NASDAQ:WEST Westrock Coffee Q2 2024 Earnings Report $6.02 +0.22 (+3.79%) As of 11:21 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Westrock Coffee EPS ResultsActual EPS-$0.20Consensus EPS -$0.04Beat/MissMissed by -$0.16One Year Ago EPS-$0.21Westrock Coffee Revenue ResultsActual Revenue$208.39 millionExpected Revenue$214.40 millionBeat/MissMissed by -$6.01 millionYoY Revenue Growth-7.30%Westrock Coffee Announcement DetailsQuarterQ2 2024Date8/8/2024TimeAfter Market ClosesConference Call DateThursday, August 8, 2024Conference Call Time4:30PM ETUpcoming EarningsWestrock Coffee's Q1 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Westrock Coffee Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 8, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:08Hello, and welcome to WestRock Coffee Company's Second Quarter 2024 Earnings Conference Call. My name is Kathy Darnell, and I'll be coordinating your call today. Following prepared remarks, we will open the call to your questions with instructions to be given at that time. I'll now hand the call over to Robert Munger with WestRock Coffee. Speaker 100:00:35Thank you, and welcome to WestRock Coffee Company's Q2 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. Speaker 100:00:48By now, everyone should have access to the company's 2nd 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. Speaker 100:01:23Please 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 Speaker 200:01:51the call over to Scott Ford, our Co Founder and Chief Executive Officer. Thank you, Robert, and good afternoon, everyone. We have a number of significant updates we're pleased to share with you today in conjunction with the Q2's earnings details, which our CFO, Chris Pletcher, will take you through in just a moment. The Q2 of 2024 marks a celebratory milestone for all of us that have labored so hard for so long to bring to realization. The commencement of commercial operations of our Conway, Arkansas extract and ready to drink facility. Speaker 200:02:22We are in full production and sales mode on our multi serve bottle line. We have completed the start up of our RTD canning line and expect to begin commercial sales off that line in the second half of this year and we are on target for the completion of our glass bottle line later this year. Importantly, as we continue our sales effort to fill these lines, we have several new commitments in hand that we expect will completely fill our RTD can line over the next 18 months. Our glass bottle line remains fully committed to an anchor tenant that we expect will commence purchasing product in mid-twenty 25 and our multi serve bottle line has already been forced to add a second production ship. This essentially completes our commitment to having the lines in place on time and largely sold through before they begin full production. Speaker 200:03:15My hat is off too and my gratitude is profound for each of the team members that financed, designed, built, created products for, sold and commercialized each of the production and packaging lines in this magnificent facility. I know of no other team in the world who could have accomplished these goals in this timeframe and within this budget. Unprecedented and yet so typical of these fantastic individuals who sought each other out and came together from every corner of this industry to do something extraordinary for our customers, shareholders, communities and the farmers who reside at the origin source of these vast and complex global supply chains. As an old and important mentor of mine, Eamon Mahoney once told me, if you're not happy when you can be, you never will be. So today, we are happy to share this exceptionally good news with all of you. Speaker 200:04:12Now having stopped momentarily to celebrate and before I turn the call over to Chris, let me say a word or 2 about our current operations and outlook. The investments we made over the past 2 years in people, processes and systems are paying off handsomely and our core operating and sales metrics are the best they have been in years, hence the 200 basis point improvement in margins. In fact, we were extremely pleased with every key performance metric we measure except for unit sales in our single serve cup segment this quarter. We could have easily been up over 50% in adjusted EBITDA year over year and not just 20% had the retail customer acted just nearly normal in the quarter. We believe the volume miss is primarily due to the trade down in packaging size that the retail private label customer is executing across multiple products as interest rates and fuel prices continue to absorb a disproportionately higher portion of their disposable income. Speaker 200:05:13I doubt that the current single serve cut volume softness is permanent and we have a number of new volume opportunities in this category that we are currently working on, which would not only fill this hole, but be very additive to our business overall. So I remain very optimistic about the market position and commensurate earnings power we are assembling over the next few years. I'd like to conclude my prepared remarks by offering this important insight. Our 2024 and first half of twenty twenty five forecasts are still subject to material movement as volume onboarding discussions are likely to continue through the end of this year. That said, we are now much better equipped to gauge the volumes we expect to move through our in the back half of twenty twenty five once the onboarding transitions are completed. Speaker 200:06:03Therefore, we can now estimate an annualized adjusted EBITDA run rate of somewhere between $125,000,000 $150,000,000 as we exit 2025 and enter 2026. Obviously, we have a number of potential opportunities beyond this base level, including the expected continuing development of the select milk producers joint venture, which we now expect to wind up later this year as our sales pipeline fills for these products. I believe this is the most accurate and helpful information we can share at the moment. And so with that, I'll now turn the call over to Chris for a review of our financial results. Chris? Speaker 