Westrock Coffee Q3 2026 Earnings Call Transcript

Westrock Coffee (NASDAQ:WEST) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Westrock Coffee reported a record consolidated adjusted EBITDA of $26.4 million for Q3 2026, up 14% from the previous year, marking the sixth consecutive quarter of year-over-year EBITDA growth.

Despite a 15.4% decline in quarterly net sales to $300 million, largely due to tariff refunds and lower green coffee prices, the company maintained strong underlying performance with significant growth in its Ready-to-Drink extracts platform.

The company completed a $600 million upsized refinancing deal, extending maturities to 2031, which reduces debt service costs and enhances financial flexibility.

Conway facility, operating at 40% capacity, is expected to reach 85% in the next 18 months, potentially doubling its EBITDA contribution, with $60 million in new business won and a $100 million pipeline.

For 2026, the company expects consolidated adjusted EBITDA between $90 and $100 million, with an optimistic outlook for 2027 targeting $130 million, driven by contracted programs and new customer launches.

Management emphasized a strategy focusing on deleveraging and maintaining a solid balance sheet, alongside cautious capital expenditure projected at $30-$35 million for the next year.

Operational highlights include a second consecutive quarter of positive free cash flow and a significant improvement in operating profitability, swinging to a profit from a loss last year.

Full Transcript

OPERATOR

I would now like to hand the conference over to our first speaker, Juwan Arnold, VP of Investor Relations. Please go ahead.

Juwan Arnold (Vice President, Corporate Development & Investor Relations)

Thank you and welcome to Westrock Coffee’s third 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 third quarter earnings release issued earlier today. This information is available on the Investor Relations section of Westrock Coffee’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 use certain 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 T Ford (Chief Executive Officer)

Thank you, Juwan. Good afternoon, everyone, and thanks for joining us. I want to focus on three things today: our growth and the operating model behind it, the strength of the beverage category and what it says about the investments we’ve made, and the refinancing we’ve just completed. First, growth. The third quarter was a record quarter for Westrock. Consolidated Adjusted EBITDA reached a record 26.4 million, up about 14% from a year ago. And through the nine months it’s up about 58%. It was our sixth consecutive quarter of year‑over‑year EBITDA growth and our second straight quarter of positive free cash flow. That is the operating model doing what we built it to do, and that credit belongs to our people and the customers who trust us with their brands.

Second, the category. Quick service restaurant and convenience store traffic in the U.S. is down this year, yet beverage keeps growing. Operators are building out energy refreshers, cold coffee, and craft formats because those programs draw traffic and carry some of the best margins on their menus. That is the demand Conway was built to serve. And it is why our Extract and Ready‑to‑Drink programs kept growing in a soft consumer quarter. Today, Conway is running at about 40% of its current capacity, and committed programs take it to roughly 85% over the next 18 months.

At that level, Conway alone will generate more than the 70 million in consolidated adjusted EBITDA this entire company produced in 2025. As we continue to add production capabilities and packaging equipment over the next three to five years, we believe we can double the EBITDA contribution from Conway yet again. Customers who come for Conway are putting programs in place across the rest of our platform, too. So far this year, we’ve won new business worth an estimated $60 million of annualized EBITDA, with a pipeline of more than 100 million behind that.

And in single serve, we’ve already contracted enough new business to replace one third of the business we lost last year. This begins in early ’27. That said, the consumer remains choppy heading into the fourth quarter, especially where fuel costs weigh on traffic. But most of our growth comes from contracted programs coming online, not simply from a rising consumer tide. Third, the refinancing. Even in a tight financing market, our lenders committed 737 million to a $500 million deal ask, and we were pleased to close our new $600 million upsized facility late last month. It matures in October of 2031, and we are grateful for the confidence and the leadership of Rabobank and several other large institutions that have made this refinancing possible. With construction behind us and capital spending a fraction of what it has been, this was the last ingredient we needed to build a large, profitable business.

