales) compared to $37.8 million (42% of net sales) in the prior year period. This included a $100,000 decrease in selling expenses and a $700,000 decrease in G&A expenses, primarily due to reduced personnel-related costs.
Net Loss $4.9 million for the quarter, compared to $200,000 of net income in the prior year period. The loss was influenced by higher costs and reduced margins.
Unrestricted Cash and Cash Equivalents $4.2 million as of December 31, 2025, with $24.6 million available under the revolving credit facility.
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Operating Highlights
DSD network utilization: Farmer Bros. aims to unlock the full potential of its Direct Store Delivery (DSD) network to drive product penetration with existing customers and add new accounts.
White label customer portfolio: The company plans to grow its white label customer portfolio by leveraging its core coffee capabilities and utilizing its Portland roasting facility.
Cost management: Year-over-year improvement in selling, general, and administrative costs. Operating costs decreased by $1.4 million, including reductions in personnel-related costs.
Gross margin: Gross margin remained above 35% despite challenges, with expectations of improvement starting in Q4 FY2026 due to declines in coffee commodity prices.
Strategic committee: A strategic committee is actively assessing potential opportunities to maximize shareholder value.
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Risk or Challenges
Higher Cost Inventory: The company faced pressure due to higher cost inventory flowing through its cost of goods sold (COGS), impacting profitability.
Macroeconomic Pressures: Continued macroeconomic pressures, including low consumer confidence and reduced purchasing power, are affecting the company's performance.
Decline in Coffee Pounds and Net Sales: Coffee pounds decreased by just under 3%, and net sales were down 1% year-over-year, indicating challenges in maintaining sales volume.
Green Coffee Inflation: The rise in green coffee costs has pressured gross margins, which declined by 680 basis points compared to the prior year period.
Net Loss: The company recorded a net loss of $4.9 million in the second quarter, compared to $200,000 of net income in the prior year period.
Gross Margin Pressure: Gross margins are expected to remain pressured throughout the fiscal year, averaging in the high 30% range.
Strategic Execution Risks: The company is actively evaluating strategic opportunities through a strategic committee, which could pose execution risks.
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Guidance & Outlook
Gross Margin: Gross margin is expected to remain above 35% for the remainder of fiscal 2026. Improvement in gross margins is anticipated starting in the fourth quarter of fiscal 2026, with further benefits in fiscal 2027, driven by recent declines in Arabica and Robusta commodity markets and reductions in tariff rates in coffee-sourcing countries.
Revenue Growth and Customer Expansion: The company aims to drive top-line revenue growth by leveraging its DSD network, increasing product penetration with existing customers, and adding new accounts. Efforts will also focus on growing the white-label customer portfolio and utilizing the Portland roasting facility.
Strategic Committee Initiatives: The strategic committee continues to evaluate opportunities to maximize shareholder value, with updates to be provided when appropriate.
Cost Management: Operating costs are expected to remain controlled, with a focus on reducing personnel-related expenses and maintaining efficiency.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Review of Unclear Management Responses
A:
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bros Conference
Bros line
COGS micro
Coffee pound
EST statement
Executive afternoon
Farmer Bros
GA personnel
Officer PM
Robusta commodity
account core
action decline
afternoon coffee
avenue shareholder
behavior conference
benefit avenue
challenge improvement
class SQF
coffee decline
coffee pound
commitment today
conference consumer
confidence level
consumer confidence
consumer pressure
count team
date margin
decline Robusta
decline margin
decline period
decrease GA
decrease coffee
degradation power
effort result
environment decrease
expectation relief
facility reduction
facility summary
formation committee
good period
improvement benefit
pound sale
pressure result
sale period
FARM Transcript
Farmer Bros. Co. (FARM) Q2 2026 Earnings Call Prepared Remarks Transcript
Unknown2-13
The earnings call highlights several challenges, including declining net sales, increased costs, and a net loss. While there are strategic initiatives in place, such as leveraging the DSD network and a strategic committee, the persistent pressure on gross margins and macroeconomic headwinds are concerning. Additionally, the lack of discussion on shareholder returns and the absence of clear guidance further contribute to a negative sentiment. The market is likely to react negatively due to these factors, despite some cost management improvements and potential future gross margin recovery.
Farmer Bros. Co. (FARM) Q1 2026 Earnings Call Prepared Remarks Transcript
Unknown11-7
The earnings call indicates several challenges, including a 4% revenue decline, gross margin compression to 39.7%, and continued pressure from high coffee costs and tariffs. Despite operational efficiencies, the economic environment remains tough with declining restaurant traffic and consumer spending shifts. The focus on strategic growth initiatives and operational adjustments is positive, but the overall outlook is negative due to persistent market challenges and financial pressures.
Farmer Bros. Co. (FARM) Q4 2025 Earnings Call Transcript
Positive9-11
The earnings call highlighted strong financial performance with improvements in gross margins and adjusted EBITDA, despite a challenging revenue environment. The Q&A session revealed a strategic shift towards operational efficiency and customer retention, which is positive. However, management's lack of clarity on churn and macro headwinds is a concern. Overall, the positive financial metrics and strategic focus outweigh the uncertainties, indicating a likely positive stock price movement.
Farmer Bros. Co. (FARM) Q3 2025 Earnings Call Transcript
Unknown5-9
The earnings call reveals mixed financial performance, with improved EBITDA and gross margin but declining net sales and a significant net loss. The Q&A section highlights confidence in maintaining margins but acknowledges macroeconomic challenges and competitive pressures. Despite operational improvements, the absence of a share repurchase program and unclear management responses on growth impact contribute to a negative outlook. The declining coffee volumes and consumer confidence further exacerbate concerns, suggesting a likely stock price decline in the range of -2% to -8%.
FARM Report
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