WEST - Earnings call 3 2023 | Westrock Coffee Company, LLC

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Operator

Hello, and welcome to the Westrock Coffee Company's Third Quarter 2023 Earnings Conference call. My name is Tanya, and I'll be your coordinating your call today. [Operator Instructions]. I would now like to hand all over to Clay Crumbliss with ICR.

Clay Crumbliss

Good afternoon, and welcome to the WestRock Coffee Company's Third Quarter 2023 Earnings Conference Call. recorded. being is call Today's With us Mr. are Scott Co-Founder and Chief Mr. and Officer; Executive Ford, Financial Pledger, Officer. Chris Chief everyone have now, release By should issued quarter company's earlier earnings third today. access to the of available Investor on This Company's information investors.westrockcoffee. Relations is section at website Westrock the Coffee call this of subject provisions forward-looking statements, Private XXXX. Securities Litigation on to made which safe the comments include Certain of harbor the are Reform Act uncertainties concerning that on forward-looking future are cause described forward-looking based management's several current risks and those to statements to and and events statements. results beliefs could are actual from differ subject These expectations materially these in

Please those SEC detailed press refer use to press of discussion well expressed any forward-looking business Scott? it describe as to or other to Officer. as today. could and to more risk filings the measures the is we directly my results most filings that implied discussions will Co-Founder the non-GAAP factors in earnings the with to call today's made during the And these of call our Chief cause some GAAP statements a pleasure from and SEC Also, comparable performance. with financial as materially Scott over for the non-GAAP actual releases measures. Executive that, reconciliations provide financial The turn release Ford, measures differ

Scott Ford

first causes of $XX.X that lands. bit in to of the the reported it's a Thank call XXX% roughly period. $XX comes you, like large of distinct out acknowledge to to that first that the from That be quite from a joining Clay, miss critically EBITDA year our period our think for unique the adjusted a I'll our appears important results were looks and variance and good said, quarter virtually two performance I today. afternoon, for everyone. mess Thank million million us targeted third this as you of

and ground alone and depths in customers these the coffee this million ordered roast of our happened unit, in in did fewer in $X traditional this of they July pounds where coded. over August First, than period

with As measurably were in spike out prices, them we summer of analysts, rates, with and of the a coupled kept months informed we the forecast in restaurants work consumers the first that and gasoline with combined the hot in spike their interest repeatedly X quarter. C-stores

ground September well. back and as Fortunately, November versus largely in was in normal coming years coffee October and roast prior in are volumes normal to at early levels

for a as same year So this above went that happened $XX appears a bit. to oil the been me have barrel crunch prices soon prices gasoline demand transient and came to spiked last as when back oil retreated as coffee

GAAP. a realize the you moments, performance go going pressure we back But you compounding and Secondly, if quarter back, I XXX% combined second will of we for periods, almost the compared EBITDA expenses adjusted equates terms quarter. few is $X will. after to our this stated $X to not of the this these us quarter clearly million laying that guidance as million in what add that on our out detail Chris in GAAP our EBITDA miss to updated of gave does of further were incurred prior items associated offsets fully allow during And to business, in

revenues We looking up 'XX, deliver continue ways costs can to for will head in to we that down. all down and drive to

and professional equipment effort has WestRock been a to on of facility from to drawing commend their time. the extract employees, to rendering the has Conway providers, Turning I the service and of facilities convert that in team plant plan. board and fought type to RTD and in distribution to that be the want construction record tirelessly NAVs now of the second has finest and is million country quarter leaders what on thank joint procurement Conway. It extract contractors commercialization of $XXX is 'XX. commercial involved, schedule and Co. individual dedicated facility the Which QA and to finished to in ready-to-drink Each this development, product product production successful Construction customer the two general new of in operational completion and product vendors, Clark the launch successfully involved begin primary

in online This manufacturing XXX% Caroline. we Conway our just finished facility of is have coming essentially extract now as selling out North capacity Concord

customer core extensions while is as two and through RTD they ebb for time being market, our glorious be space of product to and extract the So compete expand capacity. an our bit it it we with open sold price gasoline to coffee seasons third in a flow absolutely difficult the extracted for overall, and volumes continue where are about February, generations, is a first and new of to out to customer time continue the the and ingredient we as where

are almost For the out of of lines, we initial sold at example, point, have this two Richmond, over plans. and the remaining the out sold on lines Conway, packaging XX% XXX% we on and California our initial six in combined capacity four Arkansas

working And inside ways moments, when we early plants 'XX a our our on will the next we're in to as current keep guidance progress new describe for on the some year. few Chris investing roll public out

a in of operations previous online and at this right of With EBITDA. is results. our track of generation until over estimate we the turn with are with Conway call 'XX financial fully the I'll of But remains assets that, Chris Now of confident 'XX. $XXX on these EBITDA X-year and million the which in around WestRock, produces early not annual current adjusted our for capacity review to to and volumes, what online that X- forecasted we commercial do expect EBITDA to end very most come