The platform, the people, the customers, and now a balance sheet built for the long term. This brings me to our outlook for 2026. We continue to expect consolidated adjusted EBITDA between 90 and 100 million, largely dependent on final customer mix decision. Our current estimate is squarely in the middle of this range. At a $95 million year‑end level, this critical growth metric would be up 36% over 2025 after being up 48% the prior year. And building on this, our initial 2027 outlook is for about 130 million in consolidated adjusted EBITDA, nearly double what we earned in ’25 and up another 35% over the midpoint of this year.

Regardless of exactly where our ’27 number lands, we fully anticipate ending 2027 at a much higher annualized run rate due to the customer programs scheduled to launch later in the year. Beyond that, the growth built into our customer agreements together with our pipeline gives us room to do even better over time. Though we are watching fuel and food prices closely in the short term, sitting here today, on balance, we are more optimistic about where we’ll land than we are concerned.

With that, I’ll turn the call over to Chris Pledger, our CFO. Chris.

Thomas Christopher Pledger (Chief Financial Officer)

Thank you, Scott, and good afternoon, everyone. Let me take you through the quarter in more detail, starting with the P&L, moving to cash flow and the balance sheet, and then ending with the refinancing we just completed on October 21st. Consolidated net sales were approximately $300 million in the third quarter, down 15.4% compared to the third quarter of 2025. Most of that decline reflects factors that are important to separate from the underlying operating performance of the business.

The largest driver is approximately $26 million in tariff refunds that we pass through or expect to pass through to our customers, which we record as a reduction of net sales rather than as cost. The corresponding refunds we collected from our vendors reduced cost of goods sold, so there’s no gross profit impact. Excluding this item, net sales would have been approximately $326 million. The balance of the decline reflects lower green coffee prices, which pass through to our customers at cost, and the previously discussed single-serve customer loss.

These factors should not mask our strong underlying business performance during the quarter, led by double-digit growth in our Ready-to-Drink extracts platform. And importantly, although consolidated net sales were lower in the third quarter versus the prior year, through the first nine months of this year consolidated net sales were $915 million, up 8% compared to the first nine months of 2025. Consolidated gross profit was $41.5 million in the third quarter, flat compared to the prior year, and year to date, gross profit was $125 million, up approximately 11% from the prior-year period. Both periods include incremental depreciation associated with our investment in Conway, $3.1 million in the quarter and $11.4 million year to date. We continue to see significant improvement in our operating profitability. In the third quarter we generated operating profit of $3.2 million compared to an operating loss of $8.6 million a year ago.

Through the first nine months of the year, operating profit was $5 million compared with an operating loss of $36.7 million in the prior-year period, a swing of $41.7 million over the past year, and our net loss narrowed by almost 50% in the quarter to $10 million from $19.1 million. Another important proof point that our model is working is that despite significant growth at Conway, our operating expense base was essentially flat year over year.

This is the operating leverage that we’ve been building towards. The platform was sized for substantially more volume than it carries today, and the overhead required to run it does not scale with that volume. As Conway continues to bring contracted programs online, we expect a significant portion of that incremental gross profit to flow through to EBITDA. All of this translated into record quarterly consolidated adjusted EBITDA of $26.4 million, up approximately 14% year over year, and through the first nine months of 2026, consolidated adjusted EBITDA was $73.7 million, up 58% over the same period last year. Beginning in the third quarter, we no longer add back Conway’s subscale operating costs in calculating Beverage Solutions segment adjusted EBITDA. Conway has reached a scale at which those costs are properly treated as ordinary operating costs, so this quarter’s segment result absorbs costs that were excluded from the prior-year comparison.

Despite this, we still delivered Beverage Solutions segment adjusted EBITDA of $23.3 million, an increase of approximately 14% compared to the third quarter of 2025. The performance reflects strength across our underlying flavors, extracts, and ingredients capabilities, driven by the continued commercialization of Conway and the benefits of our business optimization and expense management efforts. We’ve also crossed the utilization level where new business flows largely through to EBITDA.

