Westrock Coffee Aktie

At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker, Joanne Arnold, VP of Investor Relations.

Please go ahead.

Thank you and welcome to Westrock Coffee Company's third quarter 2026 earnings conference call. Today's call is being recorded. With us are Mr. Scott Ford, co-founder and chief executive officer, and Mr. Chris Pledger, chief financial officer. By now, everyone should have access to the company's third quarter earnings release issued earlier today. This information is available on the investor relations section of Westrock Coffee Company's website at investors. Certain comments made on this call include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could actual results to differ materially from those described in these forward-looking statements.

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

Thank you, Juwan. Good afternoon, everyone, and thanks for joining us. I want to focus on three things today, our growth and the operating model behind it. strength of the beverage category and what it says about the investments we've made and the refinancing we've just completed. growth the third quarter was a record quarter for Westrock consolidated adjusted EBITDA reached a record twenty six point four million up about 14% from a year ago and through the nine months it's up about 58% it was our sixth consecutive quarter of year-over-year EBITDA growth and our second straight quarter of positive free cash flow. That is the operating model doing what we built it to do and the credit belongs to our people and the customers who trust us with their brands. Second, the category. Quick service restaurant and convenience store traffic in the U.S. is down this year, yet beverage keeps growing. Operators are building out energy, refreshers, cold coffee, and craft formats because those programs draw traffic and carry some of the best margins on their menus. That is the demand Conway was built to serve, and it is why our extract and ready-to-drink programs kept growing in a soft consumer quarter. Today Conway is running at about 40% of its current capacity and committed programs take it to roughly 85% over the next 18 months.

At that level, Conway alone will generate more than the 70 million in consolidated adjusted EBITDA this entire company produced in 2025. As we continue to add production capabilities and packaging equipment over the next three to five years, we believe we can double the EBITDA contribution from Conway yet again. Customers who come for Conway are putting programs in place across the rest of our platform, too. So far this year, we've won new business worth an estimated $60 million of annualized EBITDA, with a pipeline of more than 100 million behind that. And in single serve, we've already contracted enough new business to replace one-third of the business we lost last year. This begins in early 2017. That said, the consumer remains choppy heading into the fourth quarter, especially where fuel costs weigh on traffic. But most of our growth comes from contracted programs coming online, not simply from a rising consumer tide.

Third, the refinancing. Even in a tight financing market, our lenders committed 737 million to a 500 million deal ask, and we were pleased to close our new 600 million upsized facility late last month. It matures in October of 2031, and we are grateful for the confidence and the leadership of Rabobank and several other large institutions that have made this refinancing possible. With construction behind us and capital spending a fraction of what it has been, this was the last ingredient we needed to build a large, profitable business. platform, the people, the customers, and now a balance sheet built for the long term. This brings me to our outlook. For 2026, we continue to expect consolidated adjusted EBITDA between 90 and 100 million, largely dependent on final customer mix decision. Our current estimate is squarely in the middle of this range. At a 95 million year-end level, this critical growth metric would be up 36% over 2025, after being up 48% the prior year.

And building on this, our initial 2027 outlook is for about 130 million in consolidated adjusted EBITDA, nearly double what we earned in 2025, and up another 35% over the midpoint this year. Regardless of exactly where our 27 number lands, we fully anticipate ending 2027 at a much higher annualized run rate due to the customer programs scheduled to launch later in the year. Beyond that, the growth built into our customer agreements together with our pipeline gives us room to do even better over time. though we are watching fuel and food prices closely in the short term. Sitting here today, balance, we are more optimistic about where we'll land than we are concerned. With that, I'll turn the call over to Chris Pledger, our CFO. Chris?.

Thank you, Scott, and good afternoon, everyone. Let me take you through the quarter in more detail, starting with the P&L, moving to cash flow and the balance sheet, and then ending with the refinancing we just completed on October 21st. Consolidated net sales were approximately 300 million in the third quarter, down 15.4% compared to the third quarter of 2025. Most of that decline reflects factors that are important to separate from the underlying operating performance of the business. The largest driver is approximately 26 million in tariff refunds that we pass through or expect to pass through to our customers, which we record as a reduction of net sales rather than as cost. The corresponding refunds we collected from our vendors reduced cost of goods sold, so there's no gross profit impact. Excluding this item, net sales would have been approximately 326 million.

The balance of the decline reflects lower green coffee prices, which pass through to our customers at cost, and the previously discussed single-serve customer loss. These factors should not mask our strong underlying business performance during the quarter, led by double-digit growth in our ready-to-drink extracts platform. Importantly, although consolidated net sales were lower in the third quarter versus the prior year, through the first nine months of this year, consolidated net sales were 915 million, up 8% compared to the first nine months of 2025. Consolidated gross profit was 41.5 million in the third quarter, flat compared to the prior year. And year-to-date gross profit was 125 million, up approximately 11% from the prior year period. Both periods include incremental depreciation associated with our investment in Conway, 3.1 million in the quarter and 11.4 million year to date. We continue to see significant improvement in our operating profitability.

In the third quarter, we generated operating profit of 3.2 million compared to an operating loss of 8.6 million a year ago. Through the first nine months of the year, operating profit was 5 million, compared with an operating loss of 36.7 million in the prior year period, a swing of 41.7 million over the past year, and our net loss narrowed by almost 50% in the quarter to 10 million from 19.1 million. Another important proof point that our model is working is that despite significant growth at Conway, our operating expense base was essentially flat year over year. This is the operating leverage that we've been building towards. The platform was sized for substantially more volume than it carries today, and the overhead required to run it does not scale with that volume. As Conway continues to bring contracted programs online, we expect a significant portion of that incremental gross profit to flow through to EBITDA. All of this translated into record quarterly consolidated adjusted EBITDA of 26.4 million, up approximately 14% year-over-year.

And through the first nine months of 2026, consolidated adjusted EBITDA was 73.7 million, up 58% over the same period last year. Beginning in the third quarter, we no longer add back Conway's subscale operating costs in calculating beverage solutions segment adjusted EBITDA. Conway has reached a scale at which those costs are properly treated as ordinary operating costs. So this quarter's segment result absorbs costs that were excluded from the prior year comparison. Despite this, we still delivered beverage solutions segment adjusted EBITDA of 23.3 million, an increase of approximately 14% compared to the third quarter of 2025. The performance reflects strength across our underlying flavors, extracts, and ingredients capabilities driven by the continued commercialization of Conway and the benefits of our business optimization and expense management efforts. We've also crossed the utilization level where new business flows largely through to EBITDA.

From here, each new program, whether an existing customer ramping or a new customer onboarding, comes in at a higher incremental margin. Our sustainable sourcing and traceability segment generated segment adjusted EBITDA 3.2 million in the third quarter, compared to 5.8 million in the prior year period. The third quarter comparison reflects sales timing within the year. Year-to-date, segment adjusted EBITDA of 11.6 million is up more than 5% year-over-year and consistent with our expectations for the full year. We generated cash flows from operations of 9.9 million and positive free cash flow, which we define as cash from operations less additions to property, plant, and equipment of 1.1 million during the quarter. This marks our second consecutive quarter of positive free cash flow, bringing cumulative free cash flow over the second and third quarters to approximately 21 million. Part of that resulted from working capital timing we expect to reverse, but improved profitability and lower capital expenditures are fundamentally changing our cash flow profile.

To that point, capital expenditures were approximately 8.8 million during the quarter, less than half of the 18.1 million invested in the third quarter of 2025. Year-to-date, our capital expenditures were 22.4 million compared to 79.9 million in the comparable prior year period. We continue to project approximately 30M of capital expenditures for the full year compared to 89M in 2025 and 160M in 2024. This is the structural inflection point. We've discussed for several quarters as Conway has moved from construction into operation. We also continued to deleverage during the quarter, with secured net leverage at September 30th declining to approximately 3.1 times from 3.4 times at the end of the second quarter and 4.6 times a year ago. Put differently, over the last 12 months, we've reduced secured net leverage by approximately one and a half turns. or roughly one-third, driven by a combination of debt reductions and earnings growth.

Over that period, secured net debt declined approximately 59 million, while credit agreement-adjusted EBITDA increased by approximately 17 million. As previously announced on October 21st, we took another important step in strengthening our financial position with the completion of our new 600 million senior secured first lien credit facilities, consisting of 300 million of term loans and 300 million of revolving commitments, and extending our bank maturities to October 2031. The transaction received approximately 737 million of lender commitments, allowing us to upsize the facility from the targeted 500 million at launch to 600 million at close. We're grateful for the support we received from all of our lending partners. When compared to our prior credit agreement, the new facilities meaningfully reduced our required debt service by approximately 17 million in the first year, further supporting free cash flow generation. As part of the refinancing, we repurchased 40 million of the 72 million convertible notes due 2029, paying approximately 21 million in cash and issuing approximately 2.4 million shares. In addition, we extended the maturity of the remaining 32 million of the convertible notes due 2029 to January 20th. 2032, eliminating their February 2029 maturity.

As a consequence of the refinancing and the repurchase of the convertible notes, we do expect that our leverage will temporarily increase by about half a turn in the fourth quarter and another quarter to half turn in the first quarter of next year as we pay out our annual incentive compensation to employees and pass tariff refunds through to our customers. So beginning in the second quarter of next year, we expect will once again see meaningful de-levering. Following the close of the refinancing, we had approximately 270 million of unrestricted cash and undrawn revolver commitments under our new beverage solutions credit facilities. compared with approximately 95 million at September 30. This substantially increased liquidity provides us with greater flexibility to operate the business and manage the balance sheet over time. To conclude, we believe our improved earnings, lower capital intensity, and improved balance sheet as a result of the refinancing materially strengthens our financial flexibility as we enter the next phase of Westrock Coffee's growth.

that we'd be happy to open the line for questions. Thank you. At this time we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Eric Des Lauriers of Craig-Hallum Capital Group. Your line is now open.

Great. Thank you for taking my questions, and congrats on the strong quarter and capital raise here. My first question, just kind of focusing on potential use of proceeds with this greater liquidity that you have now. Can you just kind of give us a sense of your strategic priorities here? How should we think about, you know, potential share buybacks, organic investment, M&A, maybe some more paydowns on the balance sheet? Just kind of help us level set how you're thinking about use of proceeds going forward.

Sure, I think Chris's remarks addressed the short term, you know, over the next two or three quarters, what we've got going out the door. And frankly, beyond that, at this juncture, we are very focused on retaining cash, paying debt down. We want to de-lever the business. We think we have an absolute unbelievable path towards growing an industry-leading business in this space over the next two to three years. And the best way to do that is from a rock-solid balance sheet and not the sketchy one, maybe, that we have been accused of running in times past as we were building from nothing out of our own back pocket. And so I think you would see us be very conservative with the balance sheet deleveraging. Obviously, as I've said on calls before, No business should leave its balance sheet in a position where it can't defend a reasonable stock price for the business.

