Farmer Brothers Company · NASDAQ:FARM
Farmer Brothers — Investor Presentation (March 2021)
27 slides from Farmer Brothers's investor presentation, Mar 15, 2021
Slide 1: March 2021 Investor Presentation
March 2021Investor Presentation
Slide 2: Safe Harbor
2 Safe Harbor 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, estimates and observations
Slide 3: Cultivating Connections Through the Love Of Coffee
3 Cultivating Connections Through the Love Of Coffee Farmer Brothers is a leading manufacturer, wholesaler & distributor of regular & specialty coffee, tea, and other allied products in the United States. At-A-Glance Built over 100+ years, Farmer Brothers operates one of the largest, wholly-owned, c
Slide 4: Why Now? Poised for Growth & Margin Expansion as COVID-19 Recedes
4 Why Now? Poised for Growth & Margin Expansion as COVID-19 Recedes Large & Growing Demand • Coffee is a $76 billion industry growing at 3-5% annually(1) • 63% of American adults drink coffee at least once a day(2) • Favorable consumer trends are emerging as innovation & new products continue to ent
Slide 5: Business Overview
Business Overview
Slide 6: Established National Footprint
Established National Footprint Products in Over 50,000 Establishments Across All 50 States 3 Roasting Plants Portland, OR (x2) New Headquarters: Northlake, TX 4 Distribution Centers Northlake, TX Northlake, IL Moonachie, NJ Opened Early 2021: Rialto, CA 3 Equipment Refurbishing Centers(1) Oklahoma C
Slide 7: Multi-Channel Sales Strategy
7 Multi-Channel Sales Strategy Omni-Channel Integration Increasingly Providing New Opportunities Direct-Store-Delivery (“DSD”) • Sells coffee, tea, culinary spices, other beverages & breakfast/brunch daypart products to independent & regional outlets(1) • Distributes products through our wholly-owne
Slide 8: DSD: Well-balanced National Business
8 DSD: Well-balanced National Business(1) DSD Sales by Region West Northwest South North East Sales by Customer Type Restaurants Convenience Stores & Hotels Healthcare, Casinos, Coffee Shops & All Other DSD Product Sales Coffee Tea, Culinary, Allied (1) As of 3/31/2020
Slide 9: Network Supports Coffee & Much More
9 Network Supports Coffee & Much More Coffee Accounts for Roughly(1): ~95% of our DS Revenue Other DS products include: • Specialty private labeling & consumer branding, including flavor design, packaging, artwork, etc. We Produce Over 80 Million Pounds of Coffee a Year & Offer More Than 1,000 Diffe
Slide 10: The Farmer Brothers Advantage
10 The Farmer Brothers Advantage If It’s Coffee, We Do it: Vertically Integrated Source-to-Consumption Model • Specialty manufacturing coffee capabilities: roasting, packaging, design & launch of new & private label products • Our manufacturing capabilities are leverageable via partnerships & our wh
Slide 11: Community & Sustainably Driven
11 Community & Sustainably Driven Sustainability Leadership Abroad • Dedicated staffing focused on sustainability; 9-year history of sustainability reporting with yearly reports • Co-founding member of World Coffee Research (WCR); supports research in origin countries to increase sustainability • Pr
Slide 12: Turnaround & Optimization Strategy
Turnaround & Optimization Strategy
Slide 13: Turnaround Timeline
13 Turnaround Timeline New Management Team (2019-2020) • Begins to form in late 2019; experienced in turnarounds, specifically in coffee, DSD, distribution & manufacturing • Laid out comprehensive “5 E’s” turnaround strategy Problem (~2018) • Relocated corporate headquarters from CA to TX (loss of i
Slide 14: Execution on E's
14 Execution on 5 E’s Elevate Innovation • Launched eComm sites for two of our wholly-owned retail brands (Boyd’s & Public Domain) using a replicable model • Omni-channel (cross) integration gives customers the products they need in whatever way is most convenient to them • Bringing the latest in ne
