Thank you for standing by and welcome to the Farmer Brothers Company Q1 Fiscal 2022 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question at that time, please press star then one on your touchtone telephone. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Ms. Jennifer Milan. Ma'am, you may begin. Thank you and good afternoon, everyone. Thank you for joining Farmer Brothers Fiscal First Quarter 2022 Earnings Conference Call. Joining me today are Deverl Maserang, President and Chief Executive Officer, and Scott Drake, Chief Financial Officer. Earlier today, the company issued its earnings press release, which is available on the investor relations section of Farmer Brothers' website at www.farmerbrothers.com. The press release is also included as an exhibit to the company's Form 8-K and is available on the company's website and on the Securities and Exchange Commission's website at www.sec.gov. A replay of this audio-only webcast will be available approximately two hours after the conclusion of this call. The link to the audio replay will also be available on the company's website. Before we begin the call, please note that all of the financial information presented is unaudited. An d that various remarks made by management during this call about the company's future expectations, plans and prospects may constitute forward-looking statements for purposes of the safe harbor provisions under the federal securities laws and regulations. These forward-looking statements represent the company's views only 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 that could cause actual results and other events to differ materially from those forward-looking statements is available in the company's press release and public filings. On today's call, management will also use 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 press release. I will now turn the call over to Deverl. Deverl, please go ahead. Thank you, Jen, and good afternoon, everyone. Thanks for joining us today. The first quarter of fiscal 2022 represented the fifth consecutive quarter of sequential improvement in three critical measures for Farmer. DSD sales volume, gross margin expansion, and production at our DFW facility. Starting with the top line, sales continued to trend favorably, with total net sales up 11.4% year-over-year, as volumes in both of our core channels continued to recover. The structural and operational changes we've implemented into the business led to 600 basis points of gross margin expansion year-over-year, and 200 basis points sequentially to 29%. We experienced our best DSD volumes during the quarter since the onset of COVID, and those trends have continued to improve in recent weeks. DSD sales were down around 25% compared to pre-COVID levels in our fiscal first quarter. This compares to down 41% in the corresponding period of last year, and down 27% in the previous quarter. We're very pleased with the sequential improvements materializing our top line numbers and gross margin. Especially considering the headwinds presented by the Delta variant and the lingering effects of the pandemic. Such as inflationary freight costs, labor shortage, and other challenges, elevated coffee prices, and the yet to come full normalization of consumer behaviors. Despite these challenges and the fact that we're still operating under significantly reduced DSD volumes compared to pre-COVID levels. It's clear that the improvements we have executed are demonstrating the leverage opportunity in our business model as market conditions gradually improve. Our gross margin is now just below 30% despite the continued reduced volumes we're operating under. We're eager to see how the business responds once our volumes fully recover and even start to grow beyond that. Our pre-COVID historical range hovered in the low- to mid-30s%. We're also seeing improvements materialize within our operating expenses. Although that's progressing slower than our gross margin recovery. Primarily due to the elevated labor and freight cost. With the bulk of the turnaround initiatives behind us and volumes continuing to recover. Our focus remains on right-sizing our expenses against our sales levels. Prioritizing the most impactful expenses and continuing to implement new cost control procedures such as restructuring our internal invoicing processes. The consistent and sequential improvements in our gross margin speaks volumes to the optimization efforts, we've been communicating and executing on over the past year. With increasing green coffee prices, elevated ocean shipping and trucking freight costs, rising labor costs and shortage. Both internally and those that are passed through, higher wages and increased input costs. Which are largely impacting our allied products, it's incredible to see how we've proactively been able to mitigate much of the headwinds to date. All that said, it's too soon to declare complete victory. In today's operating climate, any business that relies on freight and manufacturing is going to see the continual cost of goods headwinds. We continue to work hard with a cost avoidance mentality in mind on finding new ways to mitigate those impacts and remain focused on making systematic cost adjustments, rather than adjusting on a price-only basis. On that note, we continue to execute against our optimization efforts within our network. Our West Coast distribution center in Rialto has been a big success story thus far. The inflationary environment impacting freight would have had a much more significant impact on our business. If we had not opened and leveraged Rialto. One of the keyways we're improving cost is by moving products closer to our customers, driving down freight miles to offset price creep. With Rialto fully operational, Houston closed, and continual performance improvements at DFW. Our Portland operation remains one of the last pieces in our broader distribution and network optimization strategy. Speaking