From here, each new program, whether an existing customer ramping or a new customer onboarding, comes in at a higher incremental margin. Our Sustainable Sourcing and Traceability segment generated segment adjusted EBITDA of $3.2 million in the third quarter compared to $5.8 million in the prior-year period. The third quarter comparison reflects sales timing within the year. Year to date, segment adjusted EBITDA of $11.6 million is up more than 5% year over year and consistent with our expectations for the full year. We generated cash flows from operations of $9.9 million and positive free cash flow, which we define as cash from operations less additions to property, plant, and equipment, of $1.1 million during the quarter.

This marks our second consecutive quarter of positive free cash flow, bringing cumulative free cash flow over the second and third quarters to approximately $21 million. Part of that resulted from working capital timing we expect to reverse, but improved profitability and lower capital expenditures are fundamentally changing our cash flow profile. To that point, capital expenditures were approximately $8.8 million during the quarter, less than half of the $18.1 million invested in the third quarter of 2025.

Year to date, our capital expenditures were $22.4 million, compared to $79.9 million in the comparable prior-year period. We continue to project approximately $30 million of capital expenditures for the full year compared to $89 million in 2025 and $160 million in 2024. This is the structural inflection point we’ve discussed for several quarters as Conway has moved from construction into operation. We also continued to delever during the quarter, with secured net leverage at September 30th declining to approximately 3.1 times from 3.4 times at the end of the second quarter and 4.6 times a year ago. Put differently, over the last 12 months we’ve reduced secured net leverage by approximately one and a half turns, or roughly one third, driven by a combination of debt reductions and earnings growth. Over that period, secured net debt declined approximately $59 million, while credit agreement adjusted EBITDA increased by approximately $17 million.

As previously announced on October 21, we took another important step in strengthening our financial position with the completion of our new $600 million senior secured first-lien credit facilities consisting of $300 million of term loans and $300 million of revolving commitments and extending our bank maturities to October 2031. The transaction received approximately $737 million of lender commitments, allowing us to upsize the facility from the targeted $500 million at launch to $600 million at close.

We’re grateful for the support we received from all of our lending partners. When compared to our prior credit agreement, the new facilities meaningfully reduced our required debt service by approximately $17 million in the first year, further supporting free cash flow generation. As part of the refinancing, we repurchased $40 million of the $72 million convertible notes due 2029, paying approximately $21 million in cash and issuing approximately 2.4 million shares.

In addition, we extended the maturity of the remaining $32 million of the convertible notes due 2029 to January 2032, eliminating their February 2029 maturity. As a consequence of the refinancing and the repurchase of the convertible notes, we do expect that our leverage will temporarily increase by about half a turn in the fourth quarter and another quarter to half turn in the first quarter of next year as we pay out our annual incentive compensation to employees and pass tariff refunds through to our customers. So beginning in the second quarter of next year, we’ll once again see meaningful delevering.

Following the close of the refinancing, we had approximately $270 million of unrestricted cash and undrawn revolver commitments under our new Beverage Solutions credit facilities, compared with approximately $95 million at September 30th. This substantially increased liquidity provides us with greater flexibility to operate the business and manage the balance sheet over time. To conclude, we believe our improved earnings, lower capital intensity, and improved balance sheet as a result of the refinancing materially strengthen our financial flexibility as we enter the next phase of Westrock Coffee’s growth.

With that, we’d be happy to open the line for questions.

OPERATOR

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 telephone 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 comes from the line of Eric Des Lauriers of Craig-Hallum Capital Group. Your line is now open.

Eric Des Lauriers (Analyst)

Great. Thank you for taking my questions and congrats on the strong quarter and capital raise here. My first question, just kind of focusing on potential use of proceeds with this greater liquidity that you have now, can you just kind of give us a sense of your strategic priorities here? How should we think about potential share buybacks, organic investment, M&A, maybe some more paydowns on the balance sheet? Can you just kind of help us level set how you’re thinking about use of proceeds going forward?

