WEST - Earnings call transcript Q4 2023 | Westrock Coffee Company, LLC

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Operator

Thank you for standing by, and welcome to Westrock Coffee Company's Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Melissa Calandruccio, Investor Relations. Please go ahead.

Melissa Calandruccio

Thank you, and welcome to Westrock Coffee Company's Fourth Quarter 2023 Earnings Conference Call. recorded. being is call Today's

With us Officer; and Executive Ford, Mr. Mr. Chris Scott and Officer. Co-Founder Pledger, Chief are Chief Financial

By at today. access earnings now, section of on have company's Coffee Relations everyone quarter Company's Westrock fourth website the to Investor release information This the earlier the is investors.westrockcoffee. available issued should

and current forward-looking the are differ these comments management's statements actual that future of the subject in safe to made are to which beliefs subject Act on to on Certain based Reform provisions are this Private expectations of concerning statements, XXXX. could events several materially results uncertainties described Litigation statements. and call These from those risks include forward-looking and Securities forward-looking cause harbor

and from today's cause during the comparable filings implied expressed discussions The a risk to well SEC for the of release materially financial directly use as detailed to could in factors forward-looking that measures financial made refer measures. provides differ the those press more to today. filings SEC with business non-GAAP as discussion Also, we the statements measures or some any results describe press of other as actual these performance. release most reconciliations non-GAAP call GAAP earnings the will Please

our that, it Chief and Co-Founder Executive Ford, call the Officer. Scott with And to is my turn pleasure over to

Scott Ford

equipment explained joining quarterly material for schedule Arkansas, of the year capital XXXX year and these going the necessary. us the for important upgrades was our and of our year, now Thank you, first system Westrock. a knew extract and in last The of We for our if entered transition as Conway, next with installations. on enter commercially afternoon, facility available wholly ready-to-drink be impact And system long Melissa, new we throughout we backside a on migrations, were today. you to upgrades good of was the Thank products and we equipment sometimes number upgrades even business When on a and month. painful 'XX calls delivery on year, everyone. significant of year it

the XX% each enduring XX% of place our improvements, now upgrades multiple partners entire XXXX. our the scale to year fold this XXXX we infrastructure the entered vendor This the them. these by the due and brought significant with After one run to and our Westrock current EBITDA our and heartfelt about for already year-end rate, results and expenses is in customers. business adjusted every to and unrelenting work unwavering team, to extends My above gratitude by with

last year. you announcements connection I'll expected should in adjusted turn EBITDA the we offering XXXX remind with venture adjusted 'XX up and we're month. XX% somewhere annual our and joint the for XX% to pleased that for convertible be Today, between to As reiterate that note EBITDA our for announced our year 'XX, Milk Select guidance forecast we our

Conway. make these in of are tremendous like online to slated profitability It's half X-year through come the of now. incumbent process required thank investments our commercial see life. and of and on of who most modest plants back I'd realities facility effort, starting persistence year, and and the wins coffee contract everyone's several from patience in goods. ground extracts and to these new finished We coming cups, and these wins is have the ready-to-drink our supported on delight while of and expanding roast the to tea, walk as to enjoyed a as well platforms it has new each the and be impact to to of new through part, the to able already new today to extract some RTD long modernizing single-serve everyone us facilities constructing recently our to to is even And contributions

It the was now We all was be mirror our the would XXXX. no our that and pain are modernizing excited and an seen difficult year are those in face. chose challenges this. these extremely not But challenges launched, that. to of when our of Conway then parts we XXXX, we fully bear because new of extremely facility about so doubt business us, that are There's rearview thrilled for behind in in

over And CFO, Pledger, results. review our Chris our of with call that, I'll financial to turn for the a

Thomas Pledger

so in single-serve Thanks, consumer Scott, coffee the did company XXXX, cold public products. August to good and the we company capture coffee took and afternoon, reposition of we the to to everyone. When shift

year Our quarter this full XXXX fourth reflect our results the work consumer capture and financial it. shift the performance, continues to both by to our in and in

the Consolidated the terms XXXX gross of quarter accrual not mark-to-market quarter were repeated In of consolidated between compensation million these fourth XXXX million of profit a million of numbers and the adjusted XXXX. that for in fourth noncash million is This EBITDA of of XXXX the company reversal quarter for $XX.X included compared compared of sales fourth noncash of $XX.X onetime the for quarter net XXXX. $XXX $X.X of the for $XX.X drove result financial that mark-to-market almost million quarter million the of of were for X XXXX The to quarter $XXX,XXX to our in XXXX. to for quarter XXXX, fourth entirely the fourth fourth performance, losses. fourth million of $XX.X delta was compared $XXX.X losses included