of DFW, we're pleased to see our DFW facility starting to fire on more cylinders. In fact, during the quarter, we experienced record production numbers at the facility, and we have continued to see month-over-month production improvements since the onset of COVID. Further, we've leveraged our existing roasters and added an additional 7 million lbs of roasting capacity during the quarter with very minimal upfront investment. With our inventory now fully optimized, we continue to see incremental improvements in the queue, and in our throughput. And are now finding new ways to optimize packaging, such as the utilization of more efficient packaging solutions, such as super sacks. It's great to see our efforts starting to meaningfully take hold in our manufacturing capabilities. Mainly because much of the margin expansion we've seen over the past few quarters has been driven by our footprint and network optimization initiatives. Aside from our footprint, we're also seeing our efforts in shifting our customer and inventory mix, helping drive margin expansion. As we mentioned on our last call, we began rationalizing our product SKUs and optimizing our customer base for profitability in 2019. Since then, we successfully reduced our SKU count by nearly 50%, resulting in a more profitable product portfolio overall. On the customer mix side, we continue to make progress on our tiering initiative. We've now exited a meaningful amount of less profitable Tier Five DSD accounts and continue to look for new, more profitable ways to repurpose Tier Four accounts. While we're still deep in our optimization efforts, we're starting to see the light at the end of the tunnel. We continue to improve and add new capabilities to our DFW facility and remain focused on enhancing our operations and regional footprint in Portland. Given all of the improvements we've touched on today and discussed over the past year. We're particularly excited about the opportunity DFW presents for us. We're now turning our focus to expanding our capabilities versus optimization and have begun to add new flavoring capabilities. In Portland, we added another 1 million lbs of annual roasting capacity, and we signed a lease for a 90,000 sq ft distribution and storage facility across the street. From our current manufacturing and production facility, which we expect will provide further efficiencies across our network. Portland remains a key focus for us, and the work we're doing there will further improve our expense profile and operational capabilities. As we mentioned in the past, returning Farmer Brothers to its historical success in commercializing innovative products, and services remains our core pillar of our growth strategy. And drives additional operating leverage opportunities within our network. In our fiscal 2021 year, we announced partnership with NuZee and High Brew on some ready-to-drink coffee products. Further, we began to pilot testing new plant-based beverage with our institutional food service channels during the first fiscal quarter. And partnered up with Califia Farms to launch a plant-based creamer and joined forces with RxSugar on a new low-glycemic sugar product. As we move forward, we continue to look for new partnerships and opportunities to leverage our national network and footprint. As well as other ways to solidify ourselves as a specialty beverage distributor. Lastly, we continue to make inroads in our Coffee Brewing Equipment servicing operations or CBE. In fiscal Q1, we officially branded our CBE offering to Revive Service and Restoration. From now on, we'll be referring to all things CBE as such. Revive will operate as an independent arm of Farmer Brothers and will provide equipment servicing to both our DS and our DSD customers in addition to marketing their service capabilities beyond our current customer base. We've already launched pilot programs in five geographic regions. We believe this official rebranding and restructuring of our equipment servicing offerings will allow our technicians to provide better servicing to our existing customers, enhance our equipment technology, and provide additional revenue opportunities as we bring new external services to customers in our ecosystem. With that, I'd like to turn the call over to Scott. Scott? Thanks Deverl, i n the fiscal first quarter, we saw continued meaningful progress and material improvements throughout our business. Sales in both our DSD and Direct-S hip channels continued to recover, and our margins improved in both channels as well. Of note, we achieved sequential improvements in DSD sales in each of the past five consecutive quarters. As expected, and as we've communicated to you over the past few quarters. The largest DSD sales declines were from restaurants, healthcare, hotels, and casino channels, while demand from c-stores had been impacted to a lesser degree. As Deverl mentioned, we experienced our best DSD volumes since the onset of the pandemic in our fiscal first quarter. And DSD sales volumes have continued to trend favorably in recent weeks as the Delta variant has subsided and we enter our busiest time of the year. We continue to monitor our DSD business and our pricing closely, while continuing to look for opportunities to proactively right-size our investments in technology, equipment, and personnel against our volume. We are hopeful for continued recovery but are closely watching COVID, and labor trends as they seem to be the most significant hurdles to growth that we currently face. Turning now to our Direct-S hip business. As we've mentioned in the past, our Direct-S hip business was less impacted by the pandemic given the types of customers in that channel. Including our retail businesses, private label brands, and third-party e-commerce platforms. We ended our fiscal first quarter with Direct-S hip sales down 5.7% on a year-over-year basis. Unfortunately, the fallout from the pandemic and the associated supply chain