Sign in

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

FB

FARMER BROTHERS CO (FARM)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 revenue of $85.1M rose 1% YoY and 3.8% sequentially; gross margin expanded to 44.9% (+610 bps YoY), while GAAP diluted EPS was $(0.22) due to a $7.7M pension settlement charge .
  • Against S&P Global consensus, revenue beat ($85.1M vs $81.7M*) and Primary EPS materially beat ($0.09* vs $(0.19)*), but note GAAP diluted EPS was negative given the one-time pension charge .
  • Management guided near‑term gross margin down into the “high 30%” range and indicated no further price increases, citing elevated green coffee prices and uncertainty around a new 50% Brazil import tariff; expect top‑line and margin pressure in FY2026 .
  • Strategic review is ongoing (strategy committee formed July 21, 2025), creating potential corporate action catalysts amid improved cost structure and liquidity (cash $6.8M, revolver borrowings $14.3M, availability $32.6M as of 6/30/25) .

What Went Well and What Went Wrong

What Went Well

  • Gross margin reached 44.9% in Q4 (+610 bps YoY), supported by proactive pricing and operational efficiencies; FY25 gross margin was 43.5% (+420 bps YoY) .
  • Adjusted EBITDA improved to $5.8M in Q4 and $14.8M for FY25, up more than $7M for the quarter and $14M for the year, reflecting SG&A efficiencies and SKU rationalization .
  • Management highlighted a pivot from pricing to execution, emphasizing activation of the DSD network and “white glove” service to improve customer retention and acquisition: “pivot from pricing action...to performance and execution” .

What Went Wrong

  • GAAP net loss in Q4 was $(4.7)M (per‑share $(0.22)), driven by a $7.7M pension settlement charge; FY25 net loss widened to $(14.5)M on lower gains from asset sales YoY .
  • Coffee volumes fell ~10% YoY to “just shy of 20 million pounds,” reflecting weak foodservice demand and breakfast day‑part softness across QSR and C‑store channels .
  • Management expects gross margins to decline to the high‑30% range in FY2026 due to elevated green coffee costs and tariff uncertainty; no further pricing actions planned, implying margin compression risk .

Financial Results

Quarterly Progression (oldest → newest)

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$90.021 $82.054 $85.141
Gross Margin %43.1% 42.1% 44.9%
Adjusted EBITDA ($USD Millions)$5.899 $1.736 $5.779
GAAP Diluted EPS ($USD)$0.01 $(0.23) $(0.22)

Q4 YoY Comparison (Q4 2025 vs Q4 2024)

MetricQ4 2024Q4 2025
Revenue ($USD Millions)$84.396 $85.141
Gross Profit ($USD Millions)$32.766 $38.250
Gross Margin %38.8% 44.9%
GAAP Diluted EPS ($USD)$(0.22) $(0.22)

Balance Sheet and Liquidity Trend

MetricQ2 2025 (12/31/24)Q3 2025 (3/31/25)Q4 2025 (6/30/25)
Cash & Equivalents ($USD Millions)$5.488 $4.054 $6.796
Revolver Borrowings ($USD Millions)$23.300 $23.300 $14.300
Revolver Availability ($USD Millions)$23.7 $22.1 $32.6

KPIs

KPIQ2 2025Q3 2025Q4 2025
Coffee volumes YoY——-10% YoY (“just shy of 20M lbs”)
Adjusted EBITDA Margin %6.6% 2.1% 6.8%
Free Cash Flow ($USD Millions)——$7.5

Results vs S&P Global Consensus (Q4 2025)

MetricConsensus*ActualBeat/Miss
Revenue ($USD Millions)$81.665*$85.141 Beat
Primary EPS ($USD)$(0.185)*$0.085*Beat
EBITDA ($USD Millions)$0.254*$4.095*Beat

Values with asterisks retrieved from S&P Global.