Thomas Pledger

good by extract partially Scott, providing our outlook facility traceability driven gross offset $X.X for sold results $XXX.X associated an was once the carrier X% of decrease out-of-period by green outlook and profit, quarter in quarter. approximately The million segment. Beverage $XX our XXXX out segment, and everyone. million for an launched and of by to begin company the consumed sustainable our prior the remarks end our RTD impacted million was million charges, was Solutions and afternoon, excluding the coffee Conway Scott my in charges mentioned, sales impact and the of in period. costs, of net million our Beverage for growth were third that adjustment on update to compared $X.X quarter Solutions of Consolidated I'll mark-to-market related of our overview is Thanks, and which and This recognition segment XXXX. operating and a with coffee with XX% and sales at of scale. third were third a the quarter net Total X% decrease for $XXX.X our sourcing

Consolidated Adjusted the quarter have third growth quarter. adjusted million included Beverage of gross $XX.X compared of million. profit was noncash quarter contributed of of for segment basis, EBITDA approximately XXXX, loss. out-of-period net which of million for to adjusted impact the third Consolidated $X.X a the charges, Removing the EBITDA XXXX $XXX.X million year-over-year the compared for quarter $XX.X been $XX million, million segment quarter sales to the $XX.X X%. represented for the million was On third would our prior $XX.X for $X.X million for mark-to-market of EBITDA million of quarter Solutions the XXXX. third year third third was of $X.X

coffee driven results, underperformance consumer in by extremely prices our the first the July gas and space, driven year, in hot most ground August. and the to third higher of quarter versus Like food for others While down demand lastly coffee compared we're previous was roast year significantly disappointed the flat the and demand for of U.S. across and hot in by half our quarter third prior the with temperatures

On continues side, to the and XX% and extracts pricing see our single-serve operational we earnings platform call. on we platform the grew by our improvement Flavors driven positive approximately our and improvement in sales last highlighted year-over-year ingredients by

third our not platforms and extract of the we for be excited to what the normalize business roast we're volumes is very about Although single-serve and our performance might ground continue means our quarter results, and excited grow. that and future about

XXXX, the year less third prior for quarter. of third decrease to quarter million, of which quarter $XX.X XX% to the of segment. $X.X Turning revenues quarter were intersegment $XXX,XXX the net EBITDA our Adjusted XXXX. million Sales was SS&T a of than the during is third compared

same make above that sales based we our margin profit that have You with sales price. while generated SS&T This adjusted will up down segment segment and and of year, year. fluctuate last large in same this our a we last movement the the coffee, downward largely is quarter in recall line you can on EBITDA quarter largely in swing fixed the that in is based net dollar arabica of versus the what versus why is price global net on such

facility. extract million consolidated deployed we quarter, to With our of And respect end, the primarily Conway had million credit third of we cash capital RTD CapEx, revolving at our $XXX approximately related during expenditures, commitments. undrawn quarter and $XX to approximately unrestricted and

Our EBITDA. consolidated X.Xx leverage ratio LTM September net adjusted was based on XX, at

expectations Turning quarter year to XXXX in full XXXX, our outlook our for performance impacts EBITDA. for the undoubtedly fiscal our adjusted third

We volumes continue single-serve from guidance EBITDA extracts improve expect fall the the both do performance continued provided to end range. 'XX While we our solid to platform. expect roast adjusted that will and the of and year, below ground we through anticipate fiscal previously and

XXXX. to We for return $XX adjusted adjusted EBITDA more expect million. in expectation $XX do, current year full is Our to level XXXX EBITDA normalized to million however,

we contracting on back efforts respect and this for the With pace RTD XXXX in of for the XXXX around to We'll timing of our that, on first will extract operator ability impossible with EBITDA I'll as in that in questions. continue commercialization us to we new in production experience fiscal to facility, year. the of with deliver wired XXXX, ramp of our hand accurately update more in it's guidance Now call adjusted begins the and to the the product our risk call to number. the early $XXX while consolidated you half million deliver sales, and the all EBITDA over confident remain as facility

Operator

Instructions]. -- [Operator

will Bienvenu of Stephens Our Inc. first come Ben question from

Unknown Analyst

the the can the on same and roast ground there demand is that Jack witnessed subject volatility today, This business? what see Bienvenu. with to you've in flavors and market Hello. extracts is the Harden your for the quarter Ben you during in