been EBITDA essentially adjusted consolidated have reversal, accrual the quarter-over-quarter. flat for Adjusting would

fourth quarter we our X% platform down softness grew profit In by cup million the which of compared of and the extracts the contributed to million quarter, is In coffee as well to of XXXX. flavors $XXX.X gross the XXXX. our single-serve segment as our $XX XX%. the ingredients, roast of in our and business. fourth see Beverage for fourth partially a was net Beverage traditional which sales in X% quarter XXXX, to approximately strength offset Solutions fourth of segment our quarter, ground continue Beverage compared quarter This of decrease Solutions Solutions was in continued sales,

for almost to previously Adjusted EBITDA XXXX. $XX.X compared from prior fourth repeated that Beverage decline, the as XXXX entirely in the was reversal year fourth stated, Solutions segment the result million for was compensation the quarter This a in quarter $XX.X our of not was quarter. accrual million QX of onetime

our the In normal see our an XXXX. was as $X.X Sourcing of quarter sales the return compared which for and from fourth to revenues Adjusted during more segment, of the quarter of to intersegment operating we Sustainable XXXX, quarter. to is increase started SS&T XX% million segment quarter a the were fourth fourth less $XX.X million, than results $XXX,XXX of year EBITDA prior net Traceability

our results. to Turning annual

for full XXXX. the total the profit Consolidated gross company By gross full of flat noncash was of to included mark-to-market year the year profit net included $X.X mark-to-market compared $XXX.X $XXX,XXX $XXX.X million is and essentially full was for year noncash For sales included consolidated million, losses. -- year comparison, XXXX, XXXX $XXX.X were million, full gains. million which and XXXX

XXXX in for million million adjusted Consolidated prior was $XX.X year. the EBITDA compared to $XX.X

the million segment increase segment to year compared Solutions an Beverage EBITDA XXXX, segment million for net for $XX.X of $X.X the of contributed to $XX the to decrease from intersegment is million approximately prior sales, our representing For was Beverage to $XXX.X Adjusted million contributed segment for compared $X.X net X% compared SS&T XXXX, XX% which XXXX. In XXXX. was for sales full EBITDA Solutions our a revenues year. the SS&T million million prior compared of our of Adjusted $XXX.X our year year.

on our Moving expenditures. to capital

already the Conway, quarter, fourth CapEx we Conway facility. and spend now of primarily that amount. deployed to settle ended approximately million spent we $XXX $XXX During XXXX, And of our With extract as respect expect our $XX related approximately to we around RTD CapEx, we million. million to total had

Our largest in that months, spending start down on the outlays facility then next year. half we'll of to and take step back over the will see place X expenditures the this capital

revolving unrestricted commitments. cash and undrawn end, quarter credit approximately million we of $XXX At had consolidated

consolidated net at XXXX, on ratio annualized leverage quarter Our X.Xx adjusted XX, was based EBITDA. December fourth

issued notes We fund recent of agreement facility Conway included recently us the that February these our Westrock we credit to customer the venture. $XX demand of million key in notes, Select believe and are to investments expansion that The position joint for of products. mature disclosed, Milk with our part the allow investment as in expanding RTD on will capitalize flexibility which previously amendment, covenant XXXX. combined As convertible

Turning to XXXX. our outlook for

as we the for consolidated extract of noted XXXX. in customers million This operations update for necessarily and our in broad results in February, account adjusted $XX facility guidance facility. to is in range and EBITDA be our As commercialization range we experience fiscal million RTD $XX may business we the between and expect of new begin to that

we in XXXX. traditional our exit so growth to pricing roast expect drive ground we do to new XXXX, drive strength extracts expect And approach we years, and and which in flavors, cups in in single-serve As ingredients. and business, future to we results the with a areas

our half off in to results our quarter far We XXXX the the we're conversion EBITDA our first business expectations. are our start ERP in year. that thus adjusted is first results also with turning in performance the a an of with and line and single-serve scale-up page on pleased the XXXX, coming pressured The in solid with

the ramp year. range facility, commercialization outlook EBITDA for on for progress determined wide the Conway in update to may Given it how of the you of guidance year, largely which continue and adjusted the impact our by is our we'll the

back that, for the With call operator I'll the turn to questions. over

Operator

of first The the line of Company. Our comes question Instructions] Brooks from [Operator Benchmark Todd

