Farmer Brothers Company reports 147% EBITDA decline in 2020 and 15.9% Revenue decline
09/10/2020 • About Farmer Brothers Company (
$FARM) • By InTwits
Farmer Brothers Company reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is declining: -1.5% in FY2020 vs. 2.7% in FY2019 vs. 3.4% in FY2016
- EBITDA Margin is quite volatile: -1.5% in FY2020, 2.7% in FY2019, 5.2% in FY2018, 11.5% in FY2017, 3.4% in FY2016
- Farmer Brothers Company has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.1%. At the same time it's a lot of higher than industry average of 3.5%.
- CAPEX is quite volatile: $18m in FY2020, $35m in FY2019, $37m in FY2018, $85m in FY2017, $50m in FY2016
- The company has unprofitable business model: ROIC is -16.5%
- It operates with high leverage: Net Debt/EBITDA is 81.6x while industry average is 3.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 15.9%. Revenue decline showed acceleration in FY20Q4 - it was 42.9% YoY. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 4.3 pp from 2.7% to -1.5% in FY2020. During FY2016-FY2020 EBITDA Margin topped in FY2017 at 11.5% and was declining since that time.
Gross Margin decreased on 2.5 pp from 30.1% to 27.6% in FY2020. During the last 5 years Gross Margin topped in FY2017 at 34.5% and was declining since that time. SG&A as a % of Revenue increased slightly on 1.1 pp from 31.6% to 32.8% in FY2020.
Net Income margin increased on 5.0 pp from -12.3% to -7.4% in FY2020. Net Income margin declined at -5.8 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
Farmer Brothers Company's CAPEX/Revenue was 3.5% in FY2020. Farmer Brothers Company's CAPEX/Revenue dropped on 12.2 pp from 15.7% in FY2017 to 3.5% in FY2020. For the last three years the average CAPEX/Revenue was 5.1%. During FY2016-FY2020 CAPEX as a % of Revenue topped in FY2017 at 15.7% and was declining since that time.
Return on investment
The company operates at negative ROIC (-16.5%) and ROE (-31.7%). ROIC dropped on 11.0 pp from -5.5% to -16.5% in FY2020. ROE increased on 10.0 pp from -41.7% to -31.7% in FY2020. During the last 5 years ROIC topped in FY2017 at 25.3% and was declining since that time. ROE stuck to a declining trend at -22.1 pp per annum in FY2016-FY2020.
Leverage (Debt)
Company's Net Debt / EBITDA is 81.6x and Debt / EBITDA is . Net Debt / EBITDA dropped on 5.2x from 5.2x to in FY2020. Debt surged on 55.9% while cash surged on 759%.
Farmer Brothers Company has no short term refinancing risk: cash is higher than short term debt (1,025.2%).
Management team
Farmer Brothers Company's CEO D Deverl Maserang II has spent 1 year with the company. Scott Drake is a Farmer Brothers Company's CFO. Scott Drake has spent 1 year at the company.
Financial and operational results
FY ended 06/30/2020
Farmer Brothers Company ($FARM) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 544.4 | 541.5 | 606.5 | 595.9 | 501.3 | -15.9% |
| Gross Profit | 171.2 | 186.9 | 207.4 | 179.1 | 138.1 | -22.9% |
| SG&A | 165.2 | 176.3 | 202.8 | 188.6 | 164.3 | -12.9% |
| EBITDA | 18.6 | 62.1 | 31.5 | 16.4 | -7.8 | -147.4% |
| Net Income | 71.8 | 22.6 | -18.3 | -73.6 | -37.1 | |
Balance Sheet
|
|---|
| Cash | 21.1 | 6.2 | 2.4 | 7.0 | 60.0 | 759.4% |
| Short Term Debt | 1.4 | 28.6 | 90.0 | 0.0 | 5.9 | 17,117.6% |
| Long Term Debt | 1.0 | 0.2 | 0.1 | 92.0 | 137.6 | 49.6% |
Cash flow
|
|---|
| Capex | 50.5 | 84.9 | 37.0 | 34.8 | 17.6 | -49.5% |