And this business has not had that capacity in times past. It does now, but frankly, I'd be very surprised if we were so incented as to come out of pocket with money for that this juncture I think we've got a lot of things we can do internally and perhaps externally that don't add to our net leverage position that increase our industry structure position and we think the best way to get to those cards is to continue to delever between now and then.

all right that's helpful thank you um and then um two questions as it relates to uh the um EBITDA cadence for 27. One, I think you mentioned, you know, the EBITDA growth will largely be back half, potentially even Q4 weighted. I think you mentioned some contracts that will be ramping towards the end of the year. So just wanted to kind of confirm that. And then also just touch on SG&A. So from a reported basis, looks like that's come down pretty meaningfully for about five or six straight quarters now. I'm just wondering how to think about that going forward and sort of what's been the main driver of that.

Yes, well, two things on that front. First of all, in the guidance to 27, I believe is what your first question was about, So where we say, rather than be precisely wrong, we're just trying to be generally correct. Plus or minus 130, most of our customers won't finish their allocations until deep in the first quarter for the actual volumes. We have a lot of conversations, but that's a lot of guesswork, because our fiscal year doesn't fall with the same calendar planning year as most of our customers. So that's what most of the back and forth is through this time of year. So we think 130 is plus or minus a good guess right now. And then the point I was trying to make is a number of customers that we have sold in that $60 million pipeline I referenced, they are slated to come on board towards the middle and latter part of next year.

So when we get into late 27, we'll be at a very different annualized run rate than the 130 that we are guessing right now will fall in the fiscal, which our fiscal calendar year. So that's what I was trying to distinguish. What would that be? We're not really sure. think we'll grow something like another 30 to 40% in 28 after 27's number. And I'm trying to get you some understanding of how that falls in 27 so you can understand those numbers.

And then to your SG&A question, if you recall that as the build out of Conway that there were expenses that were, or operating expenses that were added back, a lot of those were captured quarter by quarter in SG&A. As those have rolled off through the add backs and into operating expense, our SG&A comes down. This is the first quarter though, where we don't have any Conway related add-backs. So if you're looking for kind of a level line for SG&A going forward, this quarter would be it. Overall operating expense is flat, which I think is a great proof point to the business that we've built and as we continue to grow, as Scott talked about in 2027, there's not a lot of incremental opex that we need to put on the business in order to be able to produce those volumes, and you should see most of that drop to the bottom line. Awesome. Very helpful answers. I appreciate you taking my question, and congrats again. Hey, thanks a bunch.

Thank you. Next question comes from the line of Chirag Vora of TAG. Your line is now open.

Great, thank you guys for taking the question and great profitability. Great to see the Conway making progress. I know you guys gave guidance for next year, so just thinking in terms of free cash flow, the question before, how should we think about CapEx for next year? I know there are some new production lines that you were thinking of starting given the demand from customers, but you have done a great job. this year in bringing down CapEx. So I'm just curious if you can share a little bit color on how we should think about CapEx for next year. in terms of free cash flow generation. Thank you. Absolutely. Thanks, Sarong.

From a CapEx perspective, I think as we talked about, we've reached an inflection point with Conway. The construction part of Conway is complete and now we're into just operating it. Obviously there are going to be opportunities to deploy capital or deploy CapEx for customers. that want to grow with us, and we firmly expect to do that. We've done that this year within the 30 million of CapEx that we forecast. Next year's going to be 30 to 35 million of CapEx as well. And so we can deliver around the customer commitments that we've made and the opportunities that we have to continue to grow the business and deliver the next year's guidance based on the installed capacity that we have, plus some incremental growth capex in order to be able to meet customer needs. But you're not going to see us go back to a time where, you know, CapEx.

CapEx is $50, $60 million. That's not the business we're in right now. So we're going to execute within those parameters.

That's great. I had a second question on the margin profile. I know you talked about SG&A being very muted. So fair to assume that majority of this, we will see a massive gross margin expansion over the next year as Conway goes up, right? Because the mix shifts towards higher higher margin than the ground coffee and single service. Is that the right way to think about the growth trajectory on profitability?.

You definitely should see gross margin go up because there's a mix shift. Conway, as we continue to load on volume, Conway continues to be a larger, contributor to the overall EBITDA business, and that is higher margin business than what we have in most of the base business.

That's cool. And just a broader question on Conway, you were ramping up from 40 to 80. What has surprised you the most from a customer request standpoint? Anything that surprised you as you ramped up from a production standpoint? Just curious. you can share feedback from customers or something. Thank you. Thank you for taking the time today.

to hop on. The greatest surprise from Conway has been twofold. Number one, when they come to Conway, they want to go see everything else we do, and we have had a 70 plus percent multiple product sale to our new customers that are coming in. I mean that's ridiculous. We couldn't have imagined we would have seen a reaction like that to Conway. So one of the reasons that our growth this year has been so strong and frankly our growth over the next two years is likely to be as strong again is because of that multi product portfolio that when people come to Conway they see how easy it is to do business with us and then they say well do you also do cups do you also do roast and ground can you do whole bean then you expand your geographic footprint to cover more of our restaurants in a different part of the country etc etc that's been the biggest surprise this The second one is frankly the ultra-filtered milk, high protein, craze that Conway is built and capable of making and the demand for that and the number of brands coming into that space, the number of products that we have under development right now is the greatest number of individual items by a long shot than we've ever had in the house and that includes when we're were building Conway and first turning it on and so we just continue to get and what about and what about this and can you do this and would you take that and prioritizing that and getting the teams lined up to make sure that our customers have a great product development and commercialization and and then an operational delivery and daily customer follow-up. That's the key to executing a low price, high service, quality product formula, but the appetite for it from new and old customers, frankly, has just been far in excess of what we would have hoped for on our best day. And so the challenge is actually delivering against that and that's where we spend all of our time every day. That's great. Good luck. I'll pass it on.

Thanks, y'all. This concludes the question and answer session. I will now turn the call back over to Scott Ford, CEO, for closing remarks.

Well, thank you very much. I'd like to thank all of you for hopping on the call today. Obviously, we were thrilled with the quarter. We're head down trying to close the year and get ready for the new year. We are thrilled with the credit agreement being behind us. It gives us unbelievable flexibility over the next several years, and we will be very, very good stewards of the liquidity that it gives us. And we appreciate your interest in this business and following us today on this call. So y'all have a great afternoon.

Thanks so much.

Thank you for your participation in today's conference. This does conclude the program. You can now disconnect.

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Good day, and thank you for standing by. Welcome to the Westrock Coffee Company Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jauan Arnold, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to Westrock Coffee Company's Second Quarter 2026 Earnings Conference Call. Today's call is being recorded. With us are Mr. Scott Ford, Co-Founder and Chief Executive Officer; and Mr. Chris Pledger, Chief Financial Officer. By now, everyone should have access to the company's second quarter earnings release issued earlier today. This information is available on the Investor Relations section of Westrock Coffee Company's website at investors.westrockcoffee.com. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also, discussions during this call will use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release provide reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures.

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

Thank you, Jauan. Good afternoon, everyone. Thanks for joining us. I'm pleased to report that the second quarter of '26 was another strong quarter across every part of our business. It was our fifth consecutive quarter of year-over-year consolidated adjusted EBITDA growth. We turned free cash flow positive ahead of our anticipated schedule, and we ended the first half of the year almost 10% ahead of our internal EBITDA plan.

The platform we spent the last 3 years building no longer requires capital. Rather, it is a generator of cash. Second quarter consolidated adjusted EBITDA was $21.3 million, a second quarter record and up nearly 39% year-over-year. Through the first 6 months, consolidated adjusted EBITDA of $47.3 million was more than twice the first half of '25. Our credit agreement secured net leverage ratio improved to 3.36x, our fifth consecutive quarter of sequential deleveraging. And significantly, we were free cash flow positive both for the quarter and on a year-to-date basis. Commercially, our momentum continues to build.

Second quarter Beverage Solutions net sales grew nearly 17% year-over-year, led by the continued volume growth of our RTD can, glass and multi-serve bottle formats in Conway and driven by increasing volumes from both existing and new brand partners across the portfolio from packaged coffee and single-serve cups to coffee RTD beverages. We have a pipeline of new products in queue from refreshers, energy and high-protein drinks to functional and nutraceutical single-serve cups. Our customer and sales pipeline has never been more robust and the fact that our recently expanded manufacturing capacity is now fully operational, continues to shorten our sales cycle with brand partners.

Further, our recent market wins enable us to forecast revenue and profit growth that builds materially over the next several quarters without the need for additional CapEx or new sales wins, prime examples of which are recent incremental can format volume wins from both historic and new customers in our Conway facility. This facility will be an increasingly meaningful contributor to segment profitability through the balance of this year and into next.

Turning to single-serve cups. Our volumes were up over 9% year-over-year, excluding the volumes lost to a customer that departed us through industry acquisition and consolidation. New customer inbound interest remains strong. We continue to expect new volumes to begin arriving in late '26 with full replacement targeted by the end of '27. Our work with Palantir is increasingly showing up in how we run the business day-to-day. Foundries AI is now driving real-time analysis across our manufacturing, logistics and planning systems, giving our teams live visibility into performance as it happens rather than after the fact. This is structural, not cosmetic. We are not bolting AI onto a beverage company. Instead, we are running this platform on an AI native operating core and the operating leverage it creates is only beginning to show up in our results.

With the first half behind us, we are reaffirming our 2026 consolidated adjusted EBITDA outlook of $90 million to $100 million, while acknowledging that both of our first 2 quarters came in ahead of our internal plan, and we feel quite optimistic about the back half of the year. Our sales and operational momentum is continuing to build. Our story this quarter is a simple one. We have become a cash-generating platform, executing at pace with a strong team again delivering record results. We are growing sales, expanding EBITDA, deleveraging the balance sheet and now generating free cash flow. That is the business model working exactly as promised. I want to thank our entire team from the folks on the plant floors in North Carolina, Arkansas and Malaysia to our sourcing and logistics offices around the world to our systems and corporate teams, and to our shareholders whose conviction and steadfast partnership through our expansive build-out phase made this quarter's milestone earnings and free cash flow generation possible.

With that, I'll turn it over to Chris Pledger, our CFO, for the financial details. Chris?

Thank you, Scott, and good afternoon, everyone. Our second quarter results reflect continued momentum across our platform. Consolidated net sales were approximately $306 million, up 8.8% versus second quarter of 2025, led by Beverage Solutions, where net sales grew nearly 17% versus the same period. Through 6 months, consolidated net sales were approximately $614 million, up 24% versus the first half of last year. Consolidated gross profit was $37.7 million in the second quarter, down $3.6 million compared to the prior year. This was due to $4.1 million of incremental depreciation and amortization expense associated with placing assets into service at the Conway facility and a $2 million negative impact year-over-year from noncash mark-to-market adjustments in our SS&T segment.

Through the first half of 2026, consolidated gross profit was $83.5 million, up 19% over the first half of 2025. Our operating loss for the quarter narrowed to $1.4 million from $15 million a year ago. And through the first half of 2026, we are operating income positive compared to a $28 million operating loss in the first half of 2025. As with last quarter, our reported net loss of $13.7 million narrowed significantly from the $21.6 million net loss incurred in the second quarter of 2025. Consolidated adjusted EBITDA was $21.3 million, which reflects a record second quarter result for Westrock, increasing almost 40% compared to the consolidated adjusted EBITDA generated in the second quarter of 2025.