complexities put downward pressure on some of our customers' businesses. As such, we optimized our Direct-S hip customer base and exited several of our less profitable accounts throughout our fiscal 2020 and 2021 years. Which has created tougher year-over-year top-line comparisons. It's the right decision for the business as we look to drive profitability improvement. It's also worth noting that these exits are largely already accounted for, and the most challenging year-over-year comps are now behind us. The good news is that the declines continue to be partially offset by rising volumes, including significant new customer wins. As our newly refined sales strategy continues to produce tangible results in both the Direct-S hip and DSD businesses. Looking ahead, any large swings we experience within our Direct-S hip volumes will likely be from our core optimized customer base. Our net sales in fiscal Q1 were $108 million, representing an increase of about $11 million or 11.4% from the prior year period. Net sales increased primarily due to the continued volume recovery within our DSD business. As we processed and sold more green coffee and benefited from improved allied product volumes. Our gross profit in Q1 fiscal 2022 was $32 million, representing an increase of $9 million from the prior year period. At the same time, our gross margin continued to expand and was 29% at quarter end compared to 23% in the year-ago period. Deverl mentioned, our gross margin has improved sequentially in each of the past five quarters. Despite the reduced volumes we're still operating under, we essentially matched our pre-COVID gross margin from two years ago. Which was 29.3% in Q1 of fiscal year 2020. We're pleased to see that all the structural improvements and efficiencies we've put in place continue to positively impact our margins. And help to offset and mitigate some of the cost pressures we're managing through. Net sales growth primarily drove the increase in gross profit. While the continued gross margin expansion was driven by continued volume improvements. Mainly within our DSD business, in addition to all of the developments we've implemented throughout our business over the past year or so. At this time last year, our aged Houston facility was still operating, which had higher production and scrap costs. As a result, improved inventory write-downs associated with the closure of the plant during fiscal 2021 also contributed to our margin expansion this quarter. We posted a net loss of $2.4 million in Q1 of 2022, compared to a net loss of $6.3 million in the prior year period. Our adjusted EBITDA in the fiscal first quarter was $3.5 million compared to $5.7 million in the prior year period. I wanted to quickly remind everyone that our adjusted EBITDA in Q1 and Q2 of the prior fiscal year each included $7.2 million of amortized gains related to changes. To our post-retirement medical plan that was sunsetted as of December 31, 2020. The full details of our adjusted EBITDA calculation are available as part of our earnings release materials. Our adjusted EBITDA margin was 3.2% for the first fiscal quarter, compared to 5.9% in the prior year period. This prior year figure, again, was impacted by the $7.2 million of higher amortized gains. Resulting from the curtailment of the post-retirement medical plan in March of 2020. Turning to expenses, o ur operating expenses in fiscal Q1 were $33 million. Representing a slight reduction of about 2% from the prior year period. As a percentage of net sales, this equates to roughly 31% compared to approximately 35% of net sales in Q1 of last year. The improvement in our operating expense was primarily driven by a $5.2 million quarterly increase in net gains from the sales of two branches. Which was mostly offset by a $2.5 million increase in selling expenses, and a $2.1 million increase in general and administrative expenses. The cumulative increase in our SG&A expense was primarily due to higher payroll-related expenses. As we continue to bring back more employees as sales volumes recover. More specifically, the increase in SG&A expenses during fiscal Q1 was predominantly due to paying full versus reduced base salaries and the return of the 401(k) cash match suspension. That were both cost-saving actions implemented in fiscal 2020 due to the COVID-19 pandemic. As Deverl mentioned, we are not immune to the global supply chain challenges and the associated pressures being felt throughout the country. However, we continue to leverage our pricing power within our DSD channel. And remain fully hedged on coffee prices in the near term and partially hedged for the upcoming calendar year. We also continue to prioritize and make systematic cost adjustments throughout the business and remain confident that the structural improvements and efficiencies we've implemented will continue to mitigate some of these pressures. Total capital spending in fiscal Q1 was roughly $2.5 million, representing a decrease of about $2 million compared to the prior year period. Note that at this time last year, we made several strategic capital investments, all of which were completed during the fiscal 2021 year. This resulted in lower investment capital spending of roughly $2.5 million in the current quarter compared to the prior year period. The decreased investment capital spending was partially offset by roughly $600,000 of higher maintenance spending compared to the prior year period. Primarily associated with the purchase of Coffee Brewing Equipment for our DSD customers as volumes improve. We expect the investments we made throughout fiscal 2021, including the initiatives around our coffee brewing equipment offering, now Revive Service and Restoration to drive further cost savings and help mitigate some of the increased equipment prices as DSD sales recover. Turning now to our balance sheet. At the end of Q1, our total outstanding borrowings were $89 million. Representing a slight decrease