Scott T Ford (Chief Executive Officer)

Sure. I think Chris’ remarks addressed the short term over the next two or three quarters, what we’ve got going out the door, and frankly beyond that at this juncture we are very focused on retaining cash, paying debt down. We want to delever the business. We think we have an absolute unbelievable path towards growing an industry-leading business in this space over the next two to three years. And the best way to do that is from a rock-solid balance sheet and not the sketchy one maybe that we had been accused of running in times past as we were building this from nothing out of our own back pocket.

And so I think you would see us be very conservative with the balance sheet, deleveraging. Obviously, as I’ve said on calls before, no business should leave its balance sheet in a position where it can’t defend a reasonable stock price for the business. And this business has not had that capacity in times past. It does now, but frankly I’d be very surprised if we were so incented as to come out of pocket with money for that at this juncture. I think we’ve got a lot of things we can do internally and perhaps externally that don’t add to our net leverage position, that increase our industry structure position.

And we think the best way to get to those cards is to continue to delever between now and then.

Eric Des Lauriers (Analyst)

All right, that’s helpful, thank you. And then two questions as it relates to the EBITDA cadence for 27. One, I think you mentioned the EBITDA growth will largely be back half, potentially even Q4 weighted. I think you mentioned some contracts that will be ramping towards the end of the year. So just wanted to kind of confirm that and then also just touch on SG&A. So from a reported basis, looks like that’s come down pretty meaningfully for about five or six straight quarters now.

I’m just wondering how to think about that going forward and sort of what’s been the main driver of that.

Scott T Ford (Chief Executive Officer)

Yeah, well, two things on that front. First of all, in the guidance to 2027, I believe is what your first question was about. So where we say rather than be precisely wrong, we’re just trying to be generally correct, plus or minus 130. Most of our customers won’t finish their allocations until deep in the first quarter for the actual volumes. We have a lot of conversations, but that’s a lot of guesswork because our fiscal year doesn’t fall with the same calendar planning year as most of our customers.

So that’s what most of the back and forth is through this time of year. So we think 130 is, plus or minus, a good guess right now. And then the point I was trying to make is a number of customers that we have sold in that $60 million pipeline I referenced, they are slated to come on board towards the middle and latter part of next year. So when we get into late 2027, we’ll be at a very different annualized run rate than the 130 that we are guessing right now will fall in the fiscal, which is our fiscal calendar year. So that’s what I was trying to distinguish. What would that be?

We’re not really sure. We think we’ll grow something like another 30% to 40% in 2028 after 2027’s number. And I’m trying to get you some understanding of how that falls in 2027 so you can understand those numbers. And then

Thomas Christopher Pledger (Chief Financial Officer)

To your SG&A question, if you recall that as the build-out of Conway, there are expenses that were, or operating expenses that were, added back. A lot of those were captured quarter by quarter in SG&A. As those have rolled off through the add-backs and into operating expense, our SG&A comes down. This is the first quarter, though, where we don’t have any Conway-related add-backs. So if you’re looking for kind of a level line for SG&A going forward, this quarter would be it.

Overall operating expense is flat, which I think is a great, great proof point to the business that we’ve built. And as we continue to grow, as Scott talked about in 2027, there’s not a lot of incremental OPEX that we need to put on the business in order to be able to produce those volumes. And you should see most of that drop to the bottom line.

Eric Des Lauriers (Analyst)

Awesome. Very helpful answers. Appreciate you taking my question and congrats again.

Scott T Ford (Chief Executive Officer)

Hey, thanks a bunch.

OPERATOR

Thank you. Next question comes from the line of Sara Bora of TAG. Your line is now open.

Sara Bora (Analyst)

Great. Thank you, guys, for taking the question, and great profitability. Great to see Conway making progress. You know, I know you guys gave guidance for next year, so just thinking in terms of free cash — the question before — how should we think about, like, capex for next year? You know, I know there are some, like, you know, new production lines that you were thinking of starting given the demand from customers, but you have done a great job this year in bringing down capex.

So I’m just curious, like, if you can share a little bit of color on how we should think about capex for next year, you know, in terms of, like, free cash flow generation. Thank you.

