Westrock Coffee Co. Q4 FY2024 earnings call

Management Statement and Operational Highlights:

• The company made progress in executing its strategic supplier strategy in 2024, with combined segment adjusted EBITDA of $21 million in Q4 2024, up 53% y-o-y, and $60 million for the full year 2024, up 33% y-o-y.
• Invested nearly $400 million in building facilities like the largest roast-to-extract RTD facility, single serve cup manufacturing, and a distribution center.
• Examples of execution in 2024 include full automation of packaging lines in roast and ground coffee to meet new customer demand, new agreements in single serve with leading CPG brands, and nearly 25% volume growth in extracts and RTD due to facility upgrades.
• The back half of 2024 was strong both financially and operationally, with customer onboardings set to drive continued EBITDA growth, and plans to expand remaining packaging capacity in Conway facilities.

Segment Performance:

• Beverage Solutions: Fourth quarter segment adjusted EBITDA was $17.8 million, up 53% year-over-year. Full year 2024 Beverage Solutions net sales were $659.9 million, with segment adjusted EBITDA of $53.6 million, a 29% increase from 2023.
• SS&T (Sustainable Sourcing & Traceability): Fourth quarter sales increased 38% year-over-year, and segment adjusted EBITDA rose 52% y-o-y. Full year 2024 SS&T net sales totaled $191.3 million, with segment adjusted EBITDA of $6.4 million, an 84% increase from 2023.

Guidance:

• 2025 consolidated adjusted EBITDA expected to be $66.5 million (including $15 million Conway scale-up operating costs).
• 2026 consolidated adjusted EBITDA expected to be $140 million (no Conway scale-up operating costs).
• 2025 segment adjusted EBITDA: Beverage Solutions $75M, SS&T $6.5M.
• 2026 segment adjusted EBITDA: Beverage Solutions $133.5M, SS&T $6.5M.
• Beverage Solutions net secured leverage ratio expected to be 5.7x at June 30, 2025; 4.9x at end of 2025; and 3x at end of 2026.

Risks:

• Higher green coffee prices could impact customer demand for products as costs are passed to consumers.
• Uncertainty surrounding tariffs, though not expected to significantly affect the business as major input sources from affected countries are not used.
• Potential softening of customer demand due to higher coffee costs and a softer consumption environment across stores, which influenced the conservative guidance adjustments.

Question and Answer: Q: Matt Smith asked about the impact of historically higher coffee prices on customer order cadence and new product launches.

A: Chris Pledger responded that higher coffee prices could impact demand later in the year, and the guidance incorporates this potential risk.

Q: Todd Brooks inquired about new product development by customers and share taking with Conway.

A: Scott Ford stated that growth includes share taking from being a new entrant and aggressive pricer, with many new brands coming in with multiple product types.

Q: Bill Chappell asked about reflecting higher green coffee costs in projections and visibility into Conway operations.

A: Chris Pledger said guidance includes conservatism around volume ramp timing, and Scott Ford mentioned breaking guidance into halves to show step function volume lift by the third quarter, providing better visibility.