In Beverage Solutions, second quarter segment adjusted EBITDA was $22.2 million, up 13% versus the same period of 2025. Growth was driven by the continued ramp of our RTD canned glass and multi-serve bottle formats in Conway, new customer wins in our flavors, extracts and ingredients business, including the launch of a Lemonade refreshers program and improved fixed cost absorption across our manufacturing footprint. And once you exclude volumes from the customer that departed following an industry acquisition, single-serve cup volumes grew 9% across both existing and new brand partners, consistent with the recovery trajectory we outlined earlier this year.

Our SS&T segment delivered segment adjusted EBITDA of $2 million in the second quarter compared to $3.3 million in the second quarter of 2025. However, on a year-to-date basis, SS&T segment adjusted EBITDA was $8.4 million, up more than 60% versus the $5.2 million generated in the first half of 2025. The variance between quarters is simply a function of shipment timing. SS&T continues to be a strategic capability for the platform. Capital expenditures for the quarter were approximately $6.5 million compared to over $20.5 million in the second quarter of 2025, and we're on pace for estimated capital expenditures in 2026 of approximately $30 million, down from the $160 million in 2024 and $89 million in 2025, which again represents a structural shift in the capital profile of this company.

As previously announced on June 30, we extended the maturity of the vast majority of our Beverage Solutions credit facility to November 2028 and elected to terminate our covenant relief period ahead of schedule, which lowers our borrowing cost. That extension reflects the underlying momentum of the platform and gives us meaningful financial flexibility now that Conway is fully commercialized. At quarter end, we had approximately $73 million of unrestricted cash and revolver availability under our Beverage Solutions credit facility, and we remain fully in compliance with our credit agreement. We ended the second quarter with Beverage Solutions credit agreement secured net leverage of 3.36x, deleveraging slightly from the first quarter.

And finally, in the second quarter, Westrock Coffee generated $20.2 million in free cash flow and is now free cash flow positive for the first half of the year. We told you to expect this inflection in the second half of 2026, but we got there a quarter early. Our second quarter results again demonstrate the earnings power of a platform that is not just built but performing. 5 consecutive quarters of year-over-year consolidated adjusted EBITDA growth, 5 consecutive quarters of sequential deleveraging and now turning free cash flow positive a quarter ahead of schedule. With the heavy investment phase behind us, our focus remains squarely on 3 priorities: selling the remaining installed capacity we built, managing the customer mix to maximize margins and driving operational excellence across all of our plants. The first half of 2026 shows what that focus delivers, and it keeps us firmly on track for our reaffirmed full year 2026 consolidated adjusted EBITDA outlook of $90 million to $100 million.

With that, we'd be happy to open the line for questions.

[Operator Instructions] Our first question will come from Eric Des Lauriers of Craig-Hallum Capital Group.

Congrats on getting free cash flow very significantly ahead of expectations. It's really great to see. Congrats on all the progress here. My first question, just kind of on the pipeline. So on the one hand, you have this state-of-the-art, one-of-a-kind facility in Conway that's creating this demand pull. On the other hand, this disruptive M&A in the industry is also kind of causing somewhat of a push. Customers looking for alternative manufacturing options. Bit of an impossible question here, but how much of your pipeline strength do you kind of attribute to each of those? And I suppose kind of bottom line of my question, do you feel like you're taking share on a net basis? Do you feel like there's this kind of activity of overall changing of manufacturers right now, and just how do you view your sort of competitive dynamics within that?

Sure, Eric, this is Scott. It's a great question. It is -- I think it's probably the most important question in terms of what is the trajectory of the business, not just the mechanical readout of the data, but what's going on at a strategic level. I think it's right on target. As you know, this is a reasonably small industry. Most of us know what other people in the industry are doing, what their capabilities are. Most of us have figured out about where they price things. Most of us have figured out what their -- we can kind of all guesstimate where each other's costs are, et cetera, et cetera. It's the nature of any industry.

We are across the board winning share in every single category that we play in. We have won material share, some of it is in our run rate now and some of it is coming in over the next 12 months in the roast and ground space. We have won material new share, and we alluded to this in some of our prepared comments, in the canning format. We have won -- we continue where we are, what's 4x the growth rate of the overall single-serve cup industry taken as a whole. So, I think if you just -- if you go product by product, we are winning share. We are winning share because we are bringing in customers that want to see and want to get priced on a super competitive, very large-scale, very automated platform. And as they come in and start to work with us on one part of our business, we try to show them everything else that we do. And when we show them that, and we can start to take over issues for them across their book, like their risk management, like some of their green coffee and other supplies, price fixations, and things of that nature so that they get a more predictable pull-through in their own financials.

That's just been a winning combination. And frankly, Will Ford, our COO; and Kyle Newkirk, our Chief Commercial Officer, have lived on the road and lived in the plants with the sales team and with the operational support team, and they have driven momentum unlike -- I mean, I'm not going to take you through the data, but we did take our Board through it. It is the fastest-growing business win set of relationships that I have personally ever seen in my professional career. And it is a tribute to those folks in the sales and operations team who've been delivering for big customers and are getting bigger and bigger customers that are coming in the door behind them. It's -- I'm super proud of them. So thank you for asking the question.

I mean that's highly encouraging to say the least, very exciting to see what else is to come here. You touched on the expanded product portfolio sort of playing a factor in your ability to take share here. You've obviously expanded your own product capabilities quite significantly recently, protein and energy drinks to name 2. Where do you see your overall product capabilities now compared to, say, where you'd like them to be in a year or so? Do you feel like you've sort of completed or rounded out your product offerings? Are there more sort of white space or more opportunities to come here?

So I think that there are incremental opportunities and there are incremental product sets, maybe even as fragmented as down to different types of SKUs that some of our customers would like to see us put in a format line for. We're going to continue to work through that. We've got several that are on the drawing board. We've got several that are in our current plan that we're adding. I think there's 4 new format lines that we're adding this year already in part of our run rate. We've got several others that we're looking at. Essentially, what we're doing is we're saying, look, if somebody wants us to edge out into something new, we will do it, but we need to get an anchor tenant that underwrites the expense of it and underwrites that for our banks because everybody knows we just spent $400 million building the world's largest roast-to-RTD plant. And if we're going to add format factors, we need to have them sold out before we add them. And normally, that has a fairly chilling effect on the market, but we -- literally, we have 8 products right now that are going through that process that I think you'll see us launch in the next 24 months. And our product development team has 2x the number of products under development that we've ever had as a business in our history at its other highest point.

Again, very highly encouraging. Congrats on all the progress. I know it's been a long time coming. Great to see you. Congrats again.

Our next question comes from Matt Smith of Stifel.

Scott, you mentioned in your prepared remarks that the strong results are ahead of even your internal expectations. Maybe you can flesh that out a little more in terms of what's driving the upside? Is it faster execution? Is it more business wins? And maybe more importantly, as we look ahead and we think about running ahead of your projections, what does that imply for EBITDA generation as we get into 2027? Is it incremental EBITDA? Is it faster realization?

Yes. Super question, one that we spend a lot of time on every day. I think at the core, we are slightly ahead of plan, both in the first and second quarter, largely because the uptake of products that we are selling both to traditional customers and to new customers have surprised us a little bit. We have had customers that have moved product and are moving product into us ahead of schedule because I think they're having a good experience. They're getting good product. They're getting great service. They've got a great price. And they tell us they're going to move x and they end up moving x plus 20%. And we can never know that, but we're always glad to have it. So I think that's been one part.

We have some new customers that have been wildly successful in some of the market spaces that we serve where we have signed on with them to do what were originally small projects that grew into medium-sized projects that are turning into very large ones. A lot of that has been coming through, but most of that is still scheduled to come in the back part of the year. So we're trying to figure out exactly where that will land. We're very -- I'll skip over where it's going to settle in the back half of this year because it's both too soon to know and it's too live real time right now. As we guesstimate where we're going to land in '27, we'll do some kind of formal number guidance for you on our next quarter call, but we are more optimistic about where we're going to land than we are fearful. We're also -- we also want to be on the side of being ahead of any of the numbers that we ever give people that finance us ever again. So you've seen us -- we beat in the first half of the year. I've called that out. We're not raising our guidance. We don't have raised guidance in our credit models that we're sharing with our creditors. And frankly, we intend to crush that, but we'll give you numbers as we get later in the year.

I certainly appreciate that, Scott. And maybe as a follow-up, you already touched on it, but with leverage now, call it, in the low 3 range on the Beverage Solutions business and you've achieved the inflection to cash flow positive. Can you talk about the cash priorities as you look ahead? You mentioned some opportunities for incremental investment. Does that benefit from leveraging the existing Conway infrastructure and how you think about the margin structure going forward, if you continue to add capabilities, does that benefit from some of the fixed costs you already have in place at Conway?

Yes. So we actually have started working with our Board on what we actually think at a high level, the free cash flow and the cash available from the business will be over the next 3 or 4 years. And in our Board meeting when we took them through it, about half of them had to sit back in their chair and say, I had no idea. Now that's how dramatic getting a huge factory up and running and full can be. When you can shock your Board of Directors with the free cash flow generation over the next 3 to 5 years. I think it will be good for our shareholders. When we look at what to do with that cash, of course, it's not something that Westrock has in its history. We have been a growth business in an investment phase since we've -- obviously, since we've been public, but for 15 years before we were public, we were in the same cycle. We've got every opportunity that every other business that goes through this kind of transition has, and we're going to be thoughtful about it. There are our CapEx projects that return fabulous incremental returns to us because the infrastructure is in place. We can put new format lines in and the incremental lift of the contribution margin at the line profitability level that comes all the way down through EBITDA. And so these next set of lines, the next 3 to 10 lines that we put in any of the plants that we've got because they're all cash generating. They're all profitable. So everything we do from here is materially helpful all the way down to the EBITDA line and then how we wrestle through that with the balance sheet. We're working through that, frankly, now with theoretical cap structures that we might move to over the next 12 to 18 months, which are super exciting if you're a shareholder. But again, we have to deliver this month and we have to deliver this month, we have to deliver these 4 weeks, and we're going to keep the team focused there.

It is the product portfolio of we can solve multiple needs and we can solve your pricing and a lot of your commodity price variance. We can do all of that for you. And that's unique in this market, and it's just a compelling pitch. And then, hey, there's no better way to grow your business than have happy customers that got what you promised them at the price point and the time frame that you promised them because word gets out and good that gets good on that front.

Appreciate that. Just one quick follow-up, and I'll pass it on. Chris, if you took a snapshot of the business today before you consider new -- the opportunity for new lines, you talked about $30 million of CapEx this year that likely includes some residual spending in Conway. If you look ahead, do you have an estimate for what you think the maintenance capital is for the business as we move out a year before we consider any expansion?

We kind of think of CapEx, I think that -- yes, I've got it. The $30 million that we've got forecast for this year is sort of -- is the total CapEx for the business. And we think about it in terms of keeping that as kind of a go-forward run rate. And probably half of that is going to be maintenance CapEx. It will be a little less than half in the early years because you've got new assets that have been deployed, but that will creep up to be half of that $30 million going forward.

Our next question comes from Sarang Vora of TAG.

Great. And congrats on a good quarter as well as free cash flow generation, pretty big turn in the business. Just thinking about the product portfolio. As you sign up these new customers, just curious, does it make any difference from a profitability standpoint if it's a protein product versus a soda product? Just curious if you can like share now that you have expanded the portfolio, any color on like how these contracts are structured or any margin profile between categories as you think out?

