Sign in

You're signed outSign in or to get full access.

FB

FARMER BROTHERS CO (FARM)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 revenue declined 4.1% YoY to $81.6M amid softer coffee pounds and a challenging macro, while gross margin compressed 420 bps YoY to 39.7% on record green coffee inflation and tariffs; adjusted EBITDA held flat at $1.4M as cost actions offset pressure .
  • Versus S&P Global consensus, revenue missed ($86.3M* vs $81.6M) and EBITDA missed ($2.20M* vs $0.27M*), while Primary EPS was roughly in line (-$0.11* cons vs -$0.11* actual on SPGI basis; GAAP diluted EPS was -$0.19) *.
  • Management reiterated no near‑term price increases and now expects FY26 gross margins to average in the “high 30s” (previously “below 40%”), reflecting sustained coffee cost inflation and tariffs; SG&A was reduced by ~$4M YoY, helping stabilize adjusted EBITDA .
  • Strategic setup: SUM>One brand early wins and a new Eurest partnership (50 branded cafes) support medium‑term growth; the strategic alternatives process announced in July remains underway, presenting a potential stock catalyst alongside tariff‑exemption developments .

What Went Well and What Went Wrong

What Went Well

  • Cost discipline: Operating expenses fell to $35.6M (vs $40.1M YoY) with $2.5M lower G&A and $1.4M lower selling expense; adjusted EBITDA stable at $1.4M despite revenue and margin pressure .
  • Commercial progress: SUM>One brand “early wins” and a new Eurest partnership to open 50 SUM>One cafes; white‑label pipeline focus to utilize Portland facility (SQF, LEED Silver) .
  • Clear operating narrative: “We were able to maintain the majority of [FY25] progress…hold steady in terms of adjusted EBITDA and still achieve gross margins of approximately 40%,” CEO John Moore said, emphasizing execution on efficiency and cost structure .

What Went Wrong

  • Top‑line softness: Net sales fell 4.1% YoY to $81.6M on lower coffee pounds and macro headwinds impacting restaurant traffic and consumer behavior .
  • Margin compression: Gross margin decreased 400 bps YoY to 39.7%; management now expects FY26 gross margins to average in the high 30s given green coffee inflation and tariffs, with no price actions planned near term .
  • Cash usage and inventory build: Operating cash flow was -$5.0M in the quarter; inventories increased to $55.2M from $49.8M at June 30, partially reflecting cost pressures and working capital dynamics .

Financial Results

P&L and Profitability (oldest → newest)

MetricQ3 FY2025Q4 FY2025Q1 FY2026
Revenue ($M)$82.05 $85.14 $81.60
Gross Profit ($M)$34.50 $38.25 $32.44
Gross Margin (%)42.1% 44.9% 39.7%
Operating Expenses ($M)$38.07 $34.34 $35.62
(Loss) Income from Operations ($M)$(3.56) $3.91 $(3.18)
Net Loss ($M)$(4.98) $(4.75) $(4.03)
Diluted EPS (GAAP)$(0.23) $(0.22) $(0.19)
Adjusted EBITDA ($M)$1.74 $5.78 $1.36
Adjusted EBITDA Margin (%)2.1% 6.8% 1.7%

Notes on non‑GAAP: Q1 FY26 Adjusted EBITDA of $1.364M excludes $0.587M strategic initiative costs, $1.017M losses on asset disposals, $0.482M stock comp, and other items; GAAP EBITDA was $(0.751)M, highlighting the impact of adjustments .

Operating Expense Detail (oldest → newest)

Metric ($M)Q3 FY2025Q4 FY2025Q1 FY2026
Selling Expense$27.10 $26.66 $25.80
G&A Expense$8.55 $9.94 $8.80

Liquidity and Working Capital

MetricJun 30, 2025Sep 30, 2025
Cash & Cash Equivalents ($M)$6.80 $3.82
Revolver Borrowings Outstanding ($M)$14.30 $18.30
Revolver Availability ($M)$32.6 $31.2
Inventories ($M)$49.84 $55.19
Cash from Operations (quarter) ($M)N/A$(5.01) Q1 FY26

Consensus vs. Actuals (S&P Global; Q1 FY2026)

MetricConsensusActual (SPGI basis)Surprise
Revenue ($M)86.26*81.60*-4.66 (-5.4%)*
Primary EPS-0.11*-0.11*~In line*
EBITDA ($M)2.20*0.27*-1.93*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Margin (%)FY2026“Below 40% throughout FY26” (as stated on last quarter’s call) “Average in the high 30s” Maintained/Refined lower band
Pricing ActionsNear-termIndicated no near-term price increases “Do not currently have plans to take additional price in the near term” Maintained
RevenueFY2026None providedNone provided—
CapexFY2026None providedNone provided—
Corporate ActionsOngoing—Strategic alternatives process underway (announced July 21, 2025) New process in FY26

