Executive Summary
Farmer Bros Co reported a solid Q3 FY2025 despite a backdrop of macro headwinds in the coffee market. Revenue totaled $82.05 million, down 3.9% year-over-year and 8.9% quarter-over-quarter, while gross margin expanded to 42.1% from 40.1% a year ago. Importantly, the company delivered its third consecutive quarter of positive adjusted EBITDA at $1.7 million, supported by ongoing cost controls and pricing discipline. However, the quarter ended with a net loss of approximately $5.0 million, driven by non-cash and one-off asset-disposal effects that management characterized as non-operational and not indicative of recurring performance. Management emphasized rightsizing and organizational realignment (including leadership changes and a brand and SKU rationalization) as key drivers to sustain margins and support topline growth opportunities. In addition, management highlighted strategic initiatives (Sum>One Coffee Roasters, a tiered brand pyramid, and an expanded allied-products strategy) designed to drive density, cross-sell, and higher-margin mix over time. The balance sheet shows modest liquidity with $4.1 million unrestricted cash and $23.3 million drawn under the credit facility, leaving limited headroom for additional operating needs without continued cash flow improvement. Management remains cautiously optimistic that margins can stay above the 40% target as they continue inventory management, pricing actions, and cost-reduction programs in a persistently challenging demand environment. The near-term focus remains on growing top-line volumes through a renewed go-to-market strategy, improving route density, and expanding the allied-products revenue stream, while monitoring macro risks and tariff dynamics.
Key Performance Indicators
QoQ: -450.00% | YoY:-3.91%
QoQ: -2 469.52% | YoY:-629.62%
QoQ: -2 423.23% | YoY:-612.07%
Key Insights
Revenue: $82.054 million in Q3 FY2025, down 3.9% YoY and 8.9% QoQ. Gross Profit: $34.504 million; gross margin 42.05% (YoY +200 bps). Operating Income: -$3.563 million; EBIT margin -4.34%. EBITDA (reported): -$3.563 million vs. Adjusted EBITDA: +$1.7 million (positive for the third straight quarter). Net Income: -$4.976 million; Net margin -6.06%. EPS: -$0.23. Cash flow: Operating cash flow $1.306 million; Free Cash Flow -$0.684 million. Balance sheet: Total assets $163.159 million; total debt $...
Financial Highlights
Revenue: $82.054 million in Q3 FY2025, down 3.9% YoY and 8.9% QoQ. Gross Profit: $34.504 million; gross margin 42.05% (YoY +200 bps). Operating Income: -$3.563 million; EBIT margin -4.34%. EBITDA (reported): -$3.563 million vs. Adjusted EBITDA: +$1.7 million (positive for the third straight quarter). Net Income: -$4.976 million; Net margin -6.06%. EPS: -$0.23. Cash flow: Operating cash flow $1.306 million; Free Cash Flow -$0.684 million. Balance sheet: Total assets $163.159 million; total debt $63.146 million; net debt $59.092 million. Liquidity: cash & equivalents $4.054 million; current ratio 1.302; gross working capital position with receivables at $24.498 million and inventory $51.252 million. Key efficiency metrics: DSO 26.87 days; DIO 97.01 days; CCC 54.51 days. Market multiples (selected peers in dataset): FARM gross margin 42.1% vs peers with a wide band (e.g., JVA 20.9%; JJSF 33.6%; FBNC 82.2%). Price-to-sales around 0.58x; price-to-book ~1.28x; enterprise-value multiples negative in some peers, indicating varied capitalization and market sentiment across the sector.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
82.05M |
-3.87% |
-8.85% |
| Gross Profit |
34.50M |
0.72% |
-11.16% |
| Operating Income |
-3.56M |
-3.91% |
-450.00% |
| Net Income |
-4.98M |
-629.62% |
-2 469.52% |
| EPS |
-0.23 |
-612.07% |
-2 423.23% |
Key Financial Ratios
operatingProfitMargin
-4.34%
operatingCashFlowPerShare
$0.06
freeCashFlowPerShare
$-0.03
Management Commentary
Key management insights from the Q3 earnings call: Strategy and growth: - John Moore highlighted the third straight quarter of positive adjusted EBITDA at $1.7 million, with gross margins above 42% and ongoing cost structure improvements. He underscored the brand and SKU rationalization (Sum>One) and the launch of Sum>One Coffee Roasters as foundational to a tiered go-to-market approach that enables customers to move among good, better, and best options. Operations and cost control: - Vance Fisher noted gross margins of 42.1% in Q3 2025, up 200 bps YoY, with expectations to maintain margins above 40% despite rising coffee prices. He also indicated that operating expenses rose by $3.4 million YoY largely due to asset-disposal dynamics, but excluding asset-sale effects, OpEx declined by about 1.9% as a percentage of net sales. Market conditions and guidance: - Both management emphasized ongoing macro headwinds (high Arabica/Robusta prices, consumer confidence pressures, tariffs uncertainty) and Coca-Cola-like industry dynamics, but asserted active inventory and pricing management to defend margins. They projected no immediate tariff impact on COGS for the current fiscal year and expressed confidence in continued margin resilience. Growth initiatives and organizational changes: - John Moore described rightsizing measures, including leadership changes (departure of COO Tom Bauer) and the appointment of Travis Young to lead the DSD effort, with a push to increase route density and cross-sell through allied-products and white-glove service. He also stressed the focus on core topline growth alongside improved customer experience, retention, and channel differentiation.
The third quarter was another solid quarter for Farmer Brothers. We realized our third straight quarter of positive adjusted EBITDA at $1.7 million, maintained gross margins above 42% and continued improvement on our cost structure.
— John Moore
Gross margin in the third quarter was 42.1%, a year-over-year increase of 200 basis points, compared to 40.1% in the third quarter of last year. We expect this to continue and we’ll continue to actively manage inventory and pricing to deliver margins above our 40% target.
— Vance Fisher
Forward Guidance
Management guidance centers on maintaining gross margins above 40% as a baseline, despite near-term commodity-cost pressures. They expect continued inventory and pricing discipline to offset higher coffee costs and a re-optimized cost structure to sustain profitability. The company does not anticipate immediate tariff impacts to COGS in FY2025 and plans to leverage global sourcing relationships (Sum>One framework) to navigate tariff dynamics. Key catalysts identified by management include: 1) execution of the expanded allied-products strategy and deeper cross-sell within existing DSD routes, 2) successful rollout of the tiered brand pyramid that improves customer engagement and pricing power, 3) further route-density expansion translating to higher volumes and mix favorability, and 4) ongoing cost-structure rightsizing to maintain gross margins while driving growth. Risks to monitor include macroeconomic softness, coffee price volatility, competitive intensity, and tariff/risk on supply chain. Realized improvements in EBITDA and FCF will be contingent on topline growth, higher utilization of the DSD network, and continued rationalization of SG&A costs.