of about $2 million since June 30, 2021. Our cash balance decreased by $4.3 million- $6 million in Q1, compared to an ending balance of roughly $10 million in the prior quarter. The cash used was primarily on inventory as we ramped up our levels ahead of our peak season and payouts on our fiscal 2021 employee incentive plan. These were partially offset by cash proceeds from the sale of two branch properties during the quarter. Our net debt, which we define as the gross amount borrowed on the revolver and term loan balances, less cash and cash equivalents, was $83 million at the end of fiscal Q1, compared to $81 million at 2021 fiscal year-end. Thank you, I 'll now turn the call over to the operator to answer any questions. We have a question from Gerry Sweeney of ROTH Capital. Your line is open. Good afternoon, Deverl and Scott t hanks for taking my call. You bet t hanks, Gerry. I was curious, Deverl, if you could maybe describe how much of an impact Delta sort of had through the quarter. I think we started off 1Q pretty good, and then Delta raised its head. And then, you know, I think created some headwinds, and now it feels like it's dissipating. I don't know if you can do it qualitatively or quantitatively. I'm just trying to figure out, you know, could that 25% down been, you know, much better without Delta type? You know, if that makes sense. Well, as you go back to our prepared remarks up front, we gave you the 25, and the answer is yes, i t had an impact in the quarter. It got progressively better as the quarter continued towards the end. As you saw us report, we're continuing to see improvements week to week through the current quarter. While we don't provide specific, you know, guidance on the COVID recovery number cause, you know, things continue to ebb and flow. Sure. What we can tell you is two things. One, it improved, as we said, t wo, the same behaviors that we saw in the prior three from the initial COVID drop. Where we were 70% down to the July fourth to Thanksgiving, Christmas, and then most recently, Delta, the behaviors of our customers changed. We're seeing our ability to manage through with all the initiatives that we put into play. And to all the mitigations on cost avoidance that we're having as we manage our supply chain, ocean freight and transportation freight. I'll turn it to Scott for any other maybe specifics that he can give you. Yeah, Gerry, it definitely impacted us. As we talked about, you know, we just did our year-end release in September. At that point, the Delta variant was still pretty strong. I think the only thing I would really add to what Deverl said was that as we've, you know, more recently seen the Delta variant, the case counts really fall away. We've also seen a similar acceleration in our DSD recovery. It's definitely been tied to the Delta caseloads. Got it. I will tell you, we're continuing to see our best weeks, and in fact, we've seen some of our best reported days. You know, that would be the best days of sales that we've had since the outbreak of COVID, and that continues each week as we progress through. We're very hopeful with all the work that everyone is doing, and specifically, you know, across our country on a federal, state, and local level. We're seeing pockets that, you know, we're seeing a lot more recovery. We're still seeing some that still lag and haven't totally returned. As you saw in our prepared remarks, we still see a component, you know, on channels of distribution, you know, where they're showing up, you know, more progressively. We still haven't seen breakfast come back in full view in all hotels, even though hotel occupancy continues to be at an all-time high. We're just now starting to see conventions and concerts come back at more of a normal level. Thus, the products that we sell into those channels, you know, are having, you know, a slower recovery. C-stores are rebounding better now that they've taken the coffee and tea from behind the register and put it back out into the bars where you can have self-service again. Each channel that we serve is a little bit different, and every channel is reacting a little bit different than the other, and we watch that by region and by channel across the nation each and every day. Got it, n ext question was utilization of employees, assets, branches, trucks. You know, if you look at the revenue, the revenue was up on a sequential basis, I don't know, 5%-6%. Right. Gross profit was up 10%-11%. So, you're getting some pretty high contribution margins. Is this? I know at some point you say, "Well, we're gonna have to bring people back," and as volumes return. That's a pretty hefty contribution margin. I'm not looking for guidance, but as we start to accelerate the volumes, is that portend to what we could look at on the margin front, or were you running really hard with what you had in the quarter? No, I'll say a couple things on that. First, every day, every week, we are maniacal as it pertains to bringing people back. We know we have to balance the health and wellbeing of our team members first and foremost, which we're doing. We have pockets where it's outpacing the ability of some of our branches, so we're reacting. We meet weekly and literally at our Chief of Sales, who drives this process at our frontline DSD with Scott and I and our new CHRO, Amber. We constantly are evaluating this. I will tell you, we have a lot more routes that have picked up pace because we look at routes on a basis of how much total dollars each one of those routes annualize at on a run rate basis. That's our trigger on putting headcount back in, plus ensuring market by market where we're working to ensure that our team members can take their allowed PTO and balance bringing new people on. If you said, "Deverl, where are you recruiting the most?" We're making sure that we're bringing back and recruiting for both DSD, what we call RSRs, Route Service Representatives, and on our tech service