Earnings Call Themes & Trends

TopicPrior-2 (Q3 FY2025)Prior-1 (Q4 FY2025)Current (Q1 FY2026)Trend
Gross Margin42.1%; cost actions; SKU rationalization completed 44.9%; strong YoY; FY25 GM +420 bps YoY 39.7%; compression expected to avg high 30s FY26 Deteriorating near term
Pricing postureNot emphasizedNot emphasizedNo near-term price increases Steady (no pricing lever)
SG&A / Cost structureSelling and G&A down YoY OpEx down YoY; adj EBITDA improved OpEx -$4.5M YoY; adj EBITDA flat Positive
SUM>One / BrandingSUM>One launched; brand pyramid complete Continued progress Early wins; Eurest 50 cafes; higher-edu placements Improving
White-label / Portland utilizationStrategy emphasized —Renewed focus; leverage SQF/LEED Portland facility Improving
Macro / TrafficChallenging environment acknowledged —Restaurant traffic down; consumers shifting; tariffs high Negative near term
Tariffs / Coffee inflationNot highlighted—Record green coffee inflation; Brazil tariff pressure Negative
Strategic alternatives—Strategy committee formed (FY25 business highlights) Process ongoing (July PR) Ongoing

Management Commentary

  • CEO John Moore (press release): “While we did see a 4% decrease in overall revenue on a year-over-year basis, the meaningful progress we have made in driving operational efficiency and managing our cost structure allowed us to hold steady in terms of adjusted EBITDA and still achieve gross margins of approximately 40%.”
  • CEO John Moore (call): “We continue to achieve early wins with our Someone [SUM>One] coffee roaster specialty brand… our partnership with Eurest will open 50 Someone branded cafes across the country.”
  • CFO Vance Fisher: “We expected to see gross margin compression beginning in the first quarter that would push gross margins below 40% throughout fiscal ’26… we… anticipate margins to average in the high 30s throughout fiscal ’26.”
  • CFO Vance Fisher: “Operating expenses decreased $4.5 million… includes a $1.4 million decrease in selling expenses and a $2.5 million decrease in [G&A], both primarily driven by reduced personnel related costs.”

Q&A Highlights

  • No analyst Q&A was conducted on the call; the operator closed the session without questions, limiting external scrutiny and guidance clarification this quarter .

Estimates Context

  • S&P Global consensus vs actuals (SPGI basis): Revenue missed (86.26M* vs 81.60M*), EBITDA missed (2.20M* vs 0.27M*), and Primary EPS was in line (~-0.11* vs -0.11*). Note: GAAP diluted EPS reported was -$0.19 (company basis) *.
  • Forward look (S&P Global): Q2 FY26 consensus Revenue $93.44M*, Primary EPS -$0.03*, and EBITDA $3.42M*, implying modest sequential improvement as holiday quarter mix offsets cost pressure*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Expect near-term margin pressure: Management sees FY26 gross margins averaging in the high 30s as record green coffee inflation and tariffs persist and the company avoids further price increases .
  • Cost actions are working: ~$4.5M YoY OpEx reduction and stable adjusted EBITDA underscore structural improvements that should position FARM well when coffee costs normalize .
  • Commercial catalysts building: SUM>One momentum, 50‑unit Eurest rollout, and white‑label focus leveraging the Portland facility provide medium‑term top‑line optionality .
  • Working capital tightness bears watching: Inventory build and negative operating cash flow in Q1, alongside higher revolver borrowings, suggest continued discipline is required if macro and coffee costs stay elevated .
  • Strategic alternatives remain a wildcard: The ongoing process could unlock value depending on outcomes; any tariff‑exemption progress for coffee imports would be an upside catalyst for margins .
  • Estimate resets likely: Street may need to lower FY26 margin/EBITDA assumptions given reiterated no‑pricing stance and “high 30s” gross margin outlook; watch Q2 seasonal lift vs cost headwinds *.

Appendix: Additional Tables

Business Highlights (Q1 FY2026)

  • Eurest partnership: 50 SUM>One cafes .
  • SG&A improvement: ~$4M YoY reduction in SG&A (selling + G&A) .
  • Liquidity: $3.8M cash; $31.2M revolver availability at quarter‑end .

Non‑GAAP Reconciliation Snapshot (Q1 FY2026)

  • EBITDA: $(0.751)M; Adjusted EBITDA: $1.364M (adds back D&A $2.614M, interest $0.660M, stock comp $0.482M, asset disposal losses $1.017M, strategic initiative $0.587M, severance $0.029M) .