Westrock Coffee Company

Hello, and welcome to the Rest Rock Coffee Company's third quarter 2023 earnings conference call. My name is Tanya, and I'll be coordinating your call today. Following prepared remarks, we will open your call to questions with instructions to be given at that time. I would now like to hand it over to Clay Crumplis with ICR.

Good afternoon, and welcome to the West Rock Coffee Company's third quarter 2023 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.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 releases 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 is my pleasure to turn the call over to Scott Ford, our co-founder and chief executive officer. Scott?

Thank you, Clay. Good afternoon, everyone. Thank you for joining us today. I'll be the first to acknowledge that our third quarter this year looks like a bit of a mess as the variance from our targeted performance of roughly $20 million in adjusted EBITDA for the period and our reported results of $11.6 million appears quite large at first glance. That said, I think it's critically important to call out that virtually 100% of the MIS comes from two distinct causes that were unique to the period. First, over $6 million of the MIS happened in July and August alone in our traditional roasting ground coffee unit, where these customers ordered fewer pounds in this period than they did in the depths of COVID. As we worked with them and their forecast analyst, we were repeatedly informed that, quote, the spike in gasoline prices coupled with the spike in interest rates combined with a miserably hot summer kept consumers out of restaurants and C-stores in the first two months of the quarter. Fortunately, September was largely back to normal versus prior years in roast and ground coffee volumes. And October and early November are coming in at normal levels as well. So this appears to me to have been the same transient crunch that happened last year when gasoline prices spiked as oil went above $85 a barrel and demand came back for coffee as soon as oil prices retreated a bit. Secondly, as Chris will detail in a few moments, we incurred almost $2 million of expenses during this quarter that were associated offsets to prior periods, further compounding the stated performance gap. And I fully realize that GAAP does not allow us to go back and add these items back, if you will. But in terms of clearly laying out what is going on in our business, this $8 million of combined EBITDA pressure equates to 100% of our adjusted EBITDA missed for the quarter compared to the updated guidance we gave you after our second quarter. We will continue head down to deliver all that we can in 23, looking for ways to drive revenues up and costs down. Turning now to the Conway Extract and RTD plans. I want to commend and thank the team that has tirelessly fought to convert that plant and distribution facility from renderings on the drawing board to the finest facilities of their type in the country in what has to be record time. It has been a joint effort of Westrock employees, professional service providers, equipment vendors, customer product development, QA, and procurement leaders, and the two primary general contractors involved, Navholz Construction and Clark Construction Company. Each individual involved is dedicated to the successful completion, product commercialization, and operational launch of this new $300 million extract and ready to drink facility in Conway, which is on schedule to successfully begin commercial production of finished product in the second quarter of 24. This Conway facility is coming online just as we have essentially now finished selling out 100% of our extract manufacturing capacity in Concord, North Carolina. So overall, while it is a bit of a difficult time for the core hot coffee market where we continue to compete for customer volumes as they ebb and flow through the seasons and gasoline price gyrations, it is an absolutely glorious time to be in the extract and RTD space. As our new customer and product extensions continue to expand, and where we are about to open our third extracted ingredient factory, with the first two being sold out of capacity. For example, at this point, we have sold out almost 100% of our capacity on four of the initial six packaging lines. And we are over 50% sold out on the remaining two initial lines in the combined Richmond, California, and Conway, Arkansas plants. And as Chris will describe in a few moments, we're working on some new ways to keep the investing public current on our progress inside the plants when we roll out our guidance for 24 early next year. Now, we do not expect most of this capacity in Conway to come online in commercial volumes, which is what produces EBITDA, until the very end of 24 and early 25. But we are confident that the four- to five-year forecasted EBITDA generation of West Rock with these assets fully online, remains right on track with our previous estimate at around $200 million of annual adjusted EBITDA. With that, I'll turn the call over to Chris for a review of our current operations and financial results.