Todd Brooks

how, you April. ahead of In you month product or schedule hit that's to I'm commercialization us on had both couple we But acceptance release any and program any customers actually are about If talked early this, questions that a intended, the plural new can X Scott, fluidly, will you in the that. kudos so and is customer about plural remembering A pun Conway. for tell correctly, of detailed details into there initial about talking going facility? And these looks commercializations. the been no with what

Scott Ford

we Sure. Todd, projects. ahead news is of good line one schedule installation are the so every of the on

now. news that -- customers number in of We in are that, in windows a also have good we process are have the across. commercialization There commercialization

various multi-serve the or about talk formats, cold glass can we bottle, bottle packaging product room. when So

the bottles all We have is is coming coming coming There's the commercialization sequential of the one last first, second, them. can on on on on, a third. going X projects start-up, multi-serve on

we on of those the the in pipeline one any year about physical us, don't X installs, of stay schedule more end commercializes in us on we to maybe allows wants to are know and through but time the and going could we schedule range. if 'XX, that this every able do to be which and to the I faster, our stays ramp on that. And us get be it's allows their high months in And ahead product window everybody up opportunity it of it at

middle of the If how range. we for ought goes everybody EBITDA part pace, next about built at of to the forecast our kind this year. be normal we That's

Todd Brooks

know customers said of type Okay. should detail. That's I for? shelf? the watching Any helpful. multi-serve you the product And first. delivery on when turns be that that any into April we And detail on

Scott Ford

shelf brands But large space I coffee to it this should some various rolling are product leading and ready-to-drink the as for. factors, that want in out the So are they in them hit that form who obviously, into of large doing that don't summer is. is these in early into on the go resets. retailer we're turn

Todd Brooks

back And jump I'll my question, queue. Great. then in Okay. final

you and to in with You equipment talked delays was a pace fall to where last FP&A I range. want talk first $XX about single-serve, $XX million year. out which half million about tough the though commercialization both the guidance defining of there the strip

But then that of to year. really expecting million single-serve million be contributions ground where $XX commercialization. variability thoughts ground? seen and are little demand in in this $XX roast FP&A will roast you're customer Within of a variability around second there around guidance, And and half the that what here of and bit collapse kind we've a and the from

Scott Ford

want you to take Chris? Do that,

Thomas Pledger

Sure.

Scott Ford

I would will say that yours be smarter.

Thomas Pledger

No, no. no,

Chris. is this I -- think

In we And got year. the as the are outlook our customer XXXX, terms the looked of of XXXX. we in what of that half at we the look at was coming are we rate for we how that run to wins the then business built back online what have

range. so what really the And bottom helped of that's inform part our

of exit do end in as And to on our XXXX, based depending. really the after range. that we we about is being Scott so then rate able get And we about of comments feel feel good what bottom the we Conway to good kind run talked business the as about his base

Scott Ford

Much smarter answer.

Operator

of Our line Bienvenu next comes question from Inc. Stephens Ben of

Ben Bienvenu

a it to shepherd facility as you volume in up the to that your ask of to variability more as you're smoothly and of can gate this you ramping recognize, the customers I want a process rush kind relates what end ramping how commercialize. as the recognizing up? with to of increasing I windows, choose to and onboarding degree scale don't Conway able of inherent that such the helping risk To significant the ratably concentrated and versus up ramp is what

Scott Ford

committing door people for obviously before. production are question. when one through What in And to we to commercialization. to we are the super the actually try rush for a reflects come this it's on it's doing Yes, been that you've is based -- mitigate

And really tenant x our me anchor want process now. all they frame, commercialization to with -- if time force contract an let of us. our part so of it their we them you've have come you their that's And own rank anchor the got kind tenants, have to call of relationship for

now available they we that are the the And others the come, to commercialization wait actually like too. If of that us. of window been get through about if trying production. they And your right are for window come for with window. we up then then they're they to dozen a clarifier great start the the when production But slides lining their commercialization, in door when talking hitting it's delay all the of need side brands, out that's production their them, and on importance

got reset any if in you to was what to. way customers, some spend production. would to until to have and a you do as bring be money your retail chaotic your be nobody commercialization kind that understand. we to production, window. you're then window to could And people But to hit want you with have And wants for door of that do walk-through going until to you've anything you've got you could wants clearly the have Nobody if do otherwise rush to only ramp-up very a the actually have

don't we've So is capable We not, we offered Whether that's base works or guidance don't that same that to And says exactly smartly, give is will Chris all what the what going captures I guesses think and how we're doing. know around some We're we quite flow doing. that know range right which the you through. the business know, why of as it. story. very laid out, that

