Westrock Coffee Co (WEST) Q2 2026 Earnings Call Transcript

Good day and thank you for standing by. Welcome to the West Rock Coffee Company second quarter 2026 earnings conference call. 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, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Juwan 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 Pludger, 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 lead to 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, Juwan. 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 three 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 six months, consolidated adjusted at EBITDA of 47.3 million was more than twice the first half of 25. Our credit agreement secured net leverage ratio improved to 3.36 times, 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 nine percent 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 foundry's 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 to $100 million while acknowledging that both of our first two 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 quarters 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 the second quarter of 2025, led by Beverage Solutions, where net sales grew nearly 17% versus the same period. Through six 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 of Conway facility and a 2 million negative impact year-over-year from non-cash 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 can, 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 cut 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 the $89 million in 2025, which again represents a structural shift in the capital profile of this company. As previously announced on June 30th, 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 3.36 times, deleveraging slightly from the first quarter. And finally, in the second quarter, West Rock 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. Five consecutive quarters of year-over-year consolidated adjusted EBITDA growth, five 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 three priorities, selling the remaining installed capacity we've 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 EVA.outlook of $90 million to $100 million. With 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 11 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question is to come from Eric Delaurier of Craig Coulomb Capital Group. Your line is open.

Thanks for taking my questions. 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, you know, one-of-a-kind facility in Conway that's creating this demand pull. On the other hand, this disruptive M&A in the industry, you know, is also kind of causing somewhat of a push, you know, customers looking for alternative manufacturing options. A 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. Thanks.

Sure. Eric, this is Scott. It's a great question. 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 they're – we can kind of all guesstimate where each other's costs are etc etc it's the nature of 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 right now and some of it's coming in over the next 12 months in the roasting ground space we have won um material new share and we alluded to this in some of our prepared comments in the canning format we have won uh we continue where we are what 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 um customers that 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, and 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 oh thank you thank you for the answer i mean that's um highly encouraging to say the least very exciting to see um what else is to come here um you touched on the expanded product portfolio um sort of playing a factor in your ability to um take share here um you've obviously expanded your own product capabilities quite significantly recently, protein and energy drinks to name two. Where do you see your overall product capabilities now compared to, you know, 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's 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 four new format lines that we're adding um 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 um 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 dollars building in 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 literally we have eight 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 two times 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. Congrats again. Thanks for taking my questions. Well, you're kind. You bet. Thank you.

Thank you. Our next question comes from Matt Smith of Stiefel. Your line is open.

Hi. Good afternoon, everyone, and thanks for taking my question. um 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 you know EBITDA generation as we get into 2027? Is it, you know, is it incrementally 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 i'll skip over where it's going to settle in the back half of this year because it's it's it's both too soon to know and um and it's too live real time right now as i as we guesstimate where we're going to land in 27 we'll we'll do some kind of formal number guidance for you on our next quarter call but um we are more optimistic about where we're to land than we are fearful we're also um 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've beaten the first half of the year i've called that out we're not raising our guidance um we don't have raised guidance in our credit models that we're sharing with our creditors and frankly we intend to 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 three 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. And, you know, 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?

Yeah, 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 three or four years and our our in our board meeting when we took them through it uh 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 three to five 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, 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 capex projects that that return fabulous incremental returns to us because the infrastructure is in place we can put new format lines in um and and the incremental lift of the contribution margin at the line profitability level becomes all comes all the way down through evita and so these next set of lines the next three to ten lines that we put in any of the plants that we've got because they're all they're all cash generating they're all 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 four weeks and we're going to we're going to keep the team focused there it is it is the 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 timeframe that you promised them because word gets out. And good begets 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 the opportunity for new lines, you talked about $30 million of CapEx this year. That likely includes 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? Thank you.

We kind of think of CapEx. I think that, yeah, I got it. The $30 million that we've got forecast for this year 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'll be a little less than half in the early years because you've got new assets that have been deployed. But that'll creep up to be half of that 30 going forward.

Thank you for your question. Our next question comes from Serang Vora of TAG. Your line is open.

Great. And congrats on a good quarter as well as a 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 share now that you've expanded the portfolio? Any color on how these contracts are structured or any margin profile between categories as you think out?

Yeah, sure. We look at it holistically at the customer level, 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 one or two customers, for instance. we were looking at, we said, well, you know, we just don't do that product, you know, at that margin traditionally. And traditionally, we would say, you know, do we want to take line capacity for that margin? Well, we'd 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 three 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, well, 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. 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 meet, 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 if ours is actually going up on a margin basis.

Oh, that's great. And, you know, just on the SG&A, I just wanted to mention, I feel 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, you know, that line item, you know, 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 you know I know you guys have been talking about the software that you use has been really helpful in managing the cost boundary but just any color on like you know how we should think about expenses in general as you damn book more production well I was just gonna say I think from on the SDNA part and 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 two. Part one 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, you know, 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 cabool you're throwing engineering you're throwing professional services you're throwing overtime you're throwing uh fixed costs that are not directly attributed to a line in the plant and we've basically rebuilt the uh the north carolina coffee plant over the last three years and we just built this rtd plant So some of it is just quieting 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, you know, it's quieter, and quieter is more efficient and cheaper. And so that's a good part. And the rest of 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, you know, kind of worst case, we imagine that our SG&A will kind of stay flatlined at a theoretical level. Pledger, I'll turn it over to you and let you say whatever might be more accurate.

Nope, 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.

That's great. Good luck ahead.

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

Thank you very much. You know, 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 three times 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 in a tough spot and we stayed hitched as a collective team we worked through it we are now operating a every plant we have is generating free cash flow and we are 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 us 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 West Rock'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 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.