Yes, sure. We look at it holistically at the customer level, Sarang, as I think -- we then double check ourselves by running all of the math through each -- not only the plant level, but through that distribution line, through the full cost of delivery through that plant. And we are doing some things, frankly, with large customers that have had some interesting wrinkles that have been fun to work on and I think have been good solutions for them. So we have 1 or 2 customers, for instance, we were looking at and we said, well, we just don't do that product at that margin traditionally. And traditionally, we would say, do we want to take line capacity for that market growth? We say, well, what's the overall relationship with them? We do this for them as well. We do this for them as well. We cover the account with 3 really good people that, okay, we can leverage that team to cover more products that although we might run them through on an incremental basis in one of the factories at a smaller margin in the aggregate, the account is going up in profitability and the account is actually dragging up the margin of the overall business on a combined basis. And then that gets into, what does it cost us to support the account team and what kind of systems and IT systems do we have to support those people and how much of their time can we get them out of running numbers down to see if they've got the right data and giving them the right data directly out of the foundry system. And looking at that holistically and then looking at the book that we manage for them on the risk management side, we are working with customers to solve their issues. And we're doing some things that traditionally, if we had just looked at I have a plant and I have a margin and I have a product set and I have a margin and I have a volume that I want to make, we might not have done, but the aggregate profile is actually trending up, which you would be fearful that your aggregate profile would trend down. Ours is actually going up on a margin basis.

Well, that's great. And just on the SG&A, I just wanted to mention, I see like you guys have done a tremendous job in managing expenses like in the last few quarters. I would have expected SG&A going up as you ramp up this facility, but it's been very well managed. So can you talk to us about like how we should think about that line item as we think of EBITDA as well? I know gross margins improve as the mix improves, but also on the expenses side, like does it stay stable? Like I know you guys have been talking about the software that you use has been really helpful in managing the cost foundry. But just any color on like how we should think about expenses in general as you ramp up more production?

Well, I was just going to say, I think from -- on the SG&A part, Chris, I'll turn it over to you in 30 seconds. I think that the one key thing to understand about SG&A before you get into where are we in the maturation of the systems and the deployment of new technology, et cetera, which is part 2. Part 1 is you've got to remember, we were building and operating Conway at the same time. And the only way you can do that, while you've got construction going on and then you've got temporary divider walls and you've got manufacturing going on, the only way you can do that is throw people at it. And when you throw people at a manufacturing floor, you're throwing people at the whole kit and caboodle, you're throwing engineering, you're throwing professional services, you're throwing overtime, you're throwing fixed costs that are not directly attributed to a line in the plant.

And we've basically rebuilt the North Carolina coffee plant over the last 3 years, and we've just built this RTD plant. So -- some of it is just winding down all of the construction activity and starting to groom and tend to the garden rather than clearing a forest and trying to plant the garden and it's quieter and quieter is more efficient and cheaper. And so that's a good part. And the rest of it -- what we're seeing with technology so far is if we can improve our insights and we can decrease the period of time that people have to spend looking data up, we have freed the time that they have to go be more productive for our customers. And so kind of worst case, we imagine that our SG&A will kind of stay flat line at a theoretical level. Pledger, I'll turn it over to you and let you say whatever might be more accurate.

No, that's exactly right. I wasn't going to say it nearly as eloquently as you did. But no, I think you're going to see SG&A from a worst-case scenario stay flat. And I think there's going to be ample opportunity over the next several quarters and next year to see it come down.

This concludes the question-and-answer session. I would now like to turn it back to the CEO, Scott Ford, for closing remarks.

Thank you very much. I said it in my prepared remarks, you don't build something like this without people that bet on you and stay with you and stay hooked when things get tough. And when we built the world's largest roaster ready-to-drink facility and then we upsized it while we were building it 3x. And then we delayed the opening to help out a customer or two. We put ourselves and we put our shareholders and we put our creditors in a tough spot. And we stayed hitched as a collective team, we worked through it. We are now operating -- every plant we have is generating free cash flow, and we are on the precipice of becoming a very, very different business than the one that we have been. And it is -- we are in no hurry to enter into a great let's-go-build-another-plant phase of our lives until we get the balance sheet cleared up and direct marked dramatic value creation into the shareholders' pockets who bet on us and stayed with us, and we are laser-focused as we have been on getting this built and serving our customers. We are moving into a phase where we are equally laser-focused on generating value for our shareholders. And I think the next couple of years are going to be the most exciting in Westrock's entire history. And it's had some exciting times. Thank you for staying with us. I appreciate it more than you know. And I look forward to reporting out to you at least on our next set of quarterly calls if we don't have some interesting fun things to roll out for you in between some of them. So thanks very much. Have a great day.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Hello, and welcome to Westrock Coffee Company's First Quarter 2026 Earnings Conference Call. My name is Rory. I'll be coordinating your call today. Following prepared remarks, we will open up the call to your questions. Instructions will be given at that time.

I'll now hand the call over to Jauan Arnold with Westrock Coffee.

Thank you, and welcome to Westrock Coffee Company's First Quarter 2026 Earnings Conference Call. Today's call is being recorded. With us are Mr. Scott Ford, Co-Founder and Chief Executive Officer; and Mr. Chris Pledger, Chief Financial Officer. By now, everyone should have access to the company's first quarter earnings release issued earlier today. This information is available on the Investor Relations section of Westrock Coffee Company's website at investors.westrockcoffee.com.

Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also, discussions during the call will use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release provide reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures.

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

Thank you, Jauan. Good afternoon, everyone. Thanks for joining us. I am pleased to report that our first quarter of '26 delivered strong results across every dimension of our business, marking our fourth consecutive quarter of year-over-year consolidated adjusted EBITDA growth and what I believe is the most important inflection point in Westrock Coffee's history. For the first time, we are reporting results as a fully operational integrated beverage platform with construction behind us, all lines running and the full enterprise now generating operating income.

On the numbers, Q1 consolidated adjusted EBITDA was $26 million, more than tripling year-over-year. Net sales were $308.8 million, up 44%. We went from a $13 million operating loss in Q1 of last year to a $3.2 million operating profit this quarter, and our secured net leverage ratio improved to 3.45x, down 40 basis points from year-end. Chris will take you through the details, but the trajectory speaks for itself.

The real story this quarter is what's happening commercially. The platform we spent 3 years building is now attracting exactly the kind of demand we envisioned. Brands coming to us not for a single SKU, but for a full spectrum beverage partnership across multiple categories. At Conway, all 5 production lines are fully operational, cans, glass, multi-serve bottles, and bulk extract. With capital expenditure projects now complete, Conway has swung to operating cash flow positive. As volumes continue to build through the balance of this year and next, we expect the facility to become an increasingly meaningful contributor to segment profitability.

Commercially, we are continuing to make progress with current and new potential brand partners across the product portfolio from tea and lemonade-based refreshers to coffee RTD beverages to packaged coffee to single-serve cups, with energy drinks, high-protein drinks, and seltzers in various stages of product development and commercialization. In single-serve specifically, you'll recall the departure of a large customer in Q4 of '25 due to industry consolidation. That disruption is now fully behind us. We are seeing strong inbound interest from multiple customers, and we expect some of this volume to begin arriving in late '26 with full replacement targeted by the end of '27.

On Palantir, our partnership continues to deepen, and I am convinced this relationship remains underappreciated by the market. Their foundry operating system is empowering completely new ways of work. From improving efficiencies in our manufacturing, logistics, planning, procurement to the automation of workflows throughout the company, we continue to believe that the upside to this body of work is well beyond anything approaching historical normality from traditional system upgrade efforts. We are reaffirming our '26 consolidated adjusted EBITDA outlook of $90 million to $100 million. Q1's 2026 beat plan and posted strong year-over-year growth. The pipeline is the healthiest by far that it's ever been and momentum is building.

To close, the prior 3 years were about building the platform. This year is about leveraging it. We're generating operating income. We're deleveraging our balance sheet. Conway is contributing, and we have a deep pipeline of customers who want to produce with us across an expanding array of categories. This is the business model working. I want to thank our entire team from the plant floors in Concord, Conway, Collins, and Clark, to our sourcing offices around the world to our systems and corporate teams. These results are theirs. I also want to thank our shareholders who had the vision to invest in what we were building and the conviction to hold their shares through 3 years of heavy investment to get here. We appreciate your patience, and we intend to keep rewarding it. We are one of the very few platforms in North America that can formulate, fill, and ship across cans, glass, bottles and single-serve formats from a single integrated footprint and brand owners are increasingly coming to us precisely because of that.

With that, I'll turn it over to Chris Pledger, our CFO, for the financial details. Chris?

Thank you, Scott, and good afternoon, everyone. As Scott noted, we just completed the first quarter in which our Conway extract and RTD facility is fully operational and contributing at scale, and the results speak for themselves. Consolidated net sales increased 44% to approximately $309 million. Our reported net loss of $8.5 million narrowed significantly from the $27.2 million net loss incurred in the first quarter of 2025, and we went from an operating loss of $13.1 million in the first quarter of last year to a $3.2 million operating profit this quarter. This improvement reflects operating leverage now visible in every line of the P&L as Conway start-up costs diminish and volume scales. And finally, consolidated adjusted EBITDA was $26 million, which reflects another record quarter for Westrock, increasing over 3x compared to consolidated adjusted EBITDA generated in the first quarter of 2025.

In Beverage Solutions, first quarter segment adjusted EBITDA was $23.3 million, up 143% versus 2025. This result includes a one-time gain of approximately $4.6 million, which represents the final payment we received under the single-serve cup contract with a customer who was acquired by a competitor earlier this year. But even excluding this item, Beverage Solutions adjusted EBITDA was approximately $18.6 million, which is up 95% versus the first quarter of 2025. Growth in Beverage Solutions was driven by the continued ramp of our RTD can, glass and multi-serve bottle production lines in Conway, a 31% increase in single-serve cup volumes across both existing and new brand partners, 4% growth in our packaged coffee business and improved fixed cost absorption across the manufacturing footprint.

Our SS&T segment delivered segment adjusted EBITDA of $6.5 million in the first quarter compared to $1.9 million in the first quarter of 2025. SS&T continues to be a strategic capability for the platform, enabling us to offer brand owners verified traceable supply at the scale modern beverage platforms require.

Capital expenditures for the quarter were approximately $7 million compared to over $41 million of CapEx for the first quarter of 2025. As I mentioned on our last call, we expect a downward trajectory in the capital intensity of the business now that Conway is fully commercialized. That trajectory from $160 million in 2024 to $89 million in 2025 to an expected $30 million in 2026 represents a structural shift in the capital profile of the company. Maintenance capital is now our baseline as our investment phase is behind us.

At quarter end, we had approximately $63 million of unrestricted cash and revolver availability under our Beverage Solutions credit facility, and we remain in full compliance with our credit agreement. We ended the first quarter with Beverage Solutions net secured leverage of 3.45x, down from 3.85x at year-end, which is in line with our expectations and meaningfully ahead of our covenant requirements. And importantly, we remain on track to be free cash flow positive in the second half of this year.

Our first quarter results demonstrate the earnings power of the platform as we continue to grow into the capacity we've built. We continue to convert our commercial pipeline at pace and the fact that capacity is now installed, and operating has materially shortened our sales cycle with new brand partners. Our focus is squarely on commercializing the installed capacity we've built and converting our pipeline into long-term partnerships.

