Hello and welcome to Westrock Coffee Company's Fourth Quarter 2024 Earnings Conference Call. My name is Latif and I will be coordinating your call today. Following prepared remarks, we will open the call up to your questions with instructions to be given at that time. I'll now hand the call over to Robert Mounger with Westrock Coffee. Please go ahead.

Thank you, and welcome to Westrock Coffee Company's fourth quarter 2024 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 the 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 we'll 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 is my pleasure to turn the call over to Scott Ford, our Co-founder and Chief Executive Officer.

Thank you, Robert, and good afternoon everyone. Thanks for joining us today. As most of you know, our core value proposition is to be the premier integrated strategic supplier to the preeminent coffee, tea and energy beverage brands globally. We made considerable progress in our execution of this strategy in 2024, ending the fourth quarter with segment adjusted EBITDA in our Beverage Solutions unit of $17.8 million, up 53% over the prior year. We also saw a 52% increase year-over-year in our SS&T segment. In total, we generated combined segment adjusted EBITDA of $21 million, up 53% over the same period a year ago. On that same basis for the full year 2024, we ended at $60 million for the year, up 33% over the prior year, which was in line with our most recent forecast. Let me share a few highlights from 2024 that we believe set us up to continue to grow this EBITDA number at roughly 50% annually for at least the next two years. WEST went public 2.5 years ago with the value proposition I stated a few moments ago. And from that time to this, we've invested almost $400 million building and equipping the largest roast to extract ready to drink facility in the country, a new single serve cup manufacturing facility and a new distribution center that together encompass over one million square feet that can produce and distribute hundreds of millions of RTD cans, glass bottles and multi-serve bottles along with ultimately billions of single serve cups each year. We pursued this path for two fundamental reasons. First, we observed generationally rare consumer driven value shifts coming in the coffee and related beverage market that were going to create immense return opportunities for a few companies, while stagnating or even imploding others, because…

Thank you, Scott, and good afternoon, everyone. 2024 was an exceptional year for Westrock Coffee Company. We expanded our roast and ground coffee business by onboarding new CPG customers to our platform, and our extracts business grew 8.5% year-over-year. At our Conway extract and RTD facility, we launched our multi serve bottle line and successfully sold out our glass bottle line. Additionally, we launched and largely sold out our can capacity, catering to a customer base that includes large CPG customers and some of the largest coffee brands in the US. On the infrastructure side, we leverage new data insights and artificial intelligence to enhance our commodity cost forecasting and the associated risk management. We tightly managed our operating expenses and capital expenditures, to maximize the return on every dollar we invested in the business. We protected our balance sheet and ensured delivery of our Conway extract and RTD facility to a $72 million convertible debt offering in February of 2024, and we increased our revolving credit facility by $25 million in January 2025. Moreover, we implemented several working capital strategies to ensure liquidity throughout the development of the Conway facility. However, our year wasn't without its challenges. Our single serve cup volumes remain below forecast for much of the year, and we didn't begin monetizing our Conway investment in the back half of 2024, as we initially projected. Instead, this will commence in the second quarter of this year. Regarding our financial results, for the full year 2024, we generated consolidated adjusted EBITDA of $47.2 million. This result included $12.8 million of Conway facility scale-up operating costs. For comparison, consolidated adjusted EBITDA for the full year 2023, was $45.1 million but did not include any Conway scale-up operating costs. For an accurate year-over-year comparison, you would add the $12.8…

[Operator Instructions] Our first question comes from Matt Smith of Stifel. Please go ahead, Matt.

Hi. Good afternoon, Scott and Chris.

Hi Matt.

Hi there!

I appreciate the greater detail into the 2025 outlook and at the midpoint it's about $20 million or below or so below the preliminary outlook you provided last quarter. You talked about a degree of risk in the second half from higher coffee prices impacting customer orders and some conservatism built into your build out of the can and glass lines. Can you talk about the impact of historically higher coffee prices? It sounds like you're still able to pass those through and match your costs on a quarterly basis. But are you seeing an impact in customer order cadence or their acceptance to launching new products in this kind of environment both from the higher coffee costs as well as a softer consumption environment across the store?

Hey Matt, this is Chris. Yes we're seeing a little bit now. I think that if you think about when a higher coffee price would actually flow through the customer cost, it would be later in the year. And so if you listen to some of the other earnings calls, you listen to some of our other customers as they talk about it, you start to see instances where people are passing on coffee cost to the end consumer. And so our expectation is as that that could impact the demand for our products. And so for us it's just a matter of being able to -- we don't know what the answer is going to be, but as you start to predict how 2025 could be, that's one of the things that if you're going to have a little downside risk, it's associated with that. And so we wanted to be able to introduce that concept into our guidance and also as you think about scaling the Conway facility both with the RTD can scaling that occurs in the second quarter throughout the rest of the year, we wanted to build that in as well. The important thing is as you think about 2026, that number doesn't change. It's really about kind of the timing of the ramp and the exit velocity of 2025. But once you get to 2026 those numbers are still hold.

I appreciate that Chris. And as a follow-up I believe in your prepared commentary you said no scale-up costs in the 2026 guidance. Should we think of that as kind of the canning -- the second canning line and the glass line kind of coming up to speed and reaching a pretty full run rate as you exit 2025? Did I hear that right?

That's correct. Yes, everything scales pretty quickly. As we turn that on, it's largely sold out in full by the time we turn it on in the third quarter. So, you won't have any scale-up costs in 2026.

Thank you. I'll pass it on.

Thank you. Our next question comes from Todd Brooks of The Benchmark Company. Please go ahead Todd.

Hey, thanks for taking my questions. First question and Scott, maybe you can help level set this. There was an outlook for the industry in the switch to kind of extract driven cold products that we talked about a couple of years ago and we're into a different place with the consumer. We're into the different place from a C-price standpoint. Are your customers kind of iterating and developing products as quickly kind of that new product development engine that Westrock would be able to help them with? Or as we look at the growth of Conway over the next two years, is this more of a share taking exercise because you guys are truly an integrated solution for those customers?

Hey Todd, so I believe it's actually a mix to the possible answers that you are throwing out. Number one we are share taking because we have a new plant and we've taken a lot of share just from being the new entrant and being an aggressive pricer, et cetera. But the real wins that we've had in 2024, which are driving the 2025 and 2026 number, the vast majority of that are new brands to us who are not just coming with one product, they're coming with an RTD product, they're coming with a multi-serve bottle product, RTD, I mean a can or a glass bottle. They're coming with multi serve bottles. We've got the same customers coming in for roast and ground and single serve. I would say that prior to the Conway kickoff here in the last four, five months, we probably had a very small count them on both hands number of integrated customers and that would have been single serve and maybe roast and ground. At this juncture, the biggest brands in the world have all come down to go through Conway, and we have picked up sales in single serve. We've literally filled all of our single serve plants added machines, filled them and have ordered new machines. All of th at has come from RTD brands that came in when they wanted us to start to develop various liquid products for them. So that is really where we've seen our growth and that's really where our expertise helps set us apart and it's where we're winning in the market right now.

That's great. My follow-up and I'll jump back in after this one. But Scott, you've always talked about the answer is yes for the customer. And when we talked about Conway and the capacity being taken up, the concept that these were mostly take or pay type of contracts. I assume there was one set of realization that was based on it given the environment a couple of years ago versus where we are now. But how is take or pay working with these partners? Or are the relationships coming in at a different level or a different scale that we should think about just kind of the holistic value of a customer versus holding them to some sort of take or pay if they're not commercializing as quickly as the contract was speculated?

Yeah. No, it's a great question. It's one we've wrestled with and I think we dealt with it, a good bit on the third quarter call, which seems a lifetime ago at this point. What we've done is basically, we've just tried to follow the do right rule, right which is if a customer comes to you and they're trying to move over and they have issues and they need you to move your calendar out, et cetera or our best case is where they come in and they say we need you to go faster. We've actually had enough customers that were coming in saying we need to go faster. They're the ones who said we need to go slower kind of all washed out in the puts and takes of that. And it's why that we get to the run rate in 2026, which is the full ramp up of all of that activity $130 million to $150 million of EBITDA and that means, we don't have to sell anything else. That's what we've already sold. So right now, we're working on the next $100 million of EBITDA, and we're trying to find places for people to fold in and get into the flow and get the equipment in to deliver for them. And we're working on the $150 million to $300 million EBITDA run rate right now with our customers not the $150 million that's just got to go through the machine.

Thanks, Scott.

Thank you. Our next question comes from Bill Chappell of Truist Securities. Your question please, Bill.

Yes. Thanks. Good afternoon. I guess, two questions. One maybe a little more color in kind of how you're reflecting the higher green coffee costs into your kind of projections? And is it hitting both Conway and SS&T in terms of volumes? And then with that how does it flow through? Because I think a lot of the coffee companies, green coffee costs have spiked, but they have the hedges. So they don't expect to pass off the full brunt for at least a few months. So are you expecting a greater drop off in kind of customer volumes as we move to the back half? Just any more color on kind of how you're factoring that into the guidance would be great.

Yes, that's exactly -- I mean, that's exactly the way that we think about it. I think, from -- if you think about the coffee that's going through the system today is coffee that was purchased six months ago. And so the higher coffee costs that you're seeing in the headlines that's something that's going to flow through the system in the back half of the year. And so the potential for higher coffee costs impacting consumer demand, because our customers push coffee -- push price through, you're going see that in the back half of the year if it happens at all. If you listen to some of the commentary a lot of folks say that, they've got hedges, they've got their own plans in place in order to be able to hold price constant or steady for as long as they can, and if they do that then that's great. But having gone through an inflationary period where people took price, we wanted to be a little bit conservative in the back part of the year, as we think about what impact that could have. And then in terms of the products that you'd see that in, it's going to be really in the heavy coffee products. Think about roast and ground coffee some single serve. That's where you'd see it impact the business most if it happens at all.

Okay. And then maybe just a follow-up with that. When you look at your change in guidance for this year versus the preliminary, what percentage or what amount is from the higher coffee prices? And how much is from the higher kind of start-up or kind of expansion, I guess, rollout of Conway?

I would -- it's over weighted to just conservatism around the start-up. I mean, that -- we know that from a first quarter perspective, we spent a lot of time on the commercialization and qualification of products. We know that like Scott said in three weeks, as we hit the second quarter that the volume ramp is pretty steady and pretty steep. And so really it's mostly around being able to include some conservatism around what's the slope of that and our expectations around delivering and the timing of that. So it's mostly around that. Part of it, I don't, if it's half and half, but I would think about it somewhere in terms of that kind of split. Q – Bill Chappell: And then actually one follow-up. I understand, you're working with customers on Conway and speeding up and slowing down and stuff like that. Is there a time this year, where that's largely behind us, like things are locked and loaded and you have very high visibility in terms of what's going through the system?

Yes. Now, that is another great question and it's the reason we broke out our guidance in the first half, second half. So, we will really have I think, as we exit the second quarter and enter the third we're going to have great visibility into the step function volume lift that we have slated to come into the plant. But, we broke the guidance out in half, so that you could see it, because we were like if that happens in the second quarter early third, we won't be able to report that to you until the end of the year. And so, we wanted to give you an annual guidance with the component for the first half so that you could see clearly, where that step function change comes along. And then if we can hit our guidance in the first half, by the time we report the second quarter we'll be able to tell you are the volumes in for the third quarter that we use to build our forecast for the year. And I think that's a great place to check-in. And I fully expect that that's where we'll have the visibility, you're looking for. Q – Bill Chappell: Great. Thanks so much for the color.

You bet. Thank you.

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

Well, again, a quick thanks to everybody for all the work that you do to help us get our story out. We think, it is an interesting story. We are as I said in the prepared remarks, we got a little behind in the build and customer sign up, but we are back ahead of schedule on onboarding. We -- the team has done a fabulous job from commercialization, product development getting all of the various approvals and regulatory checks in. And the team has done a fabulous job. My heart and soul of thanks, goes out to everybody that has made this true. And I look forward to reporting to you on the next quarter, where we should have a good bit more visibility into the back half of the year, and what we would then be thinking about doing with our balance sheet as we go to the end of the year, as these numbers are in line because it gives us all sorts of interesting options that create value and we look forward to update you next quarter on that. So thanks very much for your time.

This concludes today's conference call. Thank you for participating. You may now disconnect.