technicians. Those are the top two job positions that we're recruiting for right now, and we're watching closely, 'cause we know that our ability, first and foremost, to continue to drive more sales is get more installs and refurbs and repairs done to ensure that equipment is servicing the customer. Two, we know that we have to not put so much burden on the RSR, and that is an absolute balancing act each and every other day. What we're really trying to do is just make sure that we focus heavily on the health and wellbeing of our team members and making sure that we're doing as much as we can given the peaks that are occurring in any one of these given markets. We will watch that. That's. We know that that's a key statistic in the question you're asking. We expect it to continue to be an area. We will not go back to the same structures that we had pre-COVID. That we've said to the Street, we'll continue to say that, and we feel very good about that. We'll be a different organization as we continue, but we'll layer costs back in as we absolutely need to so that we can continue to grow DSD sales at the frontline. Got it, o ne other question. I know you touched upon it, the inflationary items. There's a lot to unpack in the prepared remarks, but could you go over some of the levers? Obviously, you know, you have pricing power. I'm not sure how often you could or how hard it is to increase price or how often. I think you also even had fuel surcharges available in the past, you know, plus some other items. You know, maybe describe a little bit more detail of these levers that you can use to manage this. Now, first and foremost, I'll turn this to Scott, but I wanna give a couple piece of context. It's a very poignant question. We're in an unprecedented time that I haven't seen in my 35 years. That being said, we have a team that's positioned to drive cost savings and cost avoidance. I'd love to see our numbers if we wouldn't have had this pressure, but what that has done to us is it has shifted the conversation with our customers to a supply conversation. They're valuing supply over any other single item. We're working hard to keep our customers in supply. With that, Scott gives more specifics on inflationary pressures and how we're dealing with them. Yeah t hanks, Deverl, a couple quick points, Gerry. One on, I'll kind of weave it together with your last question you had about the sequential numbers quarter to quarter that we had from Q4 to Q1. Yeah. Because I think that's part of the story that's in there. You know, as you said, sales were up 5%. Gross profit dollars up 11%, so really nice leverage. Then we tend to have noise in our adjusted SG&A because of asset sales or other entries. If you look at just selling and G&A, those two areas of the business were up 8%. Up a little more than sales, but not quite as much as margin. My point was going to be a couple things. One is disinflationary pressures. You know, we are seeing the direct costs, you know, the fuel costs, pass-throughs on freight. Obviously, we're all kind of growing into the new labor rates that either we're having internally and we're also seeing externally. Those are all pressures. We also wanted to call out that we turned on a few more benefits on July first when we started the new fiscal year. Like our 401(k) cash match, those types of things as well. That was a little bit of incremental cost quarter over quarter that's in the P&L. Still, we're making sure we control those costs and keep them in line with the rest of P&L so that we're still getting contribution gains to the bottom. That was one key point. I think the other key point I would make, and I think you called it out in one of your research notes. And it was a great way to lay it out, and I think it's very true, so I'll kind of affirm it for you, is you talked about how you think we have pricing power. We can put in these fuel and freight surcharges into our business, but that it may lag a bit, you know, with the actual cost coming in the business. I think that we're currently in a mode where we're seeing those costs obviously come in and come in rapidly in some cases. But we are instituting, you know, new surcharges and some new pricing as well. We're in the process of rolling that out, so that'll kind of continue and really be impacted or kind of fully impactful by the end of the quarter. But we're kind of in the process now, whereas the costs are really here first. So, there is a little bit of a lag between that catch-up, but we're trying to manage that as closely as we can. Got it, o kay w ell, you know, great quarter. I think a lot of people are excited to see what you guys can do as, you know, volumes come back. You know, great quarter. Thanks for taking my questions, and I'll jump back in line. Thanks G erry, w e appreciate it. Thank you, I'm showing no further questions at this time. I'd like to turn the call back over to Deverl Maserang for any closing remarks. Thank you, operator, and thanks to all of you who tuned in to our call today. You know, we're pleased with our continued quarter-to-quarter improvements as we navigate COVID. The recovery, as you can see, is progressing and our strategy having the impact we expected. Many of our customers have thanked us for keeping them in supply, and I think that is a big note to make here today. While others have struggled. Farmer Brothers team members are working hard to execute each and every day. Lastly, I just wanna add another note that we talked about in the prepared remarks. But we are pleased to announce our newest website that provides more detail to the newly branded Revive Service and Restoration. The website is live at www.reviveservice.com. Check it out, w e look forward to providing more progress in the coming quarters as it relates to Revive. This is gonna be a big piece for us. Thank you for your time today. We'll talk to you in the next quarter. Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.