200:06:45Thanks, Scott, and good afternoon, everyone. Speaker 300:06:47We're pleased with another strong quarter driven by 13% gross profit growth in our Beverage Solutions segment contributing to 21% growth in our consolidated adjusted EBITDA. On a consolidated basis, net sales for the Q2 were $208,400,000 down 7.3% from the Q2 of 2023. Despite the drop in sales, consolidated gross profit was up 16% driven by operational and procurement improvements in our core coffee business, continued strength within our flavors, extracts and ingredients platform and almost 50% gross profit growth in our SS and T segment. This drove consolidated adjusted EBITDA of $13,700,000 in the Q2 of 2024 which is a 21% increase year over year. Moving to our segments, beverage solutions contributed $163,300,000 of net sales, which is a decrease of approximately 14% compared to the Q2 of last year. Speaker 300:07:46While we continue to see strong results from our flavors extracts ingredients platform with 7% sales growth. Volumes remained under pressure in our core coffee business and for the first time in our single serve cup business driving lower sales in both of those platforms. On our Q1 call, we talked about budget conscious lower and middle income consumers making fewer trips to restaurants and convenience stores. While that continued to be the case in the 2nd quarter, we are now seeing that same consumer group forego purchasing single serve cups in bulk preferring to purchase smaller pack sizes as a way to stretch their paycheck. This trading down negatively impacted our single serve sales volume in the Q2. Speaker 300:08:28But despite the drop in net sales, gross profit in our Beverage Solutions segment increased 13% due to improved gross profit margins in both our coffee and tea and flavors, extracts and ingredients platforms. Adjusted EBITDA from Beverage Solutions for the quarter was $13,200,000 a 13.6% increase compared to our prior year's Q2 and our adjusted EBITDA margin in Beverage Solutions was up 197 basis points. In our Sustainable Sourcing and Traceability segment, sales net of intersegment revenues were $45,100,000 during the Q2 of 2024, an increase of 29% compared to the Q2 of 2023, primarily due to increased sales volumes. Adjusted EBITDA from our SS and T segment for the quarter was approximately $400,000 compared to an adjusted EBITDA loss of approximately $400,000 in the Q2 of 2023. With the launch of our Conway extract and RTD facility, we took several actions intended to optimize our manufacturing footprint and reduce costs. Speaker 300:09:30During the quarter, we consolidated our Concord, North Carolina core coffee operations into a single facility and we announced that during the Q3 we'll be consolidating our In addition to these consolidations, we carried out a reduction in force impacting SG and A functions across all departments. We estimate annualized savings from these initiatives to be approximately $10,000,000 and we expect to begin fully realizing these savings on a run rate basis in the Q1 of 2025. Moving on to capital expenditures. During the Q2, we deployed approximately $36,000,000 of CapEx, primarily related to our Conway extract and RTD facility. Through the end of the second quarter, we spent approximately $245,000,000 of the anticipated $315,000,000 on the Conway facility. Speaker 300:10:27We expect to spend approximately $55,000,000 in the back half of fiscal twenty twenty four and the balance in the first half of twenty twenty five. As I mentioned last quarter, as our Conway CapEx intensity abates and our Conway sales intensity ramps in the first half of twenty twenty five, we expect to be free cash flow positive in the second half of twenty twenty five. At quarter end, we had approximately $140,000,000 of consolidated unrestricted cash and undrawn revolving credit commitments. Our consolidated net secured leverage ratio as of June 30, 2024 was 6.1 times based on an LTM adjusted EBITDA. As we've said all along, we expect leverage to increase and remain elevated during the build out of the Conway facility and these leverage levels are in line with our expectations. Speaker 300:11:16Turning to our outlook for 2024 and 2025. We are narrowing our 2024 consolidated adjusted EBITDA guidance to a range of between $60,000,000 $65,000,000 from the previously announced range of $60,000,000 to $80,000,000 to account for the softness we're experiencing in our single serve cut platform and our current expectations regarding the sales ramp of customers at our Conway extract and RTD facility. While we expect our 2024 consolidated adjusted EBITDA to come in at the lower end of our original range, we are reaffirming our consolidated adjusted EBITDA for fiscal 2025 of $115,000,000 With that, we'll turn the call back over to the operator for questions. Operator00:11:56Thank you. As mentioned, at this time, we'll conduct a question and answer session. Your first question comes from the line of Todd Brooks with The Benchmark Company. Your line is now open. Speaker 400:12:26Hey, thanks for taking my questions. Good to talk to you guys. Scott, I want to lead off with questions on 2 paces within the Conway facility. So it sounds like the commercialization pace as far as lines coming on is tracking to what your expectation was. Is the customer acceptance pace tracking as expected? Speaker 400:12:52And then on top of that, if we could talk about the contracting pace. Speaker 200:12:55There was Speaker 400:12:56a lot of positive news that you kind of flew through at the start, but it sounds like single serve can, good news there, multi serve bottle with the addition of the second line and then hadn't known the fact that single serve bottle was kind of a single tenant type of structure. So any color you could give us would be helpful. Thanks. Speaker 200:13:18Sure. We've got a range of issues with people that we're working through across the board. So commercialization to some extent is dependent not only upon our teams, but the customers. So you've got a lot of companies doing a lot of different things right now. They are reformulating drinks, they