With that, we'd be happy to open the line for questions.

[Operator Instructions] Our first question comes from the line of Eric Des Lauriers of Craig-Hallum Group.

Congrats on the amazing execution over the past several years and the progress, especially seen in Q1 here, a great job. So, my first question here, it seems like, I mean, pretty much everything is going in the right direction for you guys. All the comments are positive in terms of all the lines being produced. You have more volumes coming online throughout the year. So, my real question here is just kind of on the potential variability around timing of the ramp in those volumes. Is there much, if any, variability in that? Or is that all pretty much squared away and sort of spoken for at this point? Just kind of wondering the ability for things to ramp either faster or slower this year than currently anticipated.

First of all, thank you for your very gracious comment. I think -- Eric, this is Scott. I think that the forecast that we've given for '26 and then the plans that we're working on '27 are for the most part at this juncture contracted in. So that doesn't mean everything will land right when we think it will land. But our confidence that we'll be able to make it at the margin that we expect is very high now that we've been running the plant and running several of these lines for 12 to 18 months. We've got our per unit economics right. We run those at scale. We know where those land. So, we're actually pretty comfortable with the trajectory that we've got.

And then we've got -- we do have one interesting thing beyond just the contracts that are in and the conversations that we're having. We are seeing on the potential upside, which is -- I'm not trying to sell you on that it will happen. But we are seeing a number of brands coming around and taking a look at multiple products, and we are seeing engagement to close and commitment for production in 4- to 6-month windows as opposed to 2- to 4-year windows since Conway turned on and people could actually come walk through it, have us make a sample of their product, have us tweak it, et cetera, et cetera. And then it's something about the fact they can walk through it and see it has changed the pace at which brands are closing with us. So, I would say we've got some upside to that. And I think you see more of that in '27, certainly at this point than '26. Chris, what else would you...

No, I think that's exactly right. I think that in terms of what we have locked in for '26, I think there's some potential upside to that, but it's largely contracted and pulling through the system as we expect. '27, there's the best sales pipeline that we've had. So, I expect to continue to be able to grow through the year, and we'll see that in our '27 numbers.

Awesome. That's very helpful. I appreciate that. And no real surprises there but certainly encouraging on the expedited pace of brands closing. It's nice to hear. On to the Palantir commentary, I would say this is like this, at least from my perspective, is a bit more of like a qualitative thing for me. Certainly, nice to hear, and we'll sort of like await more results there. It's tough for me to sort of predict that.

So, I'm wondering if you can help us understand, as we look out to '28, '29, et cetera, where might we see the impact of this Palantir relationship progressing? Would this be on -- you mentioned procurement and operations. I mean I'm kind of just imagining improved margins overall. But is there anything else that we should sort of be on the lookout for over the next couple of years as this Palantir relationship potentially has increasing impact?

Super question. Let me take a run at it this way. And I was not the first person to the party on Palantir and what they could mean for our business. That came out of another group of people here in the business that did the research on it, started working on it 3 years ago, and I have been a follower, not a leader on this. But I have -- there's nothing like a convert or spreading the word. And as a bit of a somewhat reluctant convert, if you will, the more that we dig into this, the more I realize that the -- what I read and what we see talked about in the AI world and what Palantir's operating system actually is, I can barely recognize the reality of what they're doing on the ground with the talk that goes on around AI.

I don't know any -- so you're talking to a guy who's not on social media, doesn't know anything about it, doesn't care to know anything about it. I was full-grown when that came out. I skipped all of that. I thought AI and the chatbot and having conversations with an AI system was of the same ilk. When I see though, is the reality that Palantir creates a walled garden, if you will, where every piece of data in our network across all the systems and all of the handoffs and all of the spreadsheets and all of the memos and the hundreds of hours a week that we spend as individuals trying to explain and connect information from one system to another to another to then even be able to guess what our profitability is, let alone audit it.

Palantir's Foundry system contains all of that information and drains the need for all of those systems and all of that activity. We're talking tens of millions of dollars of benefit over the next 3 to 5 years annually in a business our size at only $1.3 billion run rate. I don't think the world is even writing about the impact of -- it's a little bit like when Microsoft came out. You all are probably too young. I remember when it came out. I remember an operating system that brought about a cohesive desktop experience where you could get to a financial analysis and you could get to a word document and you could get to e-mail. That was unheard of. Well, it rebuilt the office in the enterprise -- rebuilt office work across the world. I'm not so sure that the Foundry system isn't going to rebuild in the same fashion, the commercial systems of corporations around the world over the next 10 to 15 years. And we, I was a doubter, and I may be the biggest believer walking at this juncture.

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

Congratulations on a great quarter. My question is on the plant utilization, capacity utilization. I mean the demand is just very, very strong. The '26 pipeline seems full. '27, you're already taking orders. I'm curious if you can share color on where the plant or capacity utilization is today and how it ramps up in like '27? And is there room for '28? I'm just curious to know like number of shifts. Any color you can share on how the plant or the capacity is being utilized?

Yes. At a high level, Sarang, as we said last quarter, we are not going to break that kind of detail out. Our competitors don't break it out. And I don't think it behooves -- it's not going to change the story for a Westrock investor to know the percentage utilization of a specific line versus quarter-over-quarter. So, we broke that out during the construction phase so people can see where we are.

I will say this: We have well in excess of an additional $100 million of EBITDA for sale in lines that we have capacity to sell against right now. So, whether that takes us 6 months, 12 months, or 18 months, then we could expand it from there with small incremental CapEx additions within the footprint that we've built and that we have rebuilt in the plants that we've got running today.

No, that's great. That's exactly what I was trying to ask because we do get asked about like what is the long-term potential coming out of Conway. And one way or the other, I feel like you answered the potential of that business. So that was good to hear.

The second question we get a lot is on the coffee prices. And I understand the dynamics that you do end up passing the increases as well as the decreases to the customer. But can you walk us through how the lower coffee prices over '26 and maybe '27 kind of reflects on part of your businesses?

Yes. Sarang, this is Chris. I think from -- in '25, I mean, '25 was sort of, I guess, we experienced in the coffee business, historically high C price throughout '25. That coffee still continues to flow through our P&L, although as prices have come down towards the back part of last year and into the first part of this year, we're starting to get lower cost coffee that comes through. And that's a passthrough for us, as we've talked about on prior calls. And what that ends up doing is that it will end up -- your net sales will be higher because you've got a higher cost of coffee flowing through your P&L and your gross profit -- dollar gross profit will stay the same on an apples-to-apples basis.

And so, while your margins might compress, your absolute dollar growth happens on a dollar basis. And so, when we -- that's when we talk about look at the year-over-year growth in gross profit, look at the year-over-year growth in adjusted EBITDA on a dollar basis to really see the earnings power of the business. If you look at this year, gross profit in the first quarter of this year was $46 million. That's a 57% increase year-over-year. That's the value of the platform that we've created, cutting out the noise of a C price movement year-over-year.

That's great. And my final question is on the outlook. Can you share any puts and takes we should be mindful of? Very strong first quarter, you didn't raise the annual. But I'm just curious to know anything that we should be mindful that you're watching in terms of guidance, like higher gas prices. I know historically, they have impacted your business or the consumer, the lower end or the gas station consumer. So just curious to know like anything we should be mindful or watchful as we look out at the guidance for the year?

You kind of answered your own question. I will say the first quarter was exceptionally strong, and it held up strong through all of our different -- our customer segments. As you have continued high gas prices, that's going to affect things like C-store channels and travel center customers. But the way we're built now where we've grown our retail packaging, we've grown our at-home consumption or products targeted towards at-home consumption. We are much better positioned to withstand volatility that results from a C-store channel because of high gas prices than we were when we kind of went through this 2 to 3 years ago. And so that's certainly something that we watch.

Obviously, $6 gas is nobody's friend when it comes to selling products, whether it's coffee or anything else you might find in an away-from-home environment. But we'll continue to watch that, but we like where we are and how we've diversified risks around the business, and we expect to continue to be able to deliver as we have.

[Operator Instructions] I'm showing no further questions at this time. I would now like to turn the call back to Scott Ford for closing remarks.

All right. Well, fellas, thanks for hopping on. We appreciate it. Super proud of the team's effort. I'm really appreciative of the shareholder base that has stayed with us. About 70% of the shares are held by people that believed in the story of what we were doing, who were willing to put the money up to see construction go into this industry. We are excited about the fact that the construction phase is complete. I'm really appreciative of the shareholders who stayed with us. We've got about 30% of the float outstanding that's short. I know that not everybody is with us on this, but that's okay. Life works its way through.

But we are looking forward to a good remaining portion of the year. And then we think '27 is looking actually terrific because the volumes we're booking now are starting to be placed in '27. And we kind of outkicked our coverage in terms of what we expected. We're going to do some work through the back part of this year to make sure we get a good number on it. But things are going really well as we come out of construction and into filling the plants. And I just want to say thank you to everybody who has stayed with us through the thick and the thin of construction phase. And all have a great evening. Thanks so much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Hello, and welcome to Westrock Coffee Company's Fourth Quarter 2025 Earnings Conference Call. My name is Lisa, I'll be coordinating your call today. [Operator Instructions].

I'll now turn the call over to Jauan Arnold with WestRock Coffee.

Thank you, and welcome to Westrock Coffee Company's Fourth Quarter 2025 Earnings Conference Call. Today's call is being recorded. With us are Mr. Scott Ford, Co-Founder and Chief Executive Officer; and Mr. Chris Pledger, Chief Financial Officer.

By now, everyone should have access to the company's fourth quarter earnings release issued earlier today. This information is available on the Investor Relations section of Westrock Coffee Company's website at investors.westrockcoffee.com. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and our filings with the SEC for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

All discussions during the call will use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release provide reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures.

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

Thank you, Jauan. Good afternoon, everyone. Thanks for joining us. We are pleased to announce today that we produced record-breaking fourth quarter and full year '25 results, driven by continued new customer volume additions, successful scale-up of our integrated platform and disciplined cost and operational execution across every part of our business. These results reflect the strength of our customer-centered broad portfolio model and the tremendous value our strategic investments are now delivering.

On a regular SEC basis, with no construction activity add-backs, our 2025 consolidated adjusted EBITDA was $69.7 million, up #48% year-over-year. This performance sets up another strong year of EBITDA expansion in '26, where we estimate our EBITDA will be up another 30% to 45% this year. Dropping down 1 additional layer and importantly, we also outperformed our estimated deleveraging goals. In spite of '25 being the final CapEx year on the build-out of the 2 new plants we built in Conway, Arkansas. At year-end '25, our Beverage Solutions secured net leverage ratio stood at only 3.9x, a meaningful beat to our 4.5x target. The fact that we have now switched from construction mode into regular daily operations, which simply require maintenance CapEx is a pivotal moment in our company's history as we are scheduled to become fully free cash flow positive after all CapEx and debt service in 2026.

Strategically, we remain firmly on track toward our goal of becoming the premier integrated strategic supplier for the preeminent coffee tea energy and now high protein beverage brands globally. To this end, we have 2 important updates to share with you today. First, we are pleased to announce that we have completed the product development and commercialization processes for our first high-protein beverage for a leading CPG brand.