Slide 15: Revamped Management Team
15 Revamped Management Team Deverl Maserang, President & CEO – Joined September 2019 • Over 35 years of leadership in turnarounds & global supply-chain transformations in coffee, food & distribution arenas • Previously CEO & President at Earthbound Farm Organics, where he led the turnaround & return
Slide 16: Stabilized Balance Sheet & Right-Sized Cost Structure
16 Stabilized Balance Sheet & Right-Sized Cost Structure Addressed Pension Overhang • Consolidated three defined benefit plans into two frozen plans • Terminated Retiree Medical Plan, eliminating over $14 million of obligations Amended Debt Revolver • From credit facility to ABL structure to better
Slide 17: Rebalanced Manufacturing & Production Capabilities
17 Rebalanced Manufacturing & Production Capabilities • Shut down oldest manufacturing facility, which was inefficient, inflexible & costly to operate • Rebalanced volumes to nearby and newly improved DFW facility & to Portland facilities • Relocated best equipment from Houston; added new NEPTUNE ro
Slide 18: COVID-19: Accelerating Our Strategy
18 COVID-19: Accelerating Our Strategy Reduced Volumes Provided Deeper Business Insights; Optimized Business from Ground Up The Impact Direct-Store-Delivery (DSD) • Experienced YoY downdraws of ~70% at trough • As of 2020 calendar year end, was down ~40% on a YoY basis; has posted consistent month-t
Slide 19: Forward-Looking Growth Initiatives
19 Forward-Looking Growth Initiatives Move Closer to Customers • White glove services; keep our customers in-stock & expand our base (typically, we are our customers sole coffee provider) • CBE business; piloting third-party maintenance & repairs opportunities Further Unlock 109-Year-Old National Di
Slide 20: Takeaways
Takeaways 20 New Management Quickly established & executed on turnaround initiatives Stabilized the Business Strengthened balance sheet; right-sized cost structure & improved working capital Optimized Supply Chain Exited Houston; re-entered CA; improved DFW; effectively rebalancing volumes Accelerat
Slide 21: Financials
Financials
Slide 22: Selected Income Data
22 Selected Income Data(1) (1) Unaudited ($ in thousands, except per share data) FY 2017 FY 2018 FY 2019 FY 2020 FY21 Q1 (Sep) FY21 Q2 (Dec) Net Revenue 541,500 606,544 595,942 501,320 97,270 104,571 GOGS 354,622 399,502 416,840 363,198 74,851 78,321 Gross Profit 186,878 207,042 179,102 138,122 22,4
Slide 23: Gross Income & Margin
23 Gross Income & Margin(1) 0 5 10 15 20 25 30 35 40 45 $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 MAR '17 JUN '17 SEP '17 DEC '17 MAR '18 JUN '18 SEP '18 DEC '18 MAR '19 JUN '19 SEP '19 DEC '19 MAR '20 JUN '20 SEP '20 DEC '20 Gross Income Gross Margin Cost Improvements Reflected in Gross Ma
Slide 24: Adjusted EBITDA
24 Adjusted EBITDA(1) (1) Unaudited ($ in thousands) FY 2017 FY 2018 FY 2019 FY 2020 FY21 Q1 (Sep) FY21 Q2 (Dec) Depreciation & Amortization 22,968 30,464 31,065 29,896 7,041 7,308 EBITDA 62,519 32,674 14,565 (7,556) 2,906 5,294 Adjusted EBITDA 42,979 47,563 31,883 18,740 5,693 8,274 Reconciliation
Slide 25: Common Size & Margin Profile
25 Common Size & Margin Profile(1) (1) Unaudited FY 2017 FY 2018 FY 2019 FY 2020 FY21 Q1 (Sep) FY21 Q2 (Dec) Gross Margin 34.5% 34.1% 30.1% 27.6% 23.0% 25.1% Selling Expenses 24.6% 25.5% 23.4% 24.3% 24.2% 23.7% G&A Expenses 7.9% 7.9% 8.2% 8.5% 10.0% 11.1% Operating Margin 7.2% 0.2% -2.5% -8.6% -11.8
Slide 26: Selected Balance Sheet Data
26 Selected Balance Sheet Data(1) (1) Unaudited ($ in thousands) FY 2017 FY 2018 FY 2019 FY 2020 FY21 Q1 (Sep) FY21 Q2 (Dec) Cash & Cash Equivalents 6,609 2,438 6,983 60,013 11,025 5,857 Accounts Receivable 46,446 58,498 55,155 40,882 42,115 41,864 Inventory 56,251 104,431 87,910 67,408 71,729 80,61
Slide 27: Contact Us
Contact Us Investor Relations investor.relations@farmerbros.com