are creating new drinks and they're trying to get they've been to have same group has to come in and live in Conway for a few weeks. Speaker 200:13:42So I would say on the whole, we are right where we need to be on that front. I would on the contracting side, we're not trying to get into the habit of announcing every time we do or don't get a contract, but we had some major surprising positive news that came into the house. Whether we get it all squared away to the final contract, I would imagine that we do. But at this juncture, we're trying not to make any assumptions around that front. But I think that what we're experiencing in at a dollar level, estimated level and the reason that we're not quite positive where we're going to come out in the latter part of the year, 1st part of next year is because as the RTD space has experienced softness, they are actually going through for the most part and working through contracts they have with other vendors and the slotting of when we start up and what we start up and what volume that we start up with, that's all very flexible. Speaker 200:14:42And because we have the flexibility to work with people as we are the plant that's just coming up, we are offering to help people and are working through that with our customers so that they have a smooth transition. That is why we gave you the number in the back half of the year of 2025 Whenever all of those gives and takes are settled through, we can see where our run rate is expected to be. We do know the annual volumes that people plan to run with us across all of our lines at this point in time. And that's we think as of what we can see today, we think that's a $125,000,000 to $150,000,000 EBITDA business when they are all in. We are not pressuring them to come in. Speaker 200:15:26We are being good partners and letting them walk in at their pace. And I think it's been highly appreciated across the industry by people that are signing up to help us. Speaker 400:15:36That's great. Thanks. And then a second follow-up and I'll jump back in queue. We know about the three lines that are commercializing this year. Can you walk through what additional lines are slated to come on over the course of 25 in Conway as you see it now? Speaker 400:15:51And then just kind of remind us of the timing for the earliest that the select milk lines down in Texas could come on as well? Thanks. Speaker 200:16:01Right. We expect over the course of 2025, we'll have a small can line. We will have bulk fill lines coming on and we will also have bag in a box. So those are the three things that we expect to turn on in 2025 and answer the first part of your question. Where we are with Select right now, frankly everybody is so busy that we didn't want to push. Speaker 200:16:26We need to get a certain threshold of the line sold out before we turn to the banks that are going to finance the equipment side of the JV. And although we were close, we weren't quite at a number that easily made that possible. So we've delayed it a quarter while we try to number 1, line that up and number 2, get the flexibility in the banking group for the joint venture to be able to move forward with that without having to make trade offs of what we're doing back home in Congo. Speaker 400:16:57That's great. Thanks, Scott. Operator00:17:01Thank you. Speaker 200:17:01Thank you. Operator00:17:05Your next question comes from the line of Matt Smith with Stifel. Your line is now open. Speaker 500:17:11Hi, good morning. I'm sorry, good afternoon. I wanted to come back to the question around the implied run rate in 2025. You gave some nice color there. And I want to understand how the additional lines that are coming online in 2025, you mentioned the small can bag in a box and bulk fill, How you've contemplated the capacity for those lines implied in the EBITDA run rate? Speaker 200:17:38Yes. At this point, we don't have any of those in our EBITDA run rate for the moment. Speaker 500:17:45Okay. Thank you for that. And if we could talk about the single serve pressure you're seeing, you talked about retailers trading down to smaller pack sizes. We've seen that across other categories as well. Are you filling that business? Speaker 500:17:58Or is that contract volume shifting to other vendors that are already set up for the small pack size? And or is this really just a matter of customers purchasing less volume over time, but you're still providing the retailer with the smaller pack sizes? Speaker 200:18:15Yes, it's the latter. Typically, and I can't tell you how the whole industry works. I just know how we work with our retailers. We tend to do a very broad spectrum of packaging sizes for them. So we actually, if the consumer is moving from a 100 count to a 50 count to a 25 count to a 10, we will do whatever the customer volume pulls. Speaker 200:18:39So we do see as we serve the distribution centers precisely and exactly what the volume shift is from the consumer through the store, through the DC to our ability to make any product that they're pulling through at the shelf. So we know that we know that we're right on that. Speaker 500:18:59Thank you, Chad. And maybe if I could follow-up with one more question. The narrowing of the guidance range, the second half comes down, call it, $15,000,000 $20,000,000 relative to your previous expectations. You talked about the pressure in single serve as well as some commercialization activity in Conway. Any direction you can provide on the magnitude of each one of those? Speaker 500:19:21And I'll leave it there. Thank you. Speaker 200:19:23Sure. It's about eighty-twenty cups and commercialization startup. Operator00:19:41Your next question comes from the line of Sarang Vohra with Tag. Your line is now open. Speaker 600:19:47Great. Thank you, guys. So first, it was great to tour the facility earlier in the summer, give a lot of confidence about all these production plans and lines that you are starting. My question is more about next year's production. So the small cans, the bag in the box, those production lines. Speaker 600:20:07Can you share the timing of those openings? Like how are you