Scott Ford

set and biscuit, they up buy prices gas when shelf et part mill up, people you're cetera, It's they just different contracts. through flow question. goes a or value where soften that to it. good to appreciate from of different different economic go product what of coffee type guess a It's or the good you directly a It's driving to whether very do if they're very And different a being, a flow. it's buy cetera. will. of a actually versus pretty going because coming product a on consumer a to very I people That's just that et product forecast trying as quickly. on tend It's

had like and across see fluctuation much the more is industry Across quarter. third gas stable every but is and or the RTD, more ground itself of coffee business, other can It pipe experiences contractually much driven the beverage in a core roast seasonal prices. around that You terms business coffee fluctuations industry, soft a a nothing like it than business.

Unknown Analyst

follow-up. the one do Okay. changed quarter. present? the balance how throughout view quick with feel How Great. And about at sheet has And that you then

Scott Ford

it room. And we August at complicated. But to July you expect hot made were we look items little in got and -- this you a the is of a $XX year coffee two where without million out, million we're feel we close through. where Well, last taking We quarter if running and hasn't took plenty run, changed. I this to $XX year, what we've frankly, and

those come get financing they're issue stunning bridging out we room. form on needed any have that in capital it to we finish this or it as be finishing shape, if terms think business off. adventure, we're fashion numbers see And which from is were through apart into know to And can last in, finish. you're equity that this roll We're and you us wanting what part we add will. up lined are this Conway, of to done. part this perspective, call, to plenty said structure any to that going performance credit to last that ran we going of sources change in Because exactly and our But this frankly where the I or raised if even raise July we for you highly that answer. from common we we is be way, to doesn't confident didn't got certain August how summer but going last as of Conway X of to multiple So the know running a months, we've that whatsoever

Operator

And Brooks the Benchmark our of come will next Company. from Todd question

Todd Brooks

to We're quarters love one Scott, public X you, for a on I'd with could. as lead X, if I getting off company here.

over in looking can the the Conway lack of predictability of that you we've you're kind we've on as in comment knowing this got solution. that the front of frame us, predictable Just core business the business. in to return non-FE&I what seen takes rearview, portion of your just it more of ground nature kind in And time and to beverage roast and a

Scott Ford

It's a totally fair question.

last you at of two year, the First business the things all, and of on. essentially going you've look performance got overall the over

business. is putting extract roast first a the systems You new have the in in system where Concord, the part information which in business integration, the and ground and the and we single-serve accounting and of were year in

related $XX the now are, run rate. those part, out the had $X to of million this of things, two cost most which You year to million for

we So penalties. ran at XX/X in. get you orders single-serve suffered We the that. time. the equipment to We of in. overrun were late where over charges it had look beyond equipment. It We bringing paid We with basically was

All of first of the the was year. in part that

just the months the along plan, on that you. like of right is X year, business In we last told clicking

So and business and your keep heed same extracts the year. the look ingredients last I'll if business, that period at and that, question is going, over flavors XX% up quarter you extract

do. ingredients The do. what what year demand of coffee complicated had the single is you a good business where year, So bit would told exactly Flavors a told black and this we is you last doing a it serve hot exactly we've forecast. doing we year we extraction is very very, very year, but very, tough had take business, a out you would

the We biggest forecast. the created surprised rate change. the their restaurants as in spike biggest are in follow interest companies them The and destruction world, their that gas summer it the and at as demand surprised shelves C-store their these spike, Now demand much in restaurant price and us. the

and time happened saying, black XX% here hadn't you'd But well points It's sitting time guess just processing It's have been and we're that. in had business got don't pleased product. you where of coffee, periods and quarters like if go through to commodity we're just I in up a it. I'm about done, Tell no quarters some genius, where of year-over-year. when I've going had part disappointed, us, Conway. we So hot rights be to have we've you you're me idiots. like to just we've buy not contractual more make that you're people

Todd Brooks

outlook? the in an range, dip the a behind XQ. Scott. to the expectations down great, of walk of it kind of incremental looks the plan. talking the Can $X midpoint guidance prior at new that if walk the from you quarter But us could to wondering was Chris, out bridge shortfall million laid EBITDA EBITDA what's to through we're more like I -- the through That's we guide in you

Thomas Pledger

Yes.

the growth the you're in day, end in to single-serve see base. roast kind both of of you and if I to more from more and you starting lower see a think think where go starting you're ground at started, normalization extract. starting normalization, you're I and at But and

-- our underneath the our -- And your the the so second platforms at throughout over call. growth that in guidance will we of expectation growth continued quarter. expect updated we flow quarter fourth But those end whenever the