We currently expect production to begin this fall. And secondly, that with the recently completed water and tank farm upgrades, we are now fully capable of making not only milk-based RTD coffee and tea beverages and extracts but all of the traditional canned energy drinks as well. And by this fall, we expect to be in production with carbonated water, seltzer and soda customers who are seeking a partner with the scaled product development commercialization, production finished packaging format and distribution partners that our facilities afford.

The story of 2025 is our success transition from plant construction to full-scale operations. We are now focused squarely on driving growth through expanded customer volumes while delivering disciplined expense management and operational efficiencies that accelerate EBITDA expansion. The strong volume growth across both our beverage solutions and SS&T segments, combined with cost controls across our core business units, drive and process, data intelligence and risk mitigation insights via our ongoing relationship with Palantir, were once again the primary drivers of this quarter's and the full year earnings beat.

I continue to believe that this now 3-year relationship is an underappreciated component of our operational risk management and financial success. Our combined West and Palantir Systems team is some 10x more effective in multiple ways of measuring than we were just 3 years ago, while also being 30% to 40% smaller than when we began. You may recall that last quarter, we noted an uncertainty around 1 large single-serve customer that was involved in an M&A transaction. That activity is now completely behind us. The customer moved out entirely during the fourth quarter of '25.

We have numerous customers in our pipeline that should fully refill that single-serve capacity by 2027. But this transaction is the source of our '26 guidance being up only 30% to 45% when we originally expected it to be up closer to 100. We tip our hat to a worthy competitor. Finally, we remain convinced that by becoming the lead innovation and development partner, dependable and sustainable sourcing resource and low-cost processing and packaging outsourcer for the world's lead beverage brands. We enable them to capitalize on their brand equity positions in step with the movements of their consumers.

Our record full year results demonstrate growth brought about from our continued incremental delivery against this goal and our expansion into the full lineup of energy and carbonated drinks made possible by the final upgrades to our new Conway facility enables us to continue to pursue this strategy with vigor in the years to come. With that, I'm now going to turn the call over to Chris Pledger, our CFO, who will explain all of these developments in greater detail. Chris?

Thank you, Scott, and good afternoon, everyone. As Scott mentioned, 2025 was an exceptional year for WestRock Coffee. We delivered results that exceeded our outlook across each of our key financial metrics. Consolidated adjusted EBITDA for fiscal 2025 were $69.7 million, exceeding our previously communicated range of $60 million to $65 million and representing 48% year-over-year growth. At the segment level, Beverage Solutions segment adjusted EBITDA was $68.5 million, above the high end of our outlook range of $63 million to $68 million and SS&T segment adjusted EBITDA was $16.5 million, also exceeding our outlook range of $14 million to $16 million.

We also ended the year with a Beverage Solutions secured net leverage ratio of 3.85x, significantly better than the 4.5x level contemplated in our outlook. These results reflect continued improvement in operating performance throughout the year. Over the past 3 years, we have invested approximately $360 million in CapEx to build and commercialize our Conway extract and RTD facility, that investment phase is now complete.

As we move into 2026, our story shifts. With Conway fully commercialized and all production capabilities operating as designed, our focus now is straightforward, drive volume, optimize customer mix and maximize margin across the platform. With that context, I'll walk you through our full year results. For the full year consolidated net sales increased 40% of 2024. Our reported net loss of $90.4 million reflects the continued investment and scale up of Conway throughout 2025. Consolidated adjusted EBITDA was $69.7 million, up 48% year-over-year, with the fourth quarter representing our strongest order at $23 million, up 72% versus the prior year period.

In Beverage Solutions, full year segment adjusted EBITDA was $68.5 million, up 28% versus 2024. Growth was driven by the launch of the RTD can line midyear and continued ramp of multi-serve bottle volumes, a 29% increase in single-serve cut volumes across both legacy and new customers and a 6% increase in core roast and ground coffee volumes. Equally important was the execution of our supply chain management team, which navigated historically high commodity coffee prices and tariff volatility effectively throughout the year. Full year Beverage Solutions EBITDA included approximately $17.4 million of short-term incentive compensation expense that was not incurred in 2024 as performance targets were not met in the prior year. As we look at our margin profile, it's important to understand the impact of historically elevated coffee commodity prices on our reported results.

Because coffee is a pass-through cost in our business, rising commodity prices inflate our top line revenue, while the absolute dollar margin we earn on that volume remains consistent. The effect is purely mathematical. When the denominator expands but the dollar profit stays the same, our reported margins compress. You can see this in our 2025 results, where revenue grew nearly 40% year-over-year, while gross profit dollars held roughly flat. This is not a reflection of deteriorating economics in our business. It's the natural mechanics that pass through pricing in an elevated commodity environment.

When coffee prices normalize, you'll see the inverse effect, revenue contracts, but because our dollar margins are stable, our reported margin percentages will expand. We encourage investors to focus on absolute dollar profitability and EBITDA growth as the more meaningful indicators of underlying health and trajectory of our business.

Our SS&T segment, we were able to capitalize on volatility in coffee prices, delivering segment adjusted EBITDA of $16.5 million in 2025, more than doubling from $6.4 million in 2024. Capital expenditures across the business were approximately $89 million in 2025, down from approximately $160 million in 2024. For 2026, we expect total capital expenditure of approximately $30 million, the majority of which relates to routine maintenance capital. That is a trajectory from $160 million to $89 million to the $30 million over 3 years. With Conway fully commercialized, 2025 is our final year of elevated capital intensity.

This represents a structural shift in the capital profile of the company going forward. At the end of the year, we had approximately $105 million of unrestricted cash and revolver availability under our Beverage Solutions credit facility, and we remain in full compliance with our credit agreement. We ended 2025 with Beverage Solutions secured net leverage of 3.85x. Turning to 2026. We expect consolidated adjusted EBITDA of between $90 million and $100 million, representing 29% to 44% year-over-year growth. While we expect 2026 to present a challenging macroeconomic and geopolitical environment, the completion of the Conway extract and RTD facility, combined with continued supply chain optimization positions us well for another year of solid operating performance.

From a balance sheet perspective, we expect leverage in 2026 to remain relatively flat to slightly improved as we absorb new volumes in Conway start-up costs with more meaningful deleveraging beginning in 2027 as volumes normalize. Importantly, with capital expenditures stepping down to approximately $30 million and consolidated adjusted EBITDA continuing to grow, we expect to be free cash flow positive in the second half of 2026, a significant milestone for a company that's been a heavy investment phase for the past 3 years.

In prior periods, we also provided segment adjusted EBITDA guidance for Beverage Solutions and SS&T as well as beverage solutions secured net leverage guidance. We decided not to continue providing these additional guidance metrics. As business enters a more streamlined operating phase, we believe a single consolidated metric better reflects how we manage the business and gives investors the clearest view of our progress. With the Conway extract and RTD facility now complete, our story is simpler. Execute against our sales pipeline, optimize customer mix and produce the volumes at the expected margins, and that's just what we intend to do.

2025 was about building the platform, 2026 is about leveraging it. With that, I'd be happy to open the line for questions.

[Operator Instructions] Our first question today will be coming from the line of Todd Brooks of Benchmark.

A couple of questions here. I know we're talking about 29% to 44% EBITDA growth in the guidance for 2026. Can you size up maybe the EBITDA contribution of the customer that came off the platform on the single-serve side in '25, so that we really get a sense of what the growth rate is apples- for-apples because I know we're not looking until '27 to replace those single-serve revenues from the departed customer? And I have a follow-up, too.

Yes. We're going to make sure we understood your question. Yes. So the annualized run rate was about $30 million that we expected in '26. We had about a 0.5 year's performance in '25. That capacity when we refill it would be worth about that incremental over the guidance that we've given you for '26 at this point because we don't have any of that refilled in our guidance for '26. Does that all together? I think those are the right pieces, Todd.

Okay. Great. So optically, if we think about ex that 1 customer, $49 million in EBITDA and '25 going to $90 million to $100 million for kind of normalized year-over-year growth?

Correct.

Okay. Great. And then the second one, and I know increasingly, Scott, you keep talking about the partnership with Palantir, I know you talked about being 3 years into it and some of the efficiencies that have come from it. But how far into the process are you of levering their expertise? And how iterative is the process? So does it keep getting stronger, better, more effective, the more time that you're working with them?

Yes, sure. So we started out with our basic trade and logistics in our trade and logistics platform. Then had such a good experience with them. And we literally iterate with them daily, and there's weekly reviews, and it's -- they are maniacal communicators both the team that works here and that and their counterparts at Palantir. I sit on a weekly update just to make sure that I'm trying to keep my finger on the pulse of it. So we started in the trade and logistics platform. We then moved into the operational platform. And what we came to appreciate was that they are capable of delivering out of the software agents and engineering that they do. They are capable of delivering essentially every function that every SaaS software business that we pay somebody to for the license and then pay another group of people to maintain and to connect.

They're able to do all of that centrally as part of the standard engineering package that they've been working with. So we work with them through our trade and logistics platform. We work -- so that's our entire procurement team. We work with them through the manufacturing floor where they've gone in and automated and put in cameras and counters and measures on every piece of the equipment that run through our factories. And at this juncture, we are now turning the sites on every Software as a Service business that we do business with, frankly. It is unbelievable how much more efficient it is than what you have always in my 40-year career, had to close together through various software vendors.

Okay. Great. Scott. So would you say most of the kind of implementation opportunity is behind you and now it's cost extraction for what they can replace from other services? Or is there still more fruit to come from volunteer partnership?

I have learned not to put a limit on it. So I'm going to say I don't know, but I remain highly optimistic about not only what we are doing, but the fruits that will come from that and then what we will turn over next.

And for our next question is coming from the line of Eric Des Lauriers of Craig-Hallum.

Congrats on the strong end of the year here. My first question is just kind of drilling into the potential to win back some customers in the single-serve cup space now that, that large customer has moved on. I think you mentioned that you'd like to have that sort of refilled sometime in 2027. Can you just help us understand a bit more of the pacing or how you're thinking about it? Should we think this is sort of these volumes is being replaced entering 2027? Or sort of by the end of '27, you'll be able to replace these in your estimation?

Sure. We actually expect some of them might actually show up in late '26. My guess is that we will have all of it running by late '27. So let's take a phased-in approach view here. And it's a combination of retail brands, consumer brands, regional brands essentially like the customer mix that we have today. But the big win and loss hats off to our competitor being aggressive about getting them back. But it is lit the fire that there is a way to live on other infrastructures than the predominant one. And I don't think they can buy them all. So we're going to give them a chance to sort it all out.

Okay. That's helpful. And then One of the things that you've kind of highlighted is in addition to driving volume, which is you sort of have a clear path to doing that. The other, I guess, main aspect of margin enhancement is optimizing product mix. Could you just expand on that a bit? I know you mentioned new high-protein offerings coming online later this year. Can you just kind of give us a high level of which products are you looking to increase make up to drive margin? And just overall, what should we think of when we hear you referring to optimizing product mix?