in terms of like ordering the equipment? Is it more like a second half twenty twenty five story or more like a first half? Just to make sure because I know you said it's not in the guidance. So just trying to understand it better. Speaker 600:20:25Thank you. Speaker 200:20:27Sure. I think it's really twofold. Number 1 is, as we free up the product development workforce that is currently trying to launch 150 individuals SKUs in Conway right now. As we work through that this period of busyness, then we will turn to customers that are asking us for bulk fill, for hot fill bottle lines, for bag in the box. We literally are just stacked up. Speaker 200:20:57It's the same people in commercialization and product development that have to do the work. And so we don't feel any pressure to further pressure our balance sheet to turn lines on until we got the product development group freed up to actually make the products and get them started up. We are going to work through that over the course of the year. It's probably by default a back half of the year impact and it's why we didn't put anything in our guidance for it right now. That's helpful. Speaker 200:21:28Thank you so much. Speaker 600:21:29And margins, especially gross margins were much stronger back to back for Q2. So curious if you can share some color on how it looks in the back half. It's like 19.5%, 20% range or decent range as you look at the back half or with all these changes happening, we need to be more careful in expansion ahead? Speaker 300:21:54This is Chris. I think that those margins should hold. I think what you're seeing is a great job of operational efficiency. I think that our ability to drive down our COGS as we optimize our supply chain is driving real benefits through our P and L, and those things are sustainable. So we'd expect to see those margins hold as we get through the back half of the year. Speaker 100:22:15Thank you. Operator00:22:19Thank you. Your next question comes from the line of Eric De LaRae with Craig Hallum Capital Group. Your line is now open. Speaker 700:22:31Great. Thank you for taking my questions. First one for me on the timing of facility consolidations. Understood the annualized savings won't be fully recognized until 1st part of 2025. But in terms of the actual sort of transition or consolidation, how should we think about timing there? Speaker 300:22:48We started one of the consolidation of the core coffee facility in Concord, North Carolina that took place actually towards kind of the end of the second quarter. The consolidation of the Richmond, California can and bottling, that's going to take place kind of in the 3rd quarter and should be complete by the end of the Q3. Speaker 700:23:14Okay, great. And then those savings, should we expect to see those more on the OpEx side or cost of goods? Speaker 600:23:22You'll see Speaker 300:23:22them more on the OpEx side. You'll see some benefit on the cost of goods side, but mostly on the OpEx. Speaker 700:23:29Yes, makes sense. And then demand for Conway, obviously, quite robust here, kind of getting ahead of ourselves. Obviously, you guys have done a great job kind of filling those filling those lines, commercializing that facility. But given the sort of consolidations of these other facilities, I'm kind of just wondering what sort of capacity may be left in Conway for potential additional lines or overall expansion. I'm just kind of wondering as this is all coming together, sort of how much capacity do you have left in that facility itself? Speaker 300:24:03Well, we have there's excess capacity in the existing lines that put in that we're starting at now. So if you think about the can line, the glass line and then the multi serve bottle line. So there's capacity there to continue to grow in those. And then that also feeds itself into kind of the addition of a smaller can line, media we could add probably, I think, the total is around 6 different kind of lines in the footprint that is Conway from a space constraint perspective. So we have the ability to continue to grow in that facility as demand continues to grow. Speaker 300:24:42Does that answer your question? Speaker 700:24:44Yes, yes, exactly. Thank you very much for taking my questions. Operator00:24:50Thank you. I'm showing no further questions at this time and would now like to turn it back to Scott Ford for closing remarks. Speaker 200:25:00Thank you very much. Well, we appreciate everybody's interest. It's been a wild week in the market. I know everybody's busy, but we were thrilled with the quarter. Operationally, we've been working really hard at improving our metrics. Speaker 200:25:11We did. We beat our I think the median estimate for us by about 14%. We've got a lot of momentum moving into the back half of the year. We have a ton of new customers that are starting to do new lines of business with us even now in Q3. And we are excited about where we are. Speaker 200:25:29I think we are landing the brands that we wanted to land in the Conway facility. And I think you are going to see over the next 12 months an amazing development in that facility. And I just want to end this call with this is really a call to celebrate the people that have built that. And I appreciate what they've done. I'm amazed at what they've done. Speaker 200:25:55We've got to execute now and everybody on the team knows it and they're doing it. And I am looking forward to seeing everybody in the Q3 where we will be in a much better place at that juncture, both contractually to keep to post people on where we are and to give any really any kind of variance guidance we've got into the end of the year and the 1st part of next year. So thank you very much for your support. We continue to be head down delivering on a 5 year project that we're about midway through and I think we are on time and on schedule and I am super pleased. I hope that if you've got any questions, please feel free to follow back up with us and you have a good evening. Speaker 200:26:35Thanks, guys. Operator00:26:36Thank you. This does conclude the program and you may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallWestrock Coffee Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Westrock Coffee Earnings HeadlinesWestrock Coffee Releases 2024 Sustainability Report, Detailing the Company's Vision for 2030April 29 at 8:00 AM | prnewswire.comWestrock Coffee (NASDAQ:WEST) Stock Price Down 5.5% After Analyst DowngradeApril 27, 2025 | americanbankingnews.comWatch This Robotics Demo Before July 23rdJeff Brown, the tech legend who picked shares of Nvidia in 2016 before they jumped by more than 22,000%... Just did a demo of what Nvidia’s CEO said will be "the first multitrillion-dollar robotics industry."May 1, 2025 | Brownstone Research (Ad)Short Interest in Westrock Coffee (NASDAQ:WEST) Increases By 18.1%April 21, 2025 | americanbankingnews.comWestrock Coffee Company to Report First Quarter 2025 Financial Results on May 8th, 2025April 17, 2025 | gurufocus.comWestrock Coffee Company to Report First Quarter 2025 Financial Results on May 8th, 2025 | WEST ...April 17, 2025 | gurufocus.comSee More Westrock Coffee Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Westrock Coffee? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Westrock Coffee and other key companies, straight to your email. Email Address About Westrock CoffeeWestrock Coffee (NASDAQ:WEST) Company, LLC operates as an integrated coffee, tea, flavors, extracts, and ingredients solutions provider in the United States and internationally. It operates through two segments, Beverage Solutions, and Sustainable Sourcing & Traceability (SS&T). The Beverage Solutions segment provides various packaging, including branded and private label coffee in bags, fractional packs, and single serve cups, as well as extract solutions for applications in cold brew and ready-to-drink offerings. The SS&T segment engages in delivery and settlement of forward sales contracts for green coffee. The company offers coffee sourcing, supply chain management, product development, roasting, packaging, and distribution services to the retail, food service and restaurant, convenience store and travel center, non-commercial account, CPG, and hospitality industries. Westrock Coffee Company, LLC was founded in 2009 and is headquartered in Little Rock, Arkansas.View Westrock Coffee ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of EarningsAmazon's Earnings Will Make or Break the Stock's Comeback CrowdStrike Stock Nears Record High, Dip Ahead of Earnings?Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings? 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There are 8 speakers on the call. Operator00:00:08Hello, and welcome to WestRock Coffee Company's Second Quarter 2024 Earnings Conference Call. My name is Kathy Darnell, and I'll be coordinating your call today. Following prepared remarks, we will open the call to your questions with instructions to be given at that time. I'll now hand the call over to Robert Munger with WestRock Coffee. Speaker 100:00:35Thank you, and welcome to WestRock Coffee Company's Q2 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. Speaker 100:00:48By now, everyone should have access to the company's 2nd 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. Speaker 100:01:23Please 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 Speaker 200:01:51the call over to Scott Ford, our Co Founder and Chief Executive Officer. Thank you, Robert, and good afternoon, everyone. We have a number of significant updates we're pleased to share with you today in conjunction with the Q2's earnings details, which our CFO, Chris Pletcher, will take you through in just a moment. The Q2 of 2024 marks a celebratory milestone for all of us that have labored so hard for so long to bring to realization. The commencement of commercial operations of our Conway, Arkansas extract and ready to drink facility. Speaker 200:02:22We are in full production and sales mode on our multi serve bottle line. We have completed the start up of our RTD canning line and expect to begin commercial sales off that line in the second half of this year and we are on target for the completion of our glass bottle line later this year. Importantly, as we continue our sales effort to fill these lines, we have several new commitments in hand that we expect will completely fill our RTD can line over the next 18 months. Our glass bottle line remains fully committed to an anchor tenant that we expect will commence purchasing product in mid-twenty 25 and our multi serve bottle line has already been forced to add a second production ship. This essentially completes our commitment to having the lines in place on time and largely sold through before they begin full production. Speaker 200:03:15My hat is off too and my gratitude is profound for each of the team members that financed, designed, built, created products for, sold and commercialized each of the production and packaging lines in this magnificent facility. I know of no other team in the world who could have accomplished these goals in this timeframe and within this budget. Unprecedented and yet so typical of these fantastic individuals who sought each other out and came together from every corner of this industry to do something extraordinary for our customers, shareholders, communities and the farmers who reside at the origin source of these vast and complex global supply chains. As an old and important mentor of mine, Eamon Mahoney once told me, if you're not happy when you can be, you never will be. So today, we are happy to share this exceptionally good news with all of you. Speaker 200:04:12Now having stopped momentarily to celebrate and before I turn the call over to Chris, let me say a word or 2 about our current operations and outlook. The investments we made over the past 2 years in people, processes and systems are paying off handsomely and our core operating and sales metrics are the best they have been in years, hence the 200 basis point improvement in margins. In fact, we were extremely pleased with every key performance metric we measure except for unit sales in our single serve cup segment this quarter. We could have easily been up over 50% in adjusted EBITDA year over year