Good afternoon, and welcome to the Farmer Brothers Fiscal Fourth Quarter and Year-End 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Today, the company filed its Form 10-K and issued its fourth quarter and year-end results press release, which are available in the Investor Relations section of the Farmer Brothers website at farmerbros.com. The release is also included as an exhibit on the company's Form 10-K and is available on its website and the Securities and Exchange Commission's website at sec.gov. A replay of this audio-only webcast will also be available on the company's website approximately 2 hours after the conclusion of this call. Before we begin the call, please note that all financial information presented is unaudited and various remarks made by management during this call about the company's future expectations, plans and prospects may constitute forward-looking statements for the purposes of safe harbor provisions under the federal securities laws and regulations. These forward-looking statements represent the company's views as of today and should not be relied upon as representing the company's views as of any subsequent date. Results could differ materially from those forward-looking statements. Additional information on factors which could cause actual results and other events to differ materially from those forward-looking statements is available in the company's release and public filings. On today's call, management will also reference certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin in assessing the company's operating performance. Reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures is also included in the company's release and SEC filings. I will now turn the call over to Farmer Brothers' President, Chief Executive Officer, John Moore. Mr. Moore, please go ahead.

Good afternoon, everyone, and thank you for joining us. Fiscal 2025 was a strong year for Farmer Brothers. We realized significant operational and financial improvements despite market headwinds. We ended the year with gross margins above 43%, a more than $14 million year-over-year improvement in adjusted EBITDA, continued decreases in SG&A expenses and significantly paid down debt. We also captured a number of internal efficiency gains from both an organizational and cost structure perspective, as a result of our manufacturing, sales and network optimization initiatives. With the successful launch of our Sum>One specialty brand this past March, we fully realized the completion of our SKU rationalization and brand pyramid good, better, best positioning initiatives. Early response to Sum>One has been encouraging with several promising opportunities in the pipeline. In fact, we are currently working with a few of our larger customers to launch Sum>One branded cafe experiences across their locations and look forward to sharing more with you in the coming months. In distilling a multitude of brands and coffee types into our core Farmer Brothers, Boyd's and Sum>One brands, we leveraged a significant and differentiating capability in Farmer Brothers, our coffee sourcing, quality control, roasting and manufacturing teams. In addition to flexing this core competence for SKU rationalization, the team was also able to reconstitute our sourcing methodologies to enhance elasticity and provide more resilience. This is of particular importance given the current state of the green coffee markets. We've also continued to differentiate ourselves from competitors with our ability to provide a fully comprehensive set of coffee solutions. Our sourcing and product development team enable Farmer Brothers to engineer solutions from soil to sip. Our small batch and nimble manufacturing capability allows us to provide coffee finished goods ranging from more value-engineered commercial applications to the highest of…

Thanks, John, and good afternoon, everyone. As John mentioned, Farmer Brothers delivered very strong results in fiscal '25, despite a challenging market environment. We achieved significant year-over-year improvements in adjusted EBITDA gross margins and SG&A and significantly improved our cash flow generation, which allowed us to strengthen our balance sheet. Overall, our adjusted EBITDA for the fourth quarter was $5.8 million and $14.8 million for the full fiscal year, a year-over-year improvement of more than $7 million for the quarter and more than $14 million for the full fiscal year. Our adjusted EBITDA results were supported by healthy gross margins. Gross margin in the fourth quarter was 44.9%, a year-over-year increase of 610 basis points. For the full fiscal year, gross margins were 43.5%, a 420 basis point increase compared to the prior year. Our proactive approach to pricing continued to positively impact gross margins throughout the year as we strategically stayed ahead of the rising green coffee market. However, as John mentioned earlier, we believe we have maximized the benefits of this strategy. And at this time, we do not have plans to take additional price in the near term. As a result, we expect pressure on gross margins throughout fiscal '26 as we realize the impact of the rising green coffee COGS in our results and expect gross margins to drop into the high 30s range over the coming quarters. From a top line perspective, net sales during the fourth quarter were $85.1 million compared to $84.4 million during the prior year period. For the full fiscal year, net sales were up slightly to $342.3 million compared to $341.1 million in the prior year. Operating expenses increased $14.3 million to $150.4 million for the year. This increase was almost exclusively a result of a $20.2 million year-over-year decrease…

Thanks, Vance. Farmer Brothers has come a long way in a fairly short amount of time. Fiscal 2025 was a year of tremendous improvement both financially and operationally despite significant market headwinds. While we take great pride in that, as you've heard me say time and again, there is still much work to be done. As such, we remain committed to driving top line revenue growth, increasing overall coffee volumes, strengthening our customer retention and expansion efforts and delivering an exceptional customer experience in fiscal 2026. Before we open it up for questions, I want to take a quick moment to thank our team. Their leadership, perseverance and determination continue to be what drives our successes, both big and small, and how we continue to build connections over coffee. They are what makes Farmer Brothers great. Thank you all again for joining us on the call today. Operator, we will now open it up for questions.