Notes: Company-reported GAAP diluted EPS was $(0.22) due to a $7.7M pension settlement charge ; S&P “Primary EPS” reflects a normalized/continuing operations definition and is not directly comparable to GAAP diluted EPS.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Margin %Near-term FY2026 quartersNot provided“High 30% range” Lowered
Pricing actionsFY2026—No additional price increases planned Maintained (no further hikes)
Top-line trajectoryFY2026—Expect pressure on revenue (weaker foodservice traffic, tariff uncertainty) Cautious
Liquidity postureAs of 6/30/25—Cash $6.8M; borrowings $14.3M; availability $32.6M Informational

No dividend guidance was discussed.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2025)Previous Mentions (Q3 2025)Current Period (Q4 2025)Trend
Pricing & MarginsGross margin >43%; proactive pricing supporting margins Gross margin 42.1%; continued pricing support Margin 44.9%; no further pricing; guide margins to high 30% Downward margin pressure ahead
SKU rationalization & brand pyramidMilestones completed; specialty tier rollout planned Completed with Sum>One launch Execution benefits cited; efficiency gains Completed; operational tailwind
DSD network & route optimizationContinued progress on route optimization Focus on penetration “Pivot to execution”; activate DSD for acquisition/retention Execution emphasis increasing
Supply chain & fulfillment——Out-of-stock issues “almost completely solved” Improved
Macro/tariffs——Weak foodservice demand; Brazil 50% tariff risk; elevated green coffee Adverse macro
Technology initiatives——New CRM; hardware upgrades; inventory management improvements Building capabilities
Strategic alternatives——Strategy committee formed to explore options Potential corporate action

Management Commentary

  • “Pivot from pricing action and optimization to performance and execution…addressing degradation in pounds and customer counts…focus much more on our customer‑focused white glove service” — John Moore, CEO .
  • “We expect gross margins to drop into the high 30% range over the coming quarters” — Vance Fisher, CFO .
  • “Out-of-stock situation…we’ve actually solved that almost completely” — John Moore .
  • “We remain committed to driving top-line revenue growth, increasing overall coffee volumes and strengthening our customer retention efforts” — John Moore .

Q&A Highlights

  • Operational focus shift: Management emphasized moving from price-led margin protection to execution—activating DSD routes, better KPIs, and incentives to drive penetration and acquisition .
  • Customer churn and fulfillment: Order fulfillment issues have been largely resolved; improved service quality expected to aid retention despite macro weakness .
  • Large accounts and allied products: Targeting larger multi-location restaurant groups with national coverage and cross-selling allied goods to maximize the “stop” efficiency per customer .
  • Macro headwinds: Soft foodservice traffic, elevated green coffee costs, and Brazil tariff uncertainty likely to pressure top-line and margins in FY2026; no further pricing actions planned .

Estimates Context

  • Q4 FY2025 beats: Revenue $85.1M vs $81.7M consensus*; Primary EPS $0.09* vs $(0.19)* — material beats. Company GAAP diluted EPS was $(0.22), impacted by a $7.7M pension settlement charge, highlighting comparability issues between GAAP and S&P Primary EPS .
  • Forward estimates: S&P consensus for Q1–Q3 FY2026 shows revenue ~$86.3M*, $93.4M*, $85.9M* and Primary EPS of $(0.11), $(0.03), $(0.14)* respectively, with modest EBITDA expectations, suggesting cautious sell-side stance amid margin headwinds*.

Values with asterisks retrieved from S&P Global.

Where estimates may adjust:

  • Downward margin revisions likely as management guided gross margins to the high 30% range and flagged tariff and green coffee cost risks .
  • Top‑line revisions could drift lower if foodservice demand remains soft and pricing remains static .

Key Takeaways for Investors

  • Near-term margin compression risk: Management’s “high 30%” gross margin outlook and no further pricing actions suggest EBITDA pressure despite operational gains .
  • Strategic alternatives provide optionality: Committee formation introduces potential corporate catalysts; improved liquidity and reduced borrowings enhance flexibility .
  • Execution over pricing: Focus on DSD activation, KPIs, and service quality should aid retention and organic acquisition, offsetting macro softness over time .
  • Watch tariff/coffee cost dynamics: Brazil 50% tariff and elevated green coffee prices are key variables for FY2026 gross margin trajectory .
  • Non-GAAP vs GAAP EPS: Adjusted metrics and S&P Primary EPS point to underlying improvement; GAAP EPS reflects one-time pension settlement—be explicit about metric definitions in modeling .
  • Liquidity improving: Revolver borrowings fell to $14.3M; availability rose to $32.6M, providing cushion against macro volatility .
  • Near-term stance: Expect cautious multiples until margin trajectory stabilizes; catalysts include strategic review updates and evidence of DSD-led volume recovery .