Westrock Coffee Company

Hello and welcome to Westrock Coffee Company's fourth quarter 2024 earnings conference call. My name is Lateef 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 Munger 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 in the investor relations section of West Rock 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 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 24, 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 24, 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 24 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 two and a half 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 a 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 these consumer shifts were going to require profound business model changes from those of us in the supplier networks of these major brands. And secondly, because we were already positioned as one of a very few companies globally that had the technological expertise, the breadth of product offerings, and category leading customer base to deliver on this type of industry altering strategic plan. To execute against this opportunity, we set out to become the leading manufacturing partner to the preeminent global beverage brands by becoming their lead innovation and development partner dependable and sustainable sourcing resource, and a low-cost processing and packaging outsourcer. We believe that by doing this, we will become an invaluable partner to these global brands as we enable them to capitalize on their brand equity positions through the transition of their product portfolio in step with the movements of their end customers. Let me give you a few concrete examples of what our integrated strategic supplier approach yielded at the execution level in 24. In our core roasting ground coffee business, we are just this month completing the full automation of two new packaging lines that we installed in 24 in order to accommodate new customer demand of over 20 million pounds annually. This volume increase largely comes from new customers in the retail and private label and national coffee brand CPG industries, which were brought into our shop via the relationships we built with them in our single-serve and extract and RTD businesses. This volume expansion is coupled with greatly improving operational KPIs from recent investments in facilities, systems, and people. Together, these factors should translate into the greatest profitability we've seen in the roasting ground coffee unit in a number of years. In our single-serve business, we experienced setbacks early in the year from lower volumes from some of our historical customers. But in late 24 and early 25, we entered agreements with several additional leading CPG brands that contacted us through our new Conway facility for an integrated product set that should generate our best year ever in the single serve manufacturing unit in 25, both in volumes and in profits. This is another excellent manifestation of the value our customers see in West being their strategic integrated supplier, and is a prime example of the type of relationship that is at the heart of our value creation ambitions, both for our customers and our shareholders. Finally, in our extracts and RTD business, we experienced nearly 25% volume growth and more than that in gross profit expansion as we reaped the benefit of two major facility and system upgrades that we conducted over the previous two years at our Concord, North Carolina facilities. Importantly, this financial performance did not include any meaningful sales from our Conway, Arkansas complex, as that site is only now coming online at production level scale, but which acted as a brand beacon for us all year, attracting the largest brands in the world to our integrated platform. These important developments, coupled with the further impact we will experience over time as these full new contract volumes come online, Allow us to confidently reiterate our forecast for sharply rising EBITDA accompanied by a precipitous drop in our credit agreement leverage ratios over the next 24 months. To summarize 2024, we now have in hand executed contracts with purchase orders from over a dozen premier global CPG brands and another dozen plus retailers and distributors that fill over 80% of our initial production and packaging capacity in Conway. But perhaps even more importantly, these very customers have also filled much of our remaining packaging capacity at our roasting ground and single serve plants. So as we speak today, we are again expanding the size of our second can line in Conway, our retail packaging lines in North Carolina, and our new single serve plant in Conway. simply to meet the additional demand these iconic brands have brought to us across our portfolio of products over the course of 24. Finally, while 24 was a demanding year, full of complicated facility expansions and strenuous customer onboarding activities, the back half of the year was an exceptional period for us, both from a financial performance perspective and as an operational and financial setup for the next several years. As Chris will walk you through shortly, the initial sales load-in I just described is expected to take approximately six quarters and is slated to begin in about three weeks. The end result of these customer volume onboardings should generate significant continued EBITDA growth over the next few years before we sell anything else to anyone else. But with that said, we fully expect to sell out the remaining installed packaging capacity in both our Conway RTD and single-serve plants over the next few months, as many premier global brands are only now beginning to hear about our capabilities in product development and manufacturing and are lining up visits to see the new plants in operation for themselves. The timing of product sales that follows each of these global customer wins is a complicated process. as product onboarding is quite laborious and multifaceted. In order to help investors see this initial sale to EBITDA process clearly, we're going to break down our 25 EBITDA guidance into two halves. Additionally, we are going to share guidance for our period-ending credit agreement leverage ratio for each of these periods in 25 and for the year in 26, as we think these metrics are the most important measures of value creation. Finally, a large component of our management incentive compensation is tied to delivering tangible results on these very two specific data points, adjusted EBITDA and leverage ratios, along with the change in the value of our stock. We are clear-eyed and focused on delivering against our integrated strategic supplier value creation model by growing our EBITDA and reducing our leverage now by providing the highest service levels imaginable to our world-leading customers. And while I fully acknowledge we got a bit behind through the construction and customer contracting phase, we are now well ahead of plan on customer brand and project onboardings across our entire product set. With that introduction, I'd like to turn the call over to Chris Pledger, our CFO, for a deeper dive into each of these topics I've outlined, and I'll rejoin you for questions in a few moments. Thank you. Chris?