Ratios
|
|---|
| Revenue growth | -0.3% | -0.5% | 12.0% | -1.7% | -15.9% | |
| EBITDA growth | -32.3% | 234.4% | -49.3% | -48.1% | -147.4% | |
|
|---|
| Gross Margin | 31.4% | 34.5% | 34.2% | 30.1% | 27.6% | -2.5% |
| EBITDA Margin | 3.4% | 11.5% | 5.2% | 2.7% | -1.5% | -4.3% |
| SG&A, % of revenue | 30.4% | 32.6% | 33.4% | 31.6% | 32.8% | 1.1% |
| Net Income Margin | 13.2% | 4.2% | -3.0% | -12.3% | -7.4% | 5.0% |
| CAPEX, % of revenue | 9.3% | 15.7% | 6.1% | 5.8% | 3.5% | -2.3% |
|
|---|
| ROIC | -2.2% | 25.3% | 0.4% | -5.5% | -16.5% | -11.0% |
| ROE | 52.7% | 10.9% | -8.4% | -41.7% | -31.7% | 10.0% |
| Net Debt/EBITDA | -1.0x | 0.4x | 2.8x | 5.2x | |
Farmer Brothers Company ($FARM) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 139 | 152 | 129 | 81 | | -6.0% | -4.6% | -12.0% | -42.9% |
| EBITDA | 16 | 18 | -36 | -5 | | 176.4% | 110.8% | -2,644.7% | -638.8% |
| Net Income | 5 | 8 | -40 | -10 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 7 | 9 | 26 | 60 | | 34.9% | -31.5% | 116.4% | 759.4% |
| Short Term Debt | 4 | 6 | 6 | 6 | | -95.8% | 5,308.7% | 10,480.7% | 17,117.6% |
| Long Term Debt | 97 | 84 | 96 | 138 | | 210,952.2% | -35.1% | -21.9% | 49.6% |
Ratios
|
|---|
| Gross Margin | 29.3% | 28.8% | 29.4% | 19.2% | | -3.4% | -4.5% | 2.2% | -7.4% |
| EBITDA Margin | 11.3% | 11.6% | -28.1% | -5.9% | | 7.4% | 6.4% | -29.1% | -6.5% |
| Net Income Margin | 3.4% | 5.1% | -30.8% | -12.0% | | 5.4% | 11.4% | 4.5% | -5.8% |
Peers in Packaged Foods & Meats
Below you can find Farmer Brothers Company benchmarking vs. other companies in Packaged Foods & Meats industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Campbell Soup Company ($CPB) | - | -26.7% | 13.3% | 22.6% | 7.2% |
| |
|---|
| Median (1 company) | - | -26.7% | 13.3% | 22.6% | 7.2% |
|---|
| Farmer Brothers Company ($FARM) | - | -0.5% | 12.0% | -1.7% | -15.9% |
Top companies by Gross margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Campbell Soup Company ($CPB) | 36.8% | 41.8% | 35.9% | 33.2% | 34.5% |
| |
|---|
| Median (1 company) | 36.8% | 41.8% | 35.9% | 33.2% | 34.5% |
|---|
| Farmer Brothers Company ($FARM) | 31.4% | 34.5% | 34.2% | 30.1% | 27.6% |
Top companies by EBITDA margin, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Campbell Soup Company ($CPB) | 15.9% | 30.0% | 21.9% | 17.6% | 17.4% |
| |
|---|
| Median (1 company) | 15.9% | 30.0% | 21.9% | 17.6% | 17.4% |
|---|
| Farmer Brothers Company ($FARM) | 3.4% | 11.5% | 5.2% | 2.7% | -1.5% |
Top companies by CAPEX/Revenue, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Campbell Soup Company ($CPB) | 4.3% | 5.8% | 6.2% | 4.7% | 3.4% |
| |
|---|
| Median (1 company) | 4.3% | 5.8% | 6.2% | 4.7% | 3.4% |
|---|
| Farmer Brothers Company ($FARM) | 9.3% | 15.7% | 6.1% | 5.8% | 3.5% |
Top companies by ROIC, %
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Campbell Soup Company ($CPB) | 16.8% | 25.7% | 11.5% | 8.7% | 11.0% |
| |
|---|
| Median (1 company) | 16.8% | 25.7% | 11.5% | 8.7% | 11.0% |
|---|
| Farmer Brothers Company ($FARM) | -2.2% | 25.3% | 0.4% | -5.5% | -16.5% |
Top companies by Net Debt / EBITDA
| Top | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Campbell Soup Company ($CPB) | 2.6x | 1.8x | 6.5x | 5.9x | 3.6x |
| |
|---|
| Median (1 company) | 2.6x | 1.8x | 6.5x | 5.9x | 3.6x |
|---|
| Farmer Brothers Company ($FARM) | -1.0x | 0.4x | 2.8x | 5.2x | - |