Sure. Well, some of it -- and this is in Pledger's remarks. Some of it is just maturation of turning something on and getting it all running and getting your shifts right and getting all your processes right. And that is a constant slog and the ops and logistics team have done a fabulous job of doing that work all year long and the systems team. But as you've talked about new products, we're actually very excited about that because this plant is built primarily as an RTD plant and handles milk and has retort systems. And you would not build that kind of, let's call that a battle tank or a small skirmish of making soda water or sodas that just need to be -- they're sterile and need to be lightly heated.

But that doesn't mean that we can't do them. And through a little bit of reengineering in the water system, and in the heating system, we can actually now -- if you come to us and say, I have -- I want to launch an RTD brand, I want to launch traditional energy beverages, I want to launch sparkling sodas, or I want to move my capacities around, and I want to bring in another vendor, the facility is now set up to be able to do all of that. And that creates more demand, which creates more options for us to fill and cover fixed costs while we're trying to get our margins tighter and our fixed costs down through just honing the operation.

[Operator Instructions] And our next question is coming from the line of Sarang Vora of Telsey Group.

Congrats on a great quarter. and it's good to see the growth in EBITDA and sales ahead. Just closing in on the construction part of the facility, can you remind us what is now fully operational at the Conway plant? My understanding is that there were 2 can lines, on multiserve, one glass line. Now that you are done with the construction phase, can you help us close the loop on like what's up and running now at convey?

Yes. The -- yes, that's a short answer. They're all up and running.

Awesome. So following up on that, can you help us understand how the capacity utilization is progressing as you are I think you started this year -- last year, middle of last year, it started operating. So can you help us how the -- just as a whole convey, how is the capacity utilization in like '25? How does it look like in '26 from where you are seeing it right? And then any color on like where it kind of ends up around '27 as you onboard some customers that one of the rep. And just curious to know like how it's ramping up.

Sure. We're not going to get into the split outs. We broke out a lot of information when we were in the construction phase so that people could follow along and make what we thought they need ample information to be able to assess where we were in the construction process. And we broke all that out last year in detail, so that people could follow along. This year, as you saw in Chris' comments, a, we don't think it's required anymore for you to understand where we are. And b, we have seen several things that we've shared with public while we went through this build out.

We've seen that used in targeted customer contacts. And -- so we're going to lighten up on what we share around all of that because it's not good for us when it's beyond what we're required to put out. But I will say this, what we generate through those plants and the utilization in '25 will be higher in '26, and we are scheduled to be busting the same in '27.

Great. One question on the margin and kind of intuitively look that both [indiscernible] and SG&A both [indiscernible] when you look at the EBITDA guidance. Is that a fair way to think is one bigger than other? Is there -- is gross margin [indiscernible] if you can share any color on between cost and the gross margin, primarily helped by mix, if you can share any color over there?

Sarang, can you repeat the question? It was coming in, you're breaking up as the question was coming through, so I didn't quite get it.

So I'll give it simple. Can you help us understand how the mix between gross margin and cost leverage helps your EBITDA for 2026? Is one bigger than other or something just curious.

No. I think -- I mean what you're going to see in 2026 is from an overall like SG&A cost, you're going to actually see that from '25 to '26 staying flat to going down. But you're going to see as the plant ramps up, you're not going to have as much of the benefit that you got in terms of subscale add-backs. So on an absolute dollar basis, that number might go up a little bit, but not quantum too big.

What I think you're going to really be able to see as we continue to layer on the volumes, as Scott was saying, you're really going to see us how we're able to leverage the platform from starting out really the medium can or the large can on in the middle of last year, getting the glass and the second can line up in December with everything on the leverage of being able to run more and more and more volume through the facility without having to add on additional costs in order to be able to do it. That's where you're really going to see the economics and the EBITDA growth that we've talked about in terms generating '26.

Thank you. That does conclude today's Q&A session. I would like to turn the call back over to Scott Ford for closing remarks. Please go ahead.

Well, I'd just like to thank everybody. It's been a long struggle to build 2 plants from scratch and fill them up. We have tried to be as transparent as we could be along the process. And at this juncture, we're going to call construction over, and we're going to go back to being a normal business, trying to fill our plants and lower our cost and drive EBITDA, which will drive refinancing and all sorts of other good funds. So thanks for joining us and look forward to talking to you in 90 days.

Thank you all for participating in today's conference call. This does conclude today's program. You may all disconnect.

Good day, and thank you for standing by. Welcome to the Westrock Coffee Company Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Robert Mounger, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to Westrock Coffee Company's Third Quarter 2025 Earnings Conference Call. Today's call is being recorded.

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

By now, you should have access to the company's third quarter earnings release issued earlier today. This information is available on the Investor Relations section of Westrock Coffee Company's website at investors.westrockcoffee.com. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other SEC filings for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements made today.

All discussions during the call will use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release provide reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures.

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

Thank you, Robert. Good afternoon, everyone. Thanks for joining us. We're pleased to announce today that for the second quarter in a row, we produced record-breaking quarterly results, driven by continued new customer volume additions and cost management execution. We believe these results reflect the strength of our customer-centered model and the value to our customers of the strategic investments we have made in both the physical expansion of our facility and the systems that allow us to manage them more effectively.

We remain on track toward our goal of becoming the premier integrated, strategic supplier to the pre-eminent coffee, tea and energy beverage brands globally. And now due to great customer interest, we're excited to be adding a new body of work focused on ultra-filtered milk-based, high-protein products as well.

We ended the third quarter with the combination of our Beverage Solutions and SS&T Adjusted EBITDA of $26.2 million, up 14% over the second quarter and up 84% over the same quarter last year. These results bring the combined Segment Adjusted EBITDA of our first 3 quarters of '25 to $60.7 million, up 55% over the same period in the prior year, leaving us on target within our original full year guidance range for the year 2025.

The growing volumes at both our new single-serve cup and extract to RTD plants in Conway, Arkansas, combined with cost controls across our core business units derived from process, data intelligence and risk mitigation insights via our ongoing relationship with Palantir continued once again this quarter to be the key drivers of this quarter's earnings beat.

Importantly, on key packaging lines in Conway, we have already reached production levels nearing 80% of our original planned capacity, and we have added significant water and tank farm capacity to the plant to enable future lines to be quickly added. We also completed the installation of our second can line, which should start commercial production in Q1 of next year.

You may recall that last quarter, we gave you some initial data on our second single-serve cup manufacturing facility located in the Conway complex, the start-up of which went seamlessly. The cup volume produced through these new lines was a key contributor to our profitability this quarter. Chris will have an important word on this topic in just a few moments.

We remain convinced that by becoming the lead innovation and development partner, dependable and sustainable sourcing resource and low-cost processing and packaging outsourcer for the world's leading beverage brand, we enable them to capitalize on their brand equity position in step with the movements of their consumers.

Our record quarterly results demonstrate growth brought about from our delivery as this leading integrated platform in the category, delivery that enhances the value of our services to our customers, contributes to the growth of the careers of our teammates, manifests as pricing fairness on the ground for smallholder farmers in the developing world and rewards our shareholders. These continue to be important things worthy of our greatest efforts.

I believe that our customers and our competitors are keenly aware of the market share shifts that we are beginning to cause as these new plants scale operationally. We have been successful at winning our customers' trust because we have spent 3 years over $350 million in capital and the time of 1,400 highly skilled development and manufacturing professionals to provide them a set of products and services that they can count on for quality, convenience, innovation and price.

That said, I also believe that historically high coffee prices and major tariffs on coffee imports, coupled with the 2 extra quarters it took us to reach scale production levels in our Conway plant has given some investors pause. Therefore, I am thrilled to share with you today the news of a new $30 million infusion of capital into our business from our traditional core shareholder group, which coupled with the realignment of our debt covenants with our growth in Conway clears the way for us to completely focus all of our resources on operational delivery and driving results for our customers and stockholders.

My thanks to the entire Westrock team who steadfastly go the extra mile to ensure our customers are positioned to win in their markets daily. Our Board and core shareholders who are simply relentless in their support of our mission and to our bank syndicate members led by Wells Fargo, Bank of America, Rabobank, Truist and others who have been the consummate engaged and encouraging professionals throughout the entire build-out and start-up phases of what is now the largest and I believe, best facility of its type anywhere in the world.

I'm now going to turn the call over to Chris Pledger, our CFO, who will explain all of these developments and more in greater detail. Chris?

Thank you, Scott, and good afternoon, everyone. Before I go into the details of the capital markets activity we announced today, I'll first cover the results of our third quarter. As Scott mentioned, we delivered an exceptional quarter, highlighted by year-over-year volume growth in our roast and ground, single-serve and flavors, extracts and ingredients platforms and continued supply chain optimization and disciplined expense management.

Our Sustainable Sourcing & Traceability segment also posted another strong quarter. On a consolidated basis, net sales increased 61% compared to the third quarter of 2024. Our reported net loss of $19.1 million reflects our continued investment in the Conway extract and RTD facility through its scale-up phase. Our Consolidated Adjusted EBITDA was $23.2 million, representing 125% growth over the third quarter of 2024.

In our Beverage Solutions segment, net sales increased 60% year-over-year and Segment Adjusted EBITDA grew 74% to $20.4 million in the third quarter. This growth was driven by a 4% increase in core roast and ground coffee volumes, an 85% volume increase in single-serve cup and continued supply chain optimization and disciplined expense management.

Year-over-year increases in commodity coffee prices and tariffs, which we passed through to our customers, also contributed to top line growth. Our SS&T segment continues to outperform our expectations with net sales growth of 62% over the third quarter of 2024, driven by volume growth, margin capture and higher coffee prices. Segment Adjusted EBITDA was $5.8 million, up from $2.5 million in the prior year quarter.

As I mentioned last quarter, our SS&T results reflect the scalability and resilience of this business segment. Capital expenditures totaled approximately $18 million in the quarter, primarily related to the Conway extract and RTD facility. We have $15 million of CapEx remaining on our original build-out of the Conway extract and RTD facility, and we expect to spend that over the next 2 quarters.

As of quarter end, we had approximately $52 million in unrestricted cash and available liquidity under our $200 million revolving credit facility. This is before taking into account the $30 million capital raise we announced today. Our leverage metrics remain within expectations and in full compliance with the covenants under our credit agreement. We have talked a lot on our last few calls about the working capital impact of historically high coffee prices and tariffs on coffee imports and their potential impact on consumer demand.

Both topics continue to be front and center for Westrock Coffee and other U.S.-based coffee roasters. To help mitigate the working capital impact of higher coffee prices and tariffs, we raised approximately $12 million in the third quarter via sales of common stock under our ATM program.

In addition, today, we announced the issuance of $30 million of convertible notes and a credit agreement amendment. The capital raise strengthens our balance sheet and provides additional liquidity to support the working capital needs resulting from elevated coffee prices and tariffs, while the credit agreement amendment realigns our financial covenants with the ongoing scale-up of our Conway facility.

While it's impossible to predict how macroeconomic influences might impact our business, we believe we now have the working capital and credit capacity needed to navigate the continued elevated coffee prices and tariffs, and we do not anticipate any additional capital markets activity in response to these headwinds.

Turning to our outlook. For 2025, we're updating our guidance to reflect our current expectation for the fiscal year. We now estimate that Consolidated Adjusted EBITDA will be between $60 million and $65 million, which is consistent with the guidance we provided at the beginning of the year.

