Westrock Coffee Co. Q3 FY2024 earnings call

• Beverage Solutions segment adjusted EBITDA was up 19% year-over-year for the quarter and 20% year-to-date, on track with previous guidance.
• SS&T segment was up 45% year-over-year for the quarter and 132% year-to-date, driven by base business improvements as Conway extract and RTD plant revenues not yet substantive.
• Single-serve cup volumes saw a slight uptick recently, with major new customer volume commitments for next year.
• Extended start-up date for a larger customer's Conway plant by 6-9 months, but secured major new customer volume commitments and contract extension.
• Completion of new contracts and agreements converted into production schedules, providing clarity into 2025 financial forecast.
• Production schedule in Conway has start dates and ramp-up slopes affecting 2025 consolidated adjusted EBITDA.
• 2024 expected to end at the bottom of previously announced guidance range, with 2025 guidance revised to $80 million to $100 million consolidated adjusted EBITDA.
• Completed warrant tender offer, delisted public warrants.

Beverage Solutions: Segment adjusted EBITDA increased almost 19% to $11.8 million, with a 157 basis point margin increase. Sales for flavors, extracts & ingredients grew 7%, while core coffee volumes were down 6% and single-serve volumes down 24% year-over-year. Sustainable Sourcing & Traceability (SS&T): Sales net of intersegment revenues were $56.9 million in the third quarter of 2024, an increase of 33% compared to the third quarter of 2023 due to a 36% increase in volumes. SS&T segment adjusted EBITDA for the quarter was $2.5 million compared to $1.7 million in the third quarter of 2023.

• 2024: Expected to report $50 million of consolidated adjusted EBITDA under new presentation, including $10 million of scale-up operating costs associated with the Conway facility, correlating with the low end of the previously announced range.
• 2025: Preliminarily expects to generate consolidated adjusted EBITDA between $80 million and $100 million under new presentation, driven by volume growth, cost savings, and Conway production schedule.

• Macroeconomic environment challenging for consumers affecting sales.
• Potential delays or changes in customer product launches affecting revenue ramp.
• Impact of scale-up operating costs on financial results.
• Dependence on new customer volume commitments and their execution.

Q: Todd Brooks asks about guarantees on the slope of the ramp over 2025 for contracts with major clients.

A: Scott Ford discusses an accommodative client move, take-or-pay vs price for lower volumes in ready-to-drink and extract contracts, and that contracts force teams to work on dates with milestones before production.

Q: Eric Des Lauriers inquires about the rebound in single-serve volumes.

A: Chris Pledger talks about new volume from existing and new customers, return to normalcy in single-serve volumes with growth expected in 2025.

Q: Matt Smith asks about the 2025 exit run rate.

A: Scott Ford mentions a back-end run rate of $125 million to $150 million, with half of top 25 customers new in 2025.

Q: Sarang Vora asks about the decline in single-serve volumes.

A: Scott Ford and Chris Pledger discuss consumer shopping down in pack size, loss and gain of distribution centers (DCs), and at-home consumption trends.

Q: Sarang Vora asks about Conway production push.

A: Chris Pledger talks about timing to be ready for 2025 start, with can line ramps increasing volume sales throughout the year.

Q: Davis Holcombe asks about the RTD coffee category slowdown.

A: Scott Ford talks about taking market share, with earnings growth from won share irrespective of category trends