Ben Bienvenu

Yes.

a as the ramp utilization important margins about range Should that be think implications process shell margin in really our what to outcomes us is the what recognizing think mix if like eye, And cost being margins pressure that be for happens? such of and through have could consider? the Help looks deleveraging of Or today? we factor. what and for the a are? Chris, Okay. adding mind's fixed for you the happens there commercialization Is will faster, margins there actually? equipment you as are we us think year,

Thomas Pledger

of -- we expense the we in on As have in sequence turning ramp. terms Conway, the with

going And sequence to as so I that's feel take how the expect of compression kind the you on really good don't about to create itself Conway I fixed out. cost. ramp margin of

business going and going business, In to to kind extracts. margin serve, our a of see growth in base improvement, part our you're in to of terms FP&A see with of continue our is higher-margin mix which of to product kind I continue growth single you're think

when half start layering the in, to products from start you really the they start in were back think on in fourth the April that come that. XX% the year, them in to quarter. to ramp continue Conway we on selling for And then see I going you're up and of volumes the growth

Operator

Matt of Smith line next comes Our from of Stifel. the question

Matthew Smith

being in cash Conway half we consider we about That million $XXX a $XXX when costs talked million in second so in the first ask, you of or the Should XXXX, product implies to that as then first investment. level does a down to spent and Want And think capital flow go. at being spend production preproduction a the of continue $X Should half? begins in that in Or April? commercially about that were moderating the half? quarter. similar level million fourth step salable about in

Thomas Pledger

on same expect CapEx I to numbers. to From spend, we end there? -- talking think just we sure are we're through Well, Is Conway the expect about page in the we that terms that $XXX $XXX be the of million. the year, And million. -- the same make

Matthew Smith

I had there. wrong appreciate the clarification. I numbers the

Thomas Pledger

cash we'll for -- we the talked step year this next as And quarter quarter flow -- for start free see -- flow a back start months we've expect then flow on we I about or of year. year. the cash free we perspective, up. down part for and mean, spend of spend you -- project think to the as From -- cash third the quarters And in expect the first got quarter to probably highest second I that call, second the next the of that turn generating the spend in

Matthew Smith

salable of to or tail costs, those in start through off? And product do now half those beginning first continue persist the should you're this the preproduction April, year to producing that

Thomas Pledger

They should start off. tail to

Scott Ford

Ben's was preproduction was the years which the the a question either going a over balance think volume -- into ago. Conway the rata X the fills, Chris next to on to comment basis about is now, margins released itself Right it And that in making sheet. was pro was the minute as I

Thomas Pledger

Correct.

Matthew Smith

Okay.

more. one Just

Can was that I in previously, more a locked costs green like coffee about as pass-through roast and for customers. a pricing you be in the little of that know about you may talked changing? sounds your talk new a business. approach pricing ground You in It more?

Scott Ford

the say which What of the would as part that changing business, doing been is roast what We're you're referring are the we've ago. in of of structure acquired the these that today. a the few not, years It's North ground modernization are not actually contract. we I Carolina the plants the structure contract, of coffee and to and

to massive massive not get rebuild We machine, are was shift that of a level finished well, of systems a operator, middle us has the just by available a we and previously. to have a allowed by in transparency cost systems rebuild by -- the

installation, on not do are, costs kind this not that unbelievably across to the to that we on very as So of an basis of price. able across we've suffered exactly months, had operations basis now line that operations, data system average to better an not of products, 'XX been we rebuild, has average And basis get for on that which in. are shift. Well, automation last or line, an slow with our ability see clearly when across that, it able turn but about to X or where operator customers, drag off, running to the on an the lines average current had burdensome average the down, detail because our specifically out, and basis, financial X to SKU running the we are

to able customers, contract lower we're you through to formula Sometimes talked about. lower that conversion prices give our the

specific demand in in that that pinch realize we just need the specific and slot. we given actually charge to SKU the because point a where higher require we sometimes And market that's more,

year And that get in or that's to price right us -- have 'XX, are large worth on year Chris so methodology bad cost SKU of and we're -- decisions the all talking higher from in a do cost bad those really our And going large rationalize to lower. several the it's allowed point, the of if and in that the by and made this throughput-based when go SKU work, all facilities. wins to customer-by-customer, set to us is have to our hinge earnings has Conway years. in everybody the a we can a help about, the a it brought 'XX that And honed whole 'XX to 'XX, so of already of fill off next that the catch all strategy X wins fixed coming And 'XX sleep our and turn on be high worth business, how powerful in you it’s over way. is about, that ability you that's