Todd Brooks

final last commercialization there's extraction, change EBITDA call, through On Okay. opportunity million able can maybe I or we if towards eventually timing fiscal think EBITDA. Great. on that in walk been any Conway, And maybe, the an in Conway for extraction XX% of tracking $XX talked the one the you still Scott. we us generate extract the Are being represents to 'XX. we EBITDA that about of the

Scott Ford

Here's let's where candid. and are, be we super

are the of the In that have plumbing equipment All ahead terms ready do, on in, go? in, is of schedule. in, or the to we to is things is the that go? of Are to ready systems the products people are

how want period do into a to that commercialize, and want SKUs that year. the they Now they when have they do commercialize come how and it, chooses to to we do to time want customer they get over and when much of the to many they

So year in. in come there they start-up, when are select they the no of penalties and

So they if all away. in, the quarter, come second blow in we that will

first delay We will happen of our then if that they in kind won't run all or the of the until 'XX. through which year -- roof contractually in on they But against guidance. 'XX, that part late can

-- that don't in what commercialization, up, year me going selection a to what me they very that which asking up in, they to you're are 'XX. tell me so the my phase have It's we've it's will I to very got customers alone it easy do to but for start-up control. 'XX. turn know, you for difficult you tell how for signed Now in

Operator

next our will question Smith Stifel. come of Matt from And

Matthew Smith

quarter. if saw? with of normalization a that Perhaps to I you question carrying customers? commentary inventory could volatility factored I'm Chris. there coffee, on the ordering the consumption the a the around a here was your about especially If sense far. go your there the was into into why in you softness and from impact with could severe they I of patterns such quarter I in hot business, if a appreciate have the in start EBITDA. But talk and reduction Do you the Can along bit were the surprised excess by Scott and inventory third so that

Scott Ford

Sure.

it two take let's think parts. I into

you that in commodity part manufacturer core When the that customers, inventory our it with one are the of they what would in on pronounced us we're were ripple-through and inventory. for our to build impact on had and in going first is they forecast revenue caused The expect. revenue scaled direct comes of variance where business a fact, is to really is processing and Well, the there as you carrying us EBITDA.

did the the you filing miss July the quarter, and day, until at people summer dollar it this for talked the whole we stunning. we've quarter? a mean as end to said, of I whole you the is, well, was literally, an question sold summer dollar -- this. in ready we and hot was the and getting full system may for And into as So the from the why for But make amended fair wait think went coffee I was was end have of August.

report August Well, not don't But it commodity you how a trouble we we well, in basis. business when in deeply didn't to save we that's and really just realized Walmart. quick can processing closed We September, when of were we're don't by quarter the anything. literally cost is nothing revenues thought, get out this order a on there timing. But do into some realize monthly time July. was We enough they

Matthew Smith

appreciate hallmarks with customers. that. then And your long-tenured the I business one relationships was of the of your

a seen you've you I inventory your the for in had customer any doing quarter? years. of related Have number many, many to Or customers and think consumption with been you really is this business largest turnover there? just trends

Scott Ford

less same XXX% customers driven by of This is business set doing the year-over-year.

Matthew Smith

clearly transition Conway. could as compelling then Okay. we to look there is It's out I XXXX. the talking to opportunity And if about over

incremental to full $XXX million XXXX. the view in about you was facility. from You of $XXX It your million EBITDA million that like business. talked WestRock Previously, for the $XXX sounded about talked

Scott Ford

that back million went we previous you -- quarter $XXX and up the public. $XXX from when go last on Con-way. That's to million XXX if was to

number upped million to $XXX to but 'XX. is in how fold minus we're $XXX million XXX to it or know exactly in, plus to actually we targeting from million $XXX the So Hard

your though. just there, are And we're go ahead question. the I same on finish the want so sure those and to make numbers page

Matthew Smith

out, the you XXX% of that's shift remaining appreciate that. built contracts some one order. sold and talked time today, then structure. you set customers? to the here. XX% to can Are on as lines And talk customers can No, about understanding decide perfect. the there that when I do about place the up many as out then take-or-pay co-manufacturers of The is timing? you contracts in last are that one get a you've those well determine you've But that have your being they volume there to trying have line with based structure Or

have for of but some Yes, a comes and don't, most take-or-pay. an of ones, the tenant, if them part, some where someone in anchor do. they them of large do do as form the They

Operator

Our from be next Advisory coming question Group. Joseph of Feldman Telsey will

Unknown Analyst

a I'm there. of on today. follow-ups couple How for Sarang Vora

quarter this not X. as you pressure we're like into It quarter, what was And when you we now? think on right concern And today hot you that like, could back really be you it of I'm about about? what come November for here be and a but sense now? a about last next of up this sitting are the quarter worried year? So fourth coming up. are what's right thinking didn't that I July, And of on you kind just fourth should reported in guys guess, coffee had aware wondering what Or seems