and not just 20% had the retail customer acted just nearly normal in the quarter. We believe the volume miss is primarily due to the trade down in packaging size that the retail private label customer is executing across multiple products as interest rates and fuel prices continue to absorb a disproportionately higher portion of their disposable income. Speaker 200:05:13I doubt that the current single serve cut volume softness is permanent and we have a number of new volume opportunities in this category that we are currently working on, which would not only fill this hole, but be very additive to our business overall. So I remain very optimistic about the market position and commensurate earnings power we are assembling over the next few years. I'd like to conclude my prepared remarks by offering this important insight. Our 2024 and first half of twenty twenty five forecasts are still subject to material movement as volume onboarding discussions are likely to continue through the end of this year. That said, we are now much better equipped to gauge the volumes we expect to move through our in the back half of twenty twenty five once the onboarding transitions are completed. Speaker 200:06:03Therefore, we can now estimate an annualized adjusted EBITDA run rate of somewhere between $125,000,000 $150,000,000 as we exit 2025 and enter 2026. Obviously, we have a number of potential opportunities beyond this base level, including the expected continuing development of the select milk producers joint venture, which we now expect to wind up later this year as our sales pipeline fills for these products. I believe this is the most accurate and helpful information we can share at the moment. And so with that, I'll now turn the call over to Chris for a review of our financial results. Chris? Speaker 200:06:45Thanks, Scott, and good afternoon, everyone. Speaker 300:06:47We're pleased with another strong quarter driven by 13% gross profit growth in our Beverage Solutions segment contributing to 21% growth in our consolidated adjusted EBITDA. On a consolidated basis, net sales for the Q2 were $208,400,000 down 7.3% from the Q2 of 2023. Despite the drop in sales, consolidated gross profit was up 16% driven by operational and procurement improvements in our core coffee business, continued strength within our flavors, extracts and ingredients platform and almost 50% gross profit growth in our SS and T segment. This drove consolidated adjusted EBITDA of $13,700,000 in the Q2 of 2024 which is a 21% increase year over year. Moving to our segments, beverage solutions contributed $163,300,000 of net sales, which is a decrease of approximately 14% compared to the Q2 of last year. Speaker 300:07:46While we continue to see strong results from our flavors extracts ingredients platform with 7% sales growth. Volumes remained under pressure in our core coffee business and for the first time in our single serve cup business driving lower sales in both of those platforms. On our Q1 call, we talked about budget conscious lower and middle income consumers making fewer trips to restaurants and convenience stores. While that continued to be the case in the 2nd quarter, we are now seeing that same consumer group forego purchasing single serve cups in bulk preferring to purchase smaller pack sizes as a way to stretch their paycheck. This trading down negatively impacted our single serve sales volume in the Q2. Speaker 300:08:28But despite the drop in net sales, gross profit in our Beverage Solutions segment increased 13% due to improved gross profit margins in both our coffee and tea and flavors, extracts and ingredients platforms. Adjusted EBITDA from Beverage Solutions for the quarter was $13,200,000 a 13.6% increase compared to our prior year's Q2 and our adjusted EBITDA margin in Beverage Solutions was up 197 basis points. In our Sustainable Sourcing and Traceability segment, sales net of intersegment revenues were $45,100,000 during the Q2 of 2024, an increase of 29% compared to the Q2 of 2023, primarily due to increased sales volumes. Adjusted EBITDA from our SS and T segment for the quarter was approximately $400,000 compared to an adjusted EBITDA loss of approximately $400,000 in the Q2 of 2023. With the launch of our Conway extract and RTD facility, we took several actions intended to optimize our manufacturing footprint and reduce costs. Speaker 300:09:30During the quarter, we consolidated our Concord, North Carolina core coffee operations into a single facility and we announced that during the Q3 we'll be consolidating our In addition to these consolidations, we carried out a reduction in force impacting SG and A functions across all departments. We estimate annualized savings from these initiatives to be approximately $10,000,000 and we expect to begin fully realizing these savings on a run rate basis in the Q1 of 2025. Moving on to capital expenditures. During the Q2, we deployed approximately $36,000,000 of CapEx, primarily related to our Conway extract and RTD facility. Through the end of the second quarter, we spent approximately $245,000,000 of the anticipated $315,000,000 on the Conway facility. Speaker 300:10:27We expect to spend approximately $55,000,000 in the back half of fiscal twenty twenty four and the balance in the first half of twenty twenty five. As I mentioned last quarter, as our Conway CapEx intensity abates and our Conway sales intensity ramps in the first half of twenty twenty five, we expect to be free cash flow positive in the second half of twenty twenty five. At quarter end, we had approximately $140,000,000 of consolidated unrestricted cash and undrawn revolving credit commitments. Our consolidated net secured leverage ratio as of June 30, 2024 was 6.1 times based on an LTM adjusted EBITDA. As we've said all along, we expect leverage to increase and remain elevated during the build out of the Conway facility and these leverage levels are in line with our expectations. Speaker 300:11:16Turning to our outlook for 2024 and 2025. We are narrowing our 2024 consolidated adjusted EBITDA guidance to a range of between $60,000,000 $65,000,000 from the previously