Operator

question Our Telsey of of from Group. line the comes Vora next Sarang

Sarang Vora

to ask just as question progress in I'll the see a great well. a side. X-year is for the When look opening you on facility at you April. production It on Conway picture, the it's

on So open will how different your the for like and Conway a help just Will the by and little the you understand look 'XX? like how ramps lines. XX% plants be at how production end operating when period other trying of saying production -- about running up X-year of in operational opens in plant you differently, to 'XX plan Can then facility, XX% much I'm you to Conway? us by 'XX? you be a fully the from see over

Scott Ford

-- a spend on This understand get X-year an this in And -- in we Conway step that is whatever to onboarding. -- file one Pledger, it that go 'XX. X-K can question, this to answer if and full is helpful, too Terrific up let this I clean ourselves, you attempt I the what wrong. I far me over be can hope lot run way Blake, of it way. essentially get But can is you rate Yes. 'XX, best a onboard you becomes if might it time

this back asked that So question better to are a goes we ago. minute Ben commercialize, the to

in to in are 'XX, run production just in we lined customers meeting and commercialize that commitments so more to get 'XX. in We slow full 'XX, up our everybody contractual better to

commercialize to in if that in we way way we and late Conway end -- If of the run late, out because the in through 'XX built Chris 'XX everybody go And ready at the get 'XX. laid forecast. so Conway late, low you comes and more our we

the $XX we EBITDA can we just million or commercialize can the there just in money to we at and on put up The your -- $XX to spent could just when sit people make of $XXX core if in run about can is you see you that in already this deliver million if customers a that business up talked generate been from of EBITDA while them that get million last business and million pick Chris more the machines. business additional are up 'XX, they the MIS $XX all in power really take I'm automated top built and can at do has powerful and in the to Well, 'XX reading of this picking the have million that much look and anything And single system that, to have don't built sale. $XX is the when lines we $XX, suffered generate door of instead that's when X years to -- off-line get to life. about. Well, you than EBITDA, why we'll

Sarang Vora

us and big one JV kind of that the about the very us you bit you JV? announced producer. you Select the through JV Milk And helpful. you how That's help ask do I I'll Can about more work? the this quarter operating this will how with a walk then help but the know initiative this rationale things of through more JV of this they P&L? And flow the about your in milk, concentrate, revenues just some do little

Scott Ford

to a the part, that a go JV then facility, will the become because will. the equipment JV. this. largest that Select extracts then we used through lease through a of deliver we conversion we that tenant of finish money you XX-XX JV, most that's come it. the borrow book that be if profit going It's if out to will will there that a revenues then We're out the is will itself put up The way sure. will put The will, Select And for each out is will. sale capitalize money And XX-XX you through and the equipment. building product of facility into be Yes, to

the and saving Extraction So line. work, XX% of powerful will residual you at come & our profitability is will everybody EBITDA extract It's same adder that the see out a you of interest the division, whatever see up come also And and in very above for division. in Flavors, of that in then earnings the that the in you'll conversion sales 'XX. see our pickup Ingredients we're

Operator

now closing to Ford remarks. like the for turn would to call I back Scott Sir?

Scott Ford

you much. very it, for with on Thank appreciate Thank gentlemen, thank interest. We questions. And your your operator. for getting you you

We in release not really are in exactly everybody the I before off are where we we there's to The were X any started, that news weeks super excited. just ago. put we were say this talking call essentially news is the And because a we out we told X, great start 'XX.

give to schedule and be us the 'XX months side. of commercialization some monetizing should year, good are the it's of a up And on fantastic. physical we And we've the got 'XX absolutely ahead really and plans that but we walk, walk that through then for the have to setting

work. with Our on customers are starting product and the commercialization development us to match

that getting Meanwhile, on. the And in plant business. about core we excited super back are

We EBITDA amount lost from an business. been and things we taking enormous actually in time of -- have spent money up the windows and suffering through down MIS energy of systems through turning and old the

I now, if to back on, bet you it us, against want get love And too. on just I want they come we're with board we're results seeing it. of and do do -- us to that, going coming All great. say, And now, that's people is on if let's about it. see and and our excited to let's back in it,

So thanks later. for you all tuning in. See

Operator

for you conference Thank participating. call. today's concludes this And

You may now disconnect.

Westrock Coffee (WEST) 12 Mar 242023 Q4 Earnings call transcript