Scott Ford

October prepared you Well, Sure. you on went an which order normally why the update we our into and and give book in insight November. remarks where do, in that's don't we gave we

third So back September, a year. prior of back is XX-plus was the November prior at October a year and bit quarter, to little the was write running right of now part percent the ahead.

and, right goes changed management not top soon information gas prices right so something back on the years So you moment. that could like now. terms we went a that be we track the year's if at accounting bit, their previous That's Christmas systems. coffee you there now. this. lay $XX, spending buying gasoline of as and is if results. it of again through you several little and as years, we stop over gave will, on, to see We patterns, We down out guidance back we're in the last don't every That the that, people comes and we're What to for that coming see last traditional day laying could came that doing business could

on just It's data that. so up to which off now early all S&D in now make month, the very we the the each basically taken roast the being These and all down operating machine are that we'll likely that that got of by of waste machines in reports the did themselves next is because system why we in once metrics algorithms I summer, actually ground where do we've wired that we're to some the over in old started us the is plant finished. know get to of what facility have We've machine. putting the throughput able the expect things many by operator. improvement few are of we business We're last to see months. and the months single-serve that material that

the that's answer So to your question.

in same and And way you are we we that are we of as manage did about from forward. always. the We're don't the then very Conway single business up information that so serve Well, going have I level roast on? working in worried beginning, rehanging same the worried I'm setting detail what about? you ground, way to are system know things about What the the

Unknown Analyst

we're from even coming concerned applies thoughts a lot we I'm start of of you've that think but should at get to sure a guess they're sales quarter. with on really fourth total regard just coffee, one And for year, about Got other slower the hearing next it. to more perspective, this then helpful. the really it. the to I about wanted about quarter your from that and in demand, and EBITDA takes pressures That's But sales quite companies not follow-up. any other talked and puts just

Thomas Pledger

Well, what what saw of I we're terms seen kind of September. we've it's in in the in of we a not fourth continuation -- think so quarter, far

we're seeing like So that anything not yet.

have from in or an commodity continue lower I lower selling SS&T comes global think a at coffee perspective, price. that you you're priced selling you're to

a you example, saw EBITDA flat. for the decrease SS&T, net for in business, the so significant year-over-year but of And is sales the

see EBITDA sales but in into And see flat. significant -- quarter, see the to you'll coming but so likely net you'll in won't decrease you fourth continue SS&T

not EBITDA we to I going the segment, Beverage to see that flow going continue You're saw saw -- kind you're to of see in you in think that off Solutions September. that same of drop sales our because

Operator

conference I turn closing to remarks. back Ford for would now the Scott like to

Scott Ford

appreciate Chris you. back thank and I a had we've afternoon. ground disappointing the back. what were mentioned pleased as this Early I'd the we hopping continues come earlier, got. was quarter It see highlight roast to visibility on volume. everybody as Well, in to and simply come it I quarter, third much about the That's fourth into coffee quarter.

on We you Conway you So can assessment. at we're That so look sharing make online own it with is your then time. that the facility coming early year. next

to it's important remember this. I think

California extract so flavor in we they We a and have North two plants, in Richmond, a and ago extracted the or that Carolina one couple bought ingredient out year are full. filled one

only for make growth right period. we've will And demand product for now. up there, more we is not have to that the than which the year-over-year XX% manufacture extract also package, can We but will pressure. it experienced relieve Conway

than do the expect start We're will I entire commercialization, ability XX% of and are and along. into as very the of more given have. business the EBITDA so own, the kind then forecast help just we made we going But completion, this. we've window, its number your it, start-up to rough same your which we Conway window out range that. make along If hard roll could the to to enterprise and be come window, up give you metrics front along some SKUs end how capable it you that EBITDA try on their of of year is facility making mind this of the that time they tough of we And us will saying lack to we're plant it and to contracted of volumes of the explode it of go percentage on it's can our our is if we'll in that got, of for that And we to wide bringing do the customers fast will money follow along of the the Conway until to lines to alone, twice really probably of you are to year, some what out get it cares that. that do now growth to we follow upside. own they because next with math, this I'll some right And and feel conclude the around nobody by

get in, Thank done. I forward tuning and will We look you you quarter. talking to next for to it

Operator

This you conference for concludes call. Thank today's participating.

disconnect. may You now

Westrock Coffee (WEST) 9 Nov 232023 Q3 Earnings call transcript