Farmer Brothers Company · NASDAQ:FARM
Farmer Brothers — Investor Presentation (March 2018)
36 slides from Farmer Brothers's investor presentation, Mar 12, 2018
Slide 1: Understanding, Leading, Building & Winning in the Business of Coffee
UNDERSTANDING, LEADING, BUILDING & WINNING IN THE BUSINESS OF COFFEE FARMER BROTHERS
Slide 2: We are a coffee company designed to deliver the coffee people want
WE ARE A COFFEE COMPANY DESIGNED TO DELIVER THE COFFEE PEOPLE WANT, THE WAY THEY WANT IT. FARMER BROTHERS 2
Slide 3: Transformed from a 100-year-old coffee company to a growing industry leader
We have transformed from a 100-year-old coffee company to a growing and profitable forward-thinking industry leader, championing coffee culture. FARMER BROTHERS 3
Slide 4: 2012 vs 2017: coffee volume, revenue, Adjusted EBITDA, stock price
2012 1 20171 CAGR2 COFFEE VOLUME (In Pounds) 61,600,000 95,499,000 9.2% REVENUE (In Millions) $498.7 $541.5 1.7% ADJUSTED EBITDA3 (In Millions) $18.0 $46.0 15.8% STOCK PRICE 4 $7.96 $30.25 30.6% NOTES 1. Fiscal year ending June 30. 2. Represents the compound annual growth rate over the entire period
Slide 5: Positioned to Win and Grow: More Coffee, Better Coffee, New Coffee
POSITIONED TO WIN AND GROW MORE COFFEE BETTER COFFEE NEW COFFEE 1 2 3 FARMER BROTHERS 5
Slide 6: Understanding the Business of Coffee
UNDERSTANDING THE BUSINESS OF COFFEE FARMER BROTHERS 6
Slide 7: The days of a single-origin pour-over anytime, everywhere are here
The days of a single-origin pour-over anytime, everywhere are here. The days of a cup of joe in the morning are over. UNDERSTANDING FARMER BROTHERS 7
Slide 8: Coffee is a dynamic category driven by innovation and changing demands
COFFEE IS A DYNAMIC CATEGORY DRIVEN BY INNOVATION AND CHANGING CONSUMER DEMANDS. UNDERSTANDING FARMER BROTHERS 8
Slide 9: Understanding Volume, Quality, Innovation
UNDERSTANDING VOLUME A $76B industry with forecasted growth of 3-5% between 2016-2021. QUALITY Specialty coffee currently accounts for 25% of the market. It is growing and commands a high price point. INNOVATION Product, technology and experience innovation are driving consumption. Cold Brew and Nit
Slide 10: Understanding trends important to us right now and in the future
UNDERSTANDING TRENDS IMPORTANT TO US RIGHT NOW TRENDS IMPORTANT TO OUR FUTURE Sourcing Sustainability and origin stories are influencing purchasing decisions. Drinking Coffee is now consumed across wider dayparts. Product Innovation Millennials and Gen Xers now prefer gourmet, specialty and espresso
Slide 11: Coffee is a multistage business; Farmer Brothers is a leader in each stage
UNDERSTANDING SOURCING ROASTING PACKAGING DISTRIBUTION EXPERIENCE COFFEE IS A MULTISTAGE BUSINESS FARMER BROTHERS IS A LEADER IN EACH STAGE FARMER BROTHERS 11
Slide 12: Delivered in many different ways to market
DELIVERED IN MANY DIFFERENT WAYS UNDERSTANDING TO MARKET DISTRIBUTION FARMER BROTHERS E-COMMERCE Fast-growing delivery channel Small delivery channel in its infancy DIRECT SHIP Servicing large sophisticated customers where marketing, innovation and sustainability are key Poised for growth following
Slide 13: Market share overview and market consolidation
UNDERSTANDING MARKET SHARE OVERVIEW By revenue, Farmer Brothers accounts for less than 1% of the U.S. coffee market "Significant consolidation lies ahead in the coffee industry." MARKET CONSOLIDATION IS UNDERWAY NOTE Please see appendix for sources. - James Watson, Rabobank FARMER BROTHERS 13
Slide 14: Coffee roasters we compete against
UNDERSTANDING COFFEE ROASTERS WE COMPETE AGAINST NOTE Company logos not owned by Farmer Brothers. FARMER BROTHERS 14
Slide 15: Leading in the Business of Coffee
LEADING IN THE BUSINESS OF COFFEE FARMER BROTHERS 15
Slide 16: We are experts in all facets of coffee
...in all facets of coffee. We are experts in coffee... LEADING FARMER BROTHERS 16
Slide 17: Industry-leading expertise
Sourcing Roasting Turnkey serviceHedging Direct ship LEADING Sourcing in 28 countries, including six with direct trade relationships, efficiently delivering coffee across all quality levels Experienced team of 10 highly-skilled, certified roasters with operations in three SQF- certified roasting fac
Slide 18: Purposeful leadership
LEADING Industry Founding member of World Coffee Research Longstanding direct trade relationships and innovative partnerships Award-winning sustainability program with science-based reduction goals Driving towards zero-waste status in roasting and distribution facilities Ethical Sourcing Sustainabil
