Westrock Coffee Company, LLC Q2 FY2025 earnings call

• Delivered record-breaking second quarter results driven by strong customer demand, improved margin performance, and successful execution across the integrated platform.
• Progress towards being the premier integrated strategic supplier led to record production, deliveries, and profits. Combined segment adjusted EBITDA for the first half was $34.5 million, up ~40% over prior year.
• Conway extract and RTD facility saw sales growth, with primary liquid product volumes approaching planned levels. Start-up challenges were faced but progress is being made.
• Partnership with Palantir for 2 years has contributed to profitability through data intelligence and risk mitigation.
• SS&T segment performed exceptionally well, reinforcing leadership in sourcing transparency.

Beverage Solutions segment: Net sales increased 27.9% year-over-year, and segment adjusted EBITDA grew 48.5% to $19.7 million in the second quarter, driven by volume increases in core roast and ground coffee, single-serve cups, and flavors, extracts and ingredients. SS&T segment: Net sales grew 60% over the second quarter of 2024, with segment adjusted EBITDA at $3.3 million, up from $400,000 in the prior year quarter. Consolidated net sales increased by 34.8% compared to the second quarter of 2024, with consolidated adjusted EBITDA at $15.3 million including scale-up operating costs related to the Conway facility.

• No changes to forward guidance as demand for products remains strong across customer segments despite macroeconomic uncertainties.
• Expect scale-up costs related to Conway facility to moderate later in the year as production volumes ramp.
• Current momentum is expected to carry into the second half of the year.

• Tariffs remain a significant focus, impacting working capital and liquidity in the short term as they are passed through to customers and affect inventory value.
• Broader macroeconomic and consumer environment could present headwinds, such as elevated tariffs, persistent inflation, or softening consumer confidence, which could impact customer ordering patterns.

Q: Congrats on the strong results. Could you expand on the comment about mix being different from initial results?

A: Mix was better in categories tracking profitability, with slower Conway volume start but made up for in core base business. Palantir partnership has been a significant contributor to profitability.

Q: Could you give more background on the relationship with Palantir?

A: Westrock sits at the nexus of data feeds, uses Palantir for forecasts, futures management, and risk management, with the data and team being more powerful than expected.

Q: Comment on the second Conway RTD can line timing?

A: Should be installed mid-October and in production early November.

Q: Thoughts on production visibility over next 6-9 months and upside?

A: Good line of sight on current customers, other customers scheduled to come on, and potential glass line start in fourth quarter with EBITDA impact.

Q: Visibility on single-serve new facility and new business?

A: Winning new business was a catalyst for the second facility, with capacity to expand and a pipeline of customers.

Q: Frame on single-serve market share and scale?

A: Keurig is the dominant player, Westrock has wins in traditional retail CPG and private label spaces, with a modular and scalable single-serve facility.

Q: Tariffs and sourcing?

A: Sourcing can be substituted from other countries in some cases, but depends on contracts and customer profiles.

Q: Beverage Solutions EBITDA and future growth?

A: Plan to drive EBITDA to $200 million over 3-4 years, with opportunities to grow EBITDA using existing assets in Conway.

Q: Cross-selling momentum?

A: Mega brands are more aggressive in cross-selling, with some customers in C-store and restaurant space being exploratory, and top accounts driving cross product enhancements.