announced range of $60,000,000 to $80,000,000 to account for the softness we're experiencing in our single serve cut platform and our current expectations regarding the sales ramp of customers at our Conway extract and RTD facility. While we expect our 2024 consolidated adjusted EBITDA to come in at the lower end of our original range, we are reaffirming our consolidated adjusted EBITDA for fiscal 2025 of $115,000,000 With that, we'll turn the call back over to the operator for questions. Operator00:11:56Thank you. As mentioned, at this time, we'll conduct a question and answer session. Your first question comes from the line of Todd Brooks with The Benchmark Company. Your line is now open. Speaker 400:12:26Hey, thanks for taking my questions. Good to talk to you guys. Scott, I want to lead off with questions on 2 paces within the Conway facility. So it sounds like the commercialization pace as far as lines coming on is tracking to what your expectation was. Is the customer acceptance pace tracking as expected? Speaker 400:12:52And then on top of that, if we could talk about the contracting pace. Speaker 200:12:55There was Speaker 400:12:56a lot of positive news that you kind of flew through at the start, but it sounds like single serve can, good news there, multi serve bottle with the addition of the second line and then hadn't known the fact that single serve bottle was kind of a single tenant type of structure. So any color you could give us would be helpful. Thanks. Speaker 200:13:18Sure. We've got a range of issues with people that we're working through across the board. So commercialization to some extent is dependent not only upon our teams, but the customers. So you've got a lot of companies doing a lot of different things right now. They are reformulating drinks, they are creating new drinks and they're trying to get they've been to have same group has to come in and live in Conway for a few weeks. Speaker 200:13:42So I would say on the whole, we are right where we need to be on that front. I would on the contracting side, we're not trying to get into the habit of announcing every time we do or don't get a contract, but we had some major surprising positive news that came into the house. Whether we get it all squared away to the final contract, I would imagine that we do. But at this juncture, we're trying not to make any assumptions around that front. But I think that what we're experiencing in at a dollar level, estimated level and the reason that we're not quite positive where we're going to come out in the latter part of the year, 1st part of next year is because as the RTD space has experienced softness, they are actually going through for the most part and working through contracts they have with other vendors and the slotting of when we start up and what we start up and what volume that we start up with, that's all very flexible. Speaker 200:14:42And because we have the flexibility to work with people as we are the plant that's just coming up, we are offering to help people and are working through that with our customers so that they have a smooth transition. That is why we gave you the number in the back half of the year of 2025 Whenever all of those gives and takes are settled through, we can see where our run rate is expected to be. We do know the annual volumes that people plan to run with us across all of our lines at this point in time. And that's we think as of what we can see today, we think that's a $125,000,000 to $150,000,000 EBITDA business when they are all in. We are not pressuring them to come in. Speaker 200:15:26We are being good partners and letting them walk in at their pace. And I think it's been highly appreciated across the industry by people that are signing up to help us. Speaker 400:15:36That's great. Thanks. And then a second follow-up and I'll jump back in queue. We know about the three lines that are commercializing this year. Can you walk through what additional lines are slated to come on over the course of 25 in Conway as you see it now? Speaker 400:15:51And then just kind of remind us of the timing for the earliest that the select milk lines down in Texas could come on as well? Thanks. Speaker 200:16:01Right. We expect over the course of 2025, we'll have a small can line. We will have bulk fill lines coming on and we will also have bag in a box. So those are the three things that we expect to turn on in 2025 and answer the first part of your question. Where we are with Select right now, frankly everybody is so busy that we didn't want to push. Speaker 200:16:26We need to get a certain threshold of the line sold out before we turn to the banks that are going to finance the equipment side of the JV. And although we were close, we weren't quite at a number that easily made that possible. So we've delayed it a quarter while we try to number 1, line that up and number 2, get the flexibility in the banking group for the joint venture to be able to move forward with that without having to make trade offs of what we're doing back home in Congo. Speaker 400:16:57That's great. Thanks, Scott. Operator00:17:01Thank you. Speaker 200:17:01Thank you. Operator00:17:05Your next question comes from the line of Matt Smith with Stifel. Your line is now open. Speaker 500:17:11Hi, good morning. I'm sorry, good afternoon. I wanted to come back to the question around the implied run rate in 2025. You gave some nice color there. And I want to understand how the additional lines that are coming online in 2025, you mentioned the small can bag in a box and bulk fill, How you've contemplated the capacity for those lines implied in the EBITDA run rate? Speaker 200:17:38Yes. At this point, we don't have any of those in our EBITDA run rate for the moment. Speaker 500:17:45Okay. Thank you for that. And if we could talk about the single serve pressure you're seeing, you talked about retailers trading down to smaller pack sizes. We've seen that across other categories as well. Are you filling that business? Speaker 500:17:58Or is that contract volume shifting to other vendors that are already set up for the small pack size? And or is this really just a matter of customers purchasing less volume over time, but you're still providing the retailer with the smaller pack sizes? Speaker 200:18:15Yes, it's the latter. Typically, and I can't tell you how the whole industry works. I just know how we work with our retailers. We tend to do a very broad spectrum of packaging sizes for them. So we actually, if the consumer is moving from a 100 count to a 50 count to a 25 count to a 10, we will do whatever the customer volume pulls. Speaker 200:18:39So we do see as we serve the distribution centers precisely and exactly what the volume shift is from the consumer through the store, through the DC to our ability to make any product that they're pulling through at the shelf. So we know that we know that we're right on that. Speaker 500:18:59Thank you, Chad. And maybe if I could follow-up with one more question. The narrowing of the guidance range, the second half comes down, call it, $15,000,000 $20,000,000 relative to your previous expectations. You talked about the pressure in single serve as well as some commercialization activity in Conway. Any direction you can provide on the magnitude of each one of those? Speaker 500:19:21And I'll leave it there. Thank you. Speaker 200:19:23Sure. It's about eighty-twenty cups and commercialization startup. Operator00:19:41Your next question comes from the line of Sarang Vohra with Tag. Your line is now open. Speaker 600:19:47Great. Thank you, guys. So first, it was great to tour the facility earlier in the summer, give a lot of confidence about all these production plans and lines that you are starting. My question is more about next year's production. So the small cans, the bag in the box, those production lines. Speaker 600:20:07Can you share the timing of those openings? Like how are you in terms of like ordering the equipment? Is it more like a second half twenty twenty five story or more like a first half? Just to make sure because I know you said it's not in the guidance. So just trying to understand it better. Speaker 600:20:25Thank you. Speaker 200:20:27Sure. I think it's really twofold. Number 1 is, as we free up the product development workforce that is currently trying to launch 150 individuals SKUs in Conway right now. As we work through that this period of busyness, then we will turn to customers that are asking us for bulk fill, for hot fill bottle lines, for bag in the box. We literally are just stacked up. Speaker 200:20:57It's the same people in commercialization and product development that have to do the work. And so we don't feel any pressure to further pressure our balance sheet to turn lines on until we got the product development group freed up to actually make the products and get them started up. We are going to work through that over the course of the year. It's probably by default a back half of the year impact and it's why we didn't put anything in our guidance for it right now. That's helpful. Speaker 200:21:28Thank you so much. Speaker 600:21:29And margins, especially gross margins were much stronger back to back for Q2. So curious if you can share some color on how it looks in the back half. It's like 19.5%, 20% range or decent range as you look at the back half or with all these changes happening, we need to be more careful in expansion ahead? Speaker 300:21:54This is Chris. I think that those margins should hold. I think what you're seeing is a great job of operational efficiency. I think that our ability to drive down our COGS as we optimize our supply chain is driving real benefits through our P and L, and those things are sustainable. So we'd expect to see those margins hold as we get through the back half of the year. Speaker 100:22:15Thank you. Operator00:22:19Thank you. Your next question comes from the line of Eric De LaRae with Craig Hallum Capital Group. Your line is now open. Speaker 700:22:31Great. Thank you for taking my questions. First one for me on the timing of facility consolidations. Understood the annualized savings won't be fully recognized until 1st part of 2025. But in terms of the actual sort of transition or consolidation, how should we think about timing there? Speaker 300:22:48We started one of the consolidation of the core coffee facility in Concord, North Carolina that took place actually towards kind of the end of the second quarter. The consolidation of the Richmond, California can and bottling, that's going to take place kind of in the 3rd quarter and should be complete by the end of the Q3. Speaker 700:23:14Okay, great. And then those savings, should we expect to see those more on the OpEx side or cost of goods? Speaker 600:23:22You'll see Speaker 300:23:22them more on the OpEx side. You'll see some benefit on the cost of goods side, but mostly on the OpEx. Speaker 700:23:29Yes, makes sense. And then demand for Conway, obviously, quite robust here, kind of getting ahead of ourselves. Obviously, you guys have done a great job kind of filling those filling those lines, commercializing that facility. But given the sort of consolidations of these other facilities, I'm kind of just wondering what sort of capacity may be left in Conway for potential additional lines or overall expansion. I'm just kind of wondering as this is all coming together, sort of how much capacity do you have left in that facility itself? Speaker 300:24:03Well, we have there's excess capacity in the existing lines that put in that we're starting at now. So if you think about the can line, the glass line and then the multi serve bottle line. So there's capacity there to continue to grow in those. And then that also feeds itself into kind of the addition of a smaller can line, media we could add probably, I think, the total is around 6 different kind of lines in the footprint that is Conway from a space constraint perspective. So we have the ability to continue to grow in that facility as demand continues to grow. Speaker 300:24:42Does that answer your question? Speaker 700:24:44Yes, yes, exactly. Thank you very much for taking my questions. Operator00:24:50Thank you. I'm showing no further questions at this time and would now like to