Thomas Christopher Pledger (Chief Financial Officer)

Absolutely. Thanks, Sara. From a capex perspective, I think as we talked about, you know, we’ve reached an inflection point with Conway. The construction part of Conway is complete, and now we’re into, you know, just operating it. Obviously, there are going to be opportunities to deploy capital or deploy capex for customers that want to grow with us, and we firmly expect to do that. We’ve done that this year within the $30 million of capex that we forecast.

Next year is going to be $30 to $35 million of capex as well. And so we can deliver around the customer commitments that we’ve made and the opportunities that we have to continue to grow the business and deliver the next year’s guidance based on the installed capacity that we have plus some incremental growth capex in order to be able to meet customer needs. But you’re not going to see us go back to a time where capex is $50, $60 million. That’s not the business we’re in right now.

So we’re going to execute within those parameters.

Sara Bora (Analyst)

That’s great. You know, I had a second question on the margin profile. I know you talked about SG&A being very muted. So fair to assume that majority of this we will see a massive gross margin expansion over the next year as Conway goes up, right? Because the mix shifts towards higher margin than the ground coffee and single-serve. Is that the right way to think about the growth trajectory on profitability?

Thomas Christopher Pledger (Chief Financial Officer)

Yeah, you definitely should see gross margin go up through the mix shift. Conway, as we continue to load on volume, continues to be a larger contributor to the overall EBITDA business, and that is higher margin business than what we have in most of the base business.

Sara Bora (Analyst)

That’s cool. And, you know, just a broader question on Conway. You know you are ramping up from 40 to 80. What has surprised you the most, you know, from a customer request standpoint? Like, you know, anything that surprised you as you ramp up from a production standpoint? Just curious — any color you can share, feedback from customers or something. Thank you.

Scott T Ford (Chief Executive Officer)

No, thank you. Thanks, and thank you for taking the time today to hop on. The greatest surprise from Conway has been twofold. Number one, when they come to Conway, they want to go see everything else we do. And we have had a 70% multiple product sale to our new customers that are coming in. I mean, that’s ridiculous. We couldn’t have imagined we would have seen a reaction like that to Conway. So one of the reasons that our growth this year has been so strong, and that, frankly, our growth over the next two years is likely to be as strong again, is because of that multiple product portfolio.

That when people come to Conway, they see how easy it is to do business with us. And then they say, well, do you also do cups? Do you also do roast and ground? Can you do whole bean? Can you expand your geographic footprint to cover more of our restaurants in a different part of the country, et cetera, et cetera. That’s been the biggest surprise. The second one is, frankly, the ultra-filtered milk high-protein craze that Conway is built and capable of making, and the demand for that and the number of brands coming into that space. The number of products that we have under development right now is the greatest number of individual items by a long shot than we’ve ever had in the house. And that includes when we were building Conway and first turning it on. And so we just continue to get: And what about?

And what about this? And can you do this? And would you take that? And prioritizing that and getting the teams lined up to make sure that our customers have a great product development and commercialization, then an operational delivery and daily customer follow-up — that’s the key to executing a low-price, high-service, quality product formula. But the appetite for it from new and old customers, frankly, has just been far in excess of what we would have hoped for on our best day.

And so the challenge is actually delivering against that. And that’s where we spend all of our time every day.

Sara Bora (Analyst)

That’s great. Good luck. I’ll pass it on.

Scott T Ford (Chief Executive Officer)

Thanks, Jerome.

OPERATOR

This concludes the question and answer session. I will now turn the call back over to Scott, our CEO, for closing remarks.

Scott T Ford (Chief Executive Officer)

Well, thank you very much. I’d like to thank all of you for hopping on the call today. Obviously, we were thrilled with the quarter. We’re head down trying to close the year and get ready for the new year. We are thrilled with the credit agreement being behind us. It gives us unbelievable flexibility over the next several years, and we will be very good stewards of the liquidity that it gives us. And we appreciate your interest in this business and following us today on this call.

So you all have a great afternoon. Thanks so much.

OPERATOR

Thank you for your participation in today’s conference. This does conclude the program. You can now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.