Slide 19: Building in the Business of Coffee
BUILDING IN THE BUSINESS OF COFFEE FARMER BROTHERS 19
Slide 20: Prepared for change; built for growth
...and prepared for change. We are built for growth... BUILDING FARMER BROTHERS 20
Slide 21: Transformation and modernization journey
BUILDING Capacity & Roasting Portfolio Customers Commerce Logistics Organization Farmer Brothers' transformation and modernization journey FARMER BROTHERS 21
Slide 22: Capacity & Roasting: then, now, next
BUILDING NOW Three facilities, including our new flagship Safe Quality Foods-Certified, Zero-Waste facility, with total potential capacity across the system of 200+ million lbs. of coffee per year THEN Three facilities with limited ability to meet the changing needs of coffee consumers NEXT Ramp up
Slide 23: Portfolio: then, now, next
BUILDING NOW Full and focused portfolio with growth in premium and specialty categories along with a presence in select adjacent beverage categories THEN Primarily traditional coffee products with limited premium products NEXT Greater traction for premium and specialty brands and high-growth innovat
Slide 24: Customers: then, now, next
BUILDING NOW Profitable legacy customers demanding premium coffee Partnerships with sophisticated global and national brands THEN Customer profile heavily weighted towards offices, truck stops and restaurants demanding traditional quality coffee NEXT Deliver increased ROI and profitability through w
Slide 25: Commerce: then, now, next
BUILDING NOW Realigned professional, national account sales operation THEN Legacy local sales network with limited focus on national relationships NEXT Drive sales growth through E-commerce and third-party distributors Modernize DSD sales capabilities COMMERCE FARMER BROTHERS 25
Slide 26: Logistics: then, now, next
BUILDING NOW Outsourced long-haul to 3PL and implemented fleet management for a more efficient distribution network THEN Owned fleet of long-haul and delivery trucks moving product along the network one step at a time NEXT Deliver efficiency through technology LOGISTICS FARMER BROTHERS 26
Slide 27: Organization: then, now, next
BUILDING ORGANIZATION NOW Experienced senior leadership team In-house sustainability and M&A expertise Infused culture with vibrant talent resulting from move of headquarters THEN Legacy management steeped in traditional coffee business NEXT Optimize M&A integration capabilities across all functiona
Slide 28: Winning in the Business of Coffee
WINNING IN THE BUSINESS OF COFFEE FARMER BROTHERS 28
Slide 29: We are positioned to win and grow
We are positioned to WIN AND GROW. WINNING FARMER BROTHERS 29
Slide 30: More Coffee, Better Coffee, New Coffee
WINNING MORE COFFEE BETTER COFFEE NEW COFFEE Win more large, national accounts Expand E-commerce and third-party distribution delivery channels Maximize DSD Growth Employ opportunistic M&A to deliver aligned brands, customers and innovation Leverage market shift to premium and specialty coffee Expan
Slide 31: Appendix
APPENDIX FARMER BROTHERS 31
Slide 32: Revenue, margin, Adjusted EBITDA and coffee volume 2012-2017
20121 20131 20141 20151 20161 20171 REVENUE (In Thousands) $498,701 $513,869 $528,280 $545,882 $544,382 $541,500 MARGIN 33.4% 36.0% 37.1% 36.1% 38.3% 39.5% ADJUSTED EBITDA2 (In Thousands) $17,950 $22,599 $40,400 $41,268 $41,386 $45,973 COFFEE VOLUME (Pounds In Thousands) 61,600 76,000 87,000 87,685
Slide 33: Reconciliation of Adjusted EBITDA to GAAP
RECONCILIATION OF ADJUSTED EBITDA TO GAAP APPENDIX YEAR ENDED JUNE 30 (IN THOUSANDS) 2012 2013 2014 2015 2016 2017 NET INCOME (LOSS), AS REPORTED $(26,576) $(8,462) $12,132 $652 $89,918 $24,400 INCOME TAX EXPENSE (BENEFIT) (347) (825) 705 402 (79,997) 15,954 INTEREST EXPENSE 2,137 1,782 1,258 769 42
Slide 34: Sources
SOURCES APPENDIX PAGE 9 PAGE 10 PAGE 13 Industry Volume & Growth Technomic AFH Beverage Study 2016 RSE, 2014-2016 CAGR Specialty Coffee Growth Nielsen XAOC latest 52 weeks WE 1/27/18 Cold & Frozen Format Growth NCA: National Coffee Drinking Trends 2017; Technomic AFH Beverage Study 2016 RSE, 2014-20
Slide 35: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS APPENDIX Certain statements contained in this presentation are not based on historical fact and are forward-looking statements within the meaning of federal securities laws and regulations. These statements are based on management’s current expectations, assumptions, estim
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