[Operator Instructions] And your first question today will come from Eric Des Lauriers with Craig-Hallum Capital Group.

Sincere congratulations on the execution that you guys have done over the past year, certainly a tough macro backdrop, but really impressive results. So hats off to you guys. John, you cited a couple of areas where you're continuing to focus on operational efficiency and margin improvements. Obviously, there's been -- you guys have done a lot of execution on the operational efficiency front already. Brand pyramid is now complete. Could you maybe sort of rank order those areas where you're focusing now? Or maybe help us understand where there remains the biggest opportunity to kind of further improve efficiency. I'm just kind of wondering how much is left considering all that you guys have done.

No, thanks for the question, Eric. I would categorize it as somewhat of a pivot at this moment, a pivot from pricing action and optimization to performance and execution. I think that we did a great deal of work over the last year or 2 years of refining many of our systems, many of our processes we've talked in the past about route optimization efforts, et cetera. And I think at this point now, we put new leadership in place, Travis Young on the field operations side, Brian Miller on the business development side. Both gentlemen are adding tremendous value and really getting their feet under them. And at this time, we're able to pivot more again into sort of addressing that degradation in pounds, addressing that degradation in customer counts and trying to focus much more on our customer-focused white-glove service and fulfillment. I think we've got a 100-year history of industry leadership in that space. We've got one of the largest coffee centric DSD networks, if not the largest in the country. We've got one of the largest, if not the largest equipment servicing, coffee-specific networks in the country. We've got arguably one of the most talented and accomplished green coffee sourcing, roasting manufacturing and fulfillment coffee operations in the country. And I think what we're really looking to do is lean on all of those core competency areas to drive value both for our customers and our shareholders. And that's what you're going to hear us focusing on over the next fiscal year.

Great. That's helpful. And I suppose it's a bit of a related question here. I mean it sounds like this is where the focus is now. But as we kind of think about customer churn levels, I know, I guess, about a year ago or so at this point, order fulfillment was one of the biggest -- or maybe the lowest hanging fruit there. It sounds like you guys have improved that significantly over the past year, but maybe kind of comment on any order fulfillment progress that there -- that remains, if any? And then, just at this point, to the extent that you've had this visibility, I'm wondering if you're seeing more of the churn now coming from simple macro headwinds. You commented on how food service industry is basically as pressured as it's been over the past decade. So to the extent that you're still seeing some churn, could you just kind of comment on, I guess, the levels of churn overall, how your order fulfillment rates have been progressing here? And just what you're seeing from a sort of like forced error on your guys' part from causing customer churn versus just sort of the whole bit of macro headwinds at this point? A bit of a wordy question there, but just if you can just expand on the dynamics there would be helpful.

Sure. I appreciate the question, and I think it gives me an opportunity to highlight some great work done by Craig Newham and his team in coffee and in general, the planning and procurement functions in the company. There was definitely a challenge to that team to address what had been a really difficult out-of-stock situation. And I think that also speaks to the final execution with the brand pyramid strategy. I mean that, as we've said in the past, it impacts a number of different facets of what we do. It makes everything more efficient from sourcing to manufacturing line time to roasting to distribution throughout the network. There's a fair amount of complexity there that we removed from the system just and finally, executing that initiative. But I have to again tip my cap to the planning and procurement team. I think they did a tremendous job. They recognize the challenge for what it was. And then it was really a complete team effort. So the operation -- field operations team, the communication between those groups. It deserves extra attention because at this point in time, I would say, knock on wood, we've actually solved that almost completely. So I'm very happy to report, as we often said, when we show up on time with the products that we should have for the customer, we think we win. Given our white-glove service commitment, the fact that our DSD network is so strong and those Route Sales Representatives provide such a comprehensive service when they go into a 4-walls environment, they rotate stock, they calibrate equipment, they wipe down a coffee servicing area, they really do take care of all of the customers' coffee, beverage fulfillment needs so that the customer can focus on their core business, servicing their customers for their downstream. So I'm very happy to report. We've done a pretty good job on that side.

That's great to hear. Congrats again on all the execution over the past year plus.

And your next question today will come from Gerard Sweeney with ROTH Capital.

On the growth side. I know headwinds, you gave a little bit of macro backdrop for the industry. But at some point, you can't cut yourself to profitability. You had to start growing, and this is a tough environment for that. But is there ability to -- what's the opportunity to drive better penetration, reduce churn and stabilize volumes, things like that? Can we do that in this environment where we're going to be just -- have to grind through this?

Thanks, Gerard. I think it's definitely a difficult macro environment to operate in, in the moment. There are a number of headwinds that are sort of truly macro, and then there are headwinds that are macro specific to coffee. We've discussed those at length. I think over the last couple of years, as we've discussed, we were able to maintain some integrity in top line and really drive the gross margin improvements through a great deal of pricing action. And one challenge with pricing action, of course, is it does put pressure, particularly on the customer retention piece. As we've discussed, we're looking to pivot a little bit away from leveraging that lever, so to speak, and now we're really emphasizing the execution at Street level. And so I think that will -- that should have some kind of positive impact when it comes to the customer retention piece. I think when it comes to the pounds and the pound's degradation, we've spoken in the past about, in some cases, you can maintain an apples-to-apples customer on comparison, but in some cases, customers seem to be potentially ordering a little bit less than they used to for a number of macro reasons. We are really looking to aggressively engage and activate our DSD network, not just in terms of product penetration, but also in terms of acquisition. We think we have a very talented group. It's our largest street-facing representative group, well over 200 or so routes running every single day. And we think given the tools, the training and the incentives we can activate that group to do more business active -- business acquisition effort. So really looking forward to seeing what Travis Young can do with his team on that side. And then, of course, again, Brian Miller and his team are more focused than ever, particularly in a differentiated group of target account types. I think really looking to grow with some of the larger enterprise value groups in the country. You and I have talked about this in the past and we've discussed it in previous calls, but I do think Farmer Brothers is somewhat unique in the scale that we bring to the equation. And when there are restaurant groups of hundreds of locations that have a diverse geography around the nation, there's really no other coffee company in the country that can service as comprehensively as Farmer Brothers can. And I think looking to engage with organizations like that, while maintaining our service levels with mom-and-pop operations in every channel, I think that will be the winning equation for us.

Have you -- how much traction have you gotten with the larger restaurant group? Are we still early in that process?

No, Gerry, I'd say we do a fair amount of work in that space already. So it's not as though this is unknown territory for us. And again, it goes back to having a pretty diverse set of client types and multiple channel types. We work with customers large and small across the various parts of the food and beverage industry, whether that's the restaurant side, coffee shops, bagel shops, doughnut shops but also in health care, gaming, institutional catering, Farmer Brothers has a strong presence, and it's a national presence that can be sorted in all contiguous states. So we are in these spaces, but we have opportunity to grow.

Is this a function of -- I mean you split the operations there between Brian and -- sorry, I forgot his same. But just give -- Travis, if you're listening, I apologize. But for Brian, does just give him the ability to focus more on these restaurant groups, I mean, obviously, you've had a lot on your plate and you're pushing more and more behind you. But does this give the opportunity to focus a little bit more on these larger restaurant groups from a sales perspective?

It does, I think -- and there are 2 sides to that, right? We have -- Brian has done a tremendous job of realigning and reprioritizing our business development efforts throughout the organization. And I think we have a tremendous opportunity to grow through referrals because we are present with many of the top food and beverage organizations in the country. And when we do an outstanding job, they tend to refer us to their peer sets, and that's how we can get a fair amount of business. But we also are providing new KPIs and new incentive structures for pure business development activity, people there are really just hunting not doing any gathering. And I think that we'll start seeing the results of that over the next fiscal year.

Got it. One more question. I know I've asked a couple, but -- and you talked about activating engage -- actively engaging, activating and you said business acquisition. I'm assuming that's acquisition of new customers or meaning yes, not necessarily acquisitions. okay, which leads me to the next question. Is coffee enough? You have a lot of allied products, and I don't think the queue is out. I didn't see what's going on there. But there's -- with such a broad distribution channel or -- yes, channel, can you add anything on to that or other opportunities to sort of leverage that white-glove service and footprint?

Yes, there are, without question. And keep in mind, we do quite a bit of what we had referred to as allied goods. It's a significant part of our book of business. And there's no question when we stop a truck, we want to sell as many products off of that truck into a 4-walls environment as possible. And we are always running various initiatives to drive interest in specific segments, different product types. And we will continue to do that to try to really get aggressive and meet our customers where they are. Again, we have an opportunity with the good, better, best portfolio now really cleanly and clearly defined. I think our inventory levels are an appropriate place. Our working capital is being as efficient as it's been. But at the same time, we're able to get the products and the appropriate mix to the customers in a way that's arguably better than it's been in years. So excited to see what kind of work can be done there with the activation of the DSD network.

This will conclude our question-and-answer session as well as conference call. Thank you all for attending today's conference presentation. You may now disconnect.