Beverage Solutions Segment Adjusted EBITDA for fiscal 2025 is expected to be between $63 million and $68 million and SS&T Segment Adjusted EBITDA is expected to be between $14 million and $16 million. Finally, our Beverage Solutions credit agreement secured net leverage ratio is expected to be 4.5x, a 40 basis point beat to our prior guidance.

Turning to 2026 guidance. Earlier this year, we shared our expectations for 2026 Consolidated Adjusted EBITDA, our expected annualized run rate for Consolidated Adjusted EBITDA as we exit 2026 and our expected year-end Beverage Solutions credit agreement secured net leverage ratio.

While we believe it would be premature to update our 2026 guidance, we also believe it's important to call out that one of our key customers is involved in a large M&A transaction within the coffee category. This is creating uncertainty for us related to their single-serve cup volume commitment for 2026.

In addition, continued elevated coffee prices and tariff costs are creating uncertainty regarding how consumers will respond to higher coffee prices across restaurants, convenience stores and on retail shelves. We expect to have greater clarity, particularly regarding the M&A transaction ahead of our fourth quarter call, and we'll update our 2026 outlook, if necessary, when we report fiscal 2025 results.

It's important to note that for purposes of resetting our credit covenants as part of our amendment, we have conservatively assumed that all single-serve cup volume related to the impacted customer will be off our platform by the end of this year, thereby assuring we don't need to seek additional relief if this scenario plays out. And even if it does, we're confident that over time, we'll be able to replace any lost volume on our single-serve cup platform with expanded volume from existing customers and new customer wins.

With that, we'd be happy to open the line for questions.

[Operator Instructions] Our first question comes from Eric Des Lauriers of Craig-Hallum Capital Group.

First question is just kind of checking in on the progress of some of the production lines after the delays reported last quarter. So on the Q2 call, you expected main production line to be up fourfold in Q3 and that you expect to be fully caught up to the delays by the end of the year. It sounds like you're about 80% there as of Q3. So just looking for an update on both of those and seeing how those trended in Q3?

Eric, this is Scott. We are -- at this juncture, we've run 80% to 125% kind of the standard volumes we would have expected off the line on the main can line. We've got all of our customers caught up at this juncture and the glass line is at this juncture, making commercial product for sale starting in the month of December.

Congrats on that progress. I suppose I'd like to focus my next question on this newly announced -- I don't know if it's a product line or just a product type, but including this ultra-filtered high-protein milk. Can you just expand on any timing and I suppose, size or scale commentary on this product? I mean, it certainly seems like this is an area where a lot of consumers are focused, looking to get more protein. So it seems like this could be quite a successful product for you and your partners. So just looking to get a little bit more info on there, whatever you're able to share.

Sure. It's early days, but it has been -- there is a tremendous amount of interest from a number of people, a number of different businesses. The core issue is as ultra-filtered milk products, high protein, if you will, start to move into cans and not just aseptic plastic bottles. There's a demand for aluminum cans over those bottles. The only plants that can run those are big major retort plants. We own and operate the largest retort lines in the country. And we have just installed a second line that is coming on for commercial production in January. So the whole product development cycle is probably a 12-month process.

But as you're probably aware, the demand from these ultra-filtered milk products that are moving into cans are competing with the traditional coffee, ready-to-drink bottle -- I mean, can lines that we've been serving. And so a lot of the same customers are saying we want to do product extensions out into that platform and so we love doing product development work. We have small-scale lines that they can set up and run on. And I don't know that it will turn into anything, but the demand and the forecasted numbers that people are talking about, I wouldn't be surprised that it's not as big as our ready-to-drink coffee business over the next 2 to 4 years.

Our next question comes from Sarang Vora of TAG.

So I'll just follow up on the protein -- ultra-processed protein line. So do you have to make incremental investment to build this line? It seems like it's a great opportunity for the future, but do you have to -- or will you be able to leverage the existing production line to cater to this segment?

Yes. So we could, if someone delivered the product to us, we could run it through our production facilities today. We have probably $5 million or $6 million of capital that we or our distribution milk partner would have to put up to fully enable that, but that's the kind of thing that as we moved into production contract levels, we could easily put in place. That's really all we have to do, the can lines themselves, the product development, the labs through which we do all the testing, that's all completely interchangeable with the products that we make for people today.

My second question is about the coffee sourcing and stuff. Coffee prices are high. There's tariffs on top of the coffee prices. How are you managing that? Like are you changing the sourcing between like markets? I know you were able to pass, but there is a pressure on gross margin right now. So how are you managing the whole dynamics on the coffee price increase? And how -- and what is your outlook when you look out for next year on coffee?

Sarang, this is Chris. I think the short answer is that with 60% of our coffee coming from Brazil and Brazil having the highest tariff, it's hard to produce product in the coffee space without using Brazil coffee. But we look at ways in order to be able to optimize the coffee that we use and the blend that we make. We'll continue to do that. And my guess is the longer the coffee prices stay high, the more innovation people will have around that, including us. The capital raise that we completed and announced today was really in order to ensure that coffee prices can stay as high as they are, tariffs can stay exactly where they are, and we've got the balance sheet in order to be able to make it through it. And so from our perspective, we feel like we're good as we move forward in whatever the market environment entails.

Our next question comes from Todd Brooks of Benchmark, StoneX.

First question, Scott, just thinking through the single-serve customer who we may be losing some M&A transaction friction. Were they existing customers on the platform? Or were these prospective customers that were contemplated when you gave the original 2026 EBITDA guidance?

They were coming on in the '25 year, and we're going to be at full ramp by early '26. And so they were incorporated in our original '26 guidance.

And then the one I wanted to explore more in depth, you talked about really having the financing in a place that from a go-forward standpoint, you could start to play a little bit more offense again. You talked about, obviously, the high protein ultra-filtered. But other areas where maybe you haven't been able to play offense that the balance sheet might let you to go attack here in '26?

Yes. It's a good question, Todd. I think for me, when I look at the last multiple months as we worked through with our bank syndicate and with our core shareholders the right and best path forward, I kind of take really 2 or 3 things away from it. The first one is that immediately this year, our performance and the capital raise is going to allow us to be at 4.5x debt to EBITDA by the end of this year.

Well, I don't think anybody thought Westrock Coffee was ever going to get back to 4.5x debt-to-EBITDA. But the team has delivered a great set of EBITDA numbers and the core shareholder groups coming in. Frankly, we've managed our cash extremely closely as the Conway plant has neared completion and out of kind of the helter-skelter fast mode. The second thing, and this is probably more important, as Conway turns on the new lines that are being commissioned and are coming up right now, and we get into the first half of next year, both Conway will be EBITDA profitable with no add-backs or any of that, just straight up old school, old-fashioned EBITDA profit and free cash flow positive and the entire business should move into free cash flow positive after debt service.

So I've talked to people that have us going free cash flow positive in 5 years. We're going to go free cash flow positive after debt service in the next, I think, 4 or 5 months. So what that allows is simply what we're going to do is very conservatively, just chip away at each incremental opportunity. But to just show you how wild it is out there, I just came out of a meeting while we're talking about losing a single-serve customer. I just came out of a meeting where we need CapEx to meet the demand that is trying to line up and come into that plant over the next 12 to 18 months.

Now I would have never guessed that. And while we were in the middle of building Conway, we wouldn't have had any capacity to deal with that other than to say we have to go to the market at this juncture. If that's what happens, we could do that ourselves. So it's a level of freedom we haven't had since we decided to go build the world's largest RTD factory, but I've missed it, and I'm glad to have it back.

Our next question comes from Bill Chappell of Truist Securities.

It's Davis on for Bill. Can you hear me okay? So just on the expanded single-serve capacity that you all brought on recently and the consolidating customer leaving the platform. You mentioned being pretty confident that you're going to be able to fill the capacity. So I guess I was just wondering is there currently a backlog of customer demand that's ready to go ahead and step in? Or is that just kind of based on the way things have worked for the facility up until now, that just gives you the confidence.

Yes. Davis, this is Scott. So we don't really know. And I think the words that pleasure you is to talk about the fact that it is an uncertain period of time for us. We haven't changed our guidance from what -- for '25 or '26 from what we said in the beginning of '25. We haven't changed the thing. The one thing that's different is one of our large single-serve customers is in the middle of an M&A acquisition transaction, and we don't know how that will play out.

And the last thing we're going to do is start to guess at how that plays out. So we will know more by the end of the year, and we will update you with whatever we know at that point. And we're trying to be very careful about staying on the line of what we know and what we don't. But nothing has happened in the business other than that transaction to make us change a single number we laid out for '25, '26.

That said, the specific transaction that is causing us to have to put you on notice that we have a large customer in the single-serve space that is potentially involved in an M&A transaction, the same transaction that is possibly going to pull that customer away has called a multiple of other customers with multiples of their volume to get interested in coming to our facility and moving off of whatever platform they're on and into this one.

How that will play out is completely unknown to me. But if it plays out the way we think it will play out over the next 2 to 3 years, which is, I know for eternity for your average 90-day hold stockholder. But if that plays out the way I think -- it plays out over the next -- we're trading at 4x EBITDA on what we think we can turn this business into over the next couple of years. So I've had high stock prices in a bad business forecast, and I'll take the low stock price and a great forecast. And we'll just play the cards from here. And that's about all we really know.

And I guess like you've mentioned a lot of -- kind of uncertainty around how the consumer is going to be actually engaging with coffee across channel next year. So I mean, I guess, kind of to connect just some past themes, are there any -- I guess, are your contracts still holding with customers? Have there been any shakeups in that area? I mean, obviously, you've mentioned having a long line of customers just wanting to get into the facility, but has there been any sort of customers falling out, new ones coming in that you haven't been expecting or haven't mentioned in the past?

Sure. We are every day battling in a very competitive like the RTD market and the roast and ground market is ultra-competitive. And we battle and we win some every quarter and we lose some every quarter. And we win SKUs and lose them. And we will win a brand customer, and we will lose one every now and then. So that battle day-to-day has been going on. In the single-serve space, I don't think we've ever lost a customer until maybe the one that's currently going through the transaction and then how that plays out is, like I said, we're going to stay out of the guessing game until we see exactly how that [indiscernible].

This concludes the question-and-answer session. I would now like to turn it back over to the Chief Executive Officer, Scott Ford, for closing remarks.

Well, thank you all for hopping on. I appreciate it. We were, as you can probably imagine, looking at being up 85% from last year. We were thrilled with the quarter. We're very optimistic about what lies in front of us, as you can tell. We're not going to try to get ahead of ourselves in terms of how it all lands. But we have recapitalized the business from mostly the same set of shareholders that have been backing us for years now. We have much more information about where we stand in Conway. Those lines are all now up, running, producing and making sellable product. We have new lines on that are just starting out on the incline for their production volumes and profits.

And I really like where we've landed with our balance sheet. We have handled the cash crunch, if you will, that was caused by 50% tariffs on Brazil. It was a painful solve, but we have been able to solve it and I think, in good order. And we're very actually optimistic about our current business, about new business that we're working on, about new cost ideas that we're working on. And the only caveat, and it's fair to call it out, the caveat is we don't know exactly where one customer is going to land that is currently being purchased or at least set to be purchased by one of our competitors.

And so I think that's all we know. That's full disclosures, and we will see you in another 90 days, and we'll give you an update as we know more. Thank you very much for your support, and we will see you soon.

Thank you…