Westrock Coffee Company, LLC (WEST) Q2 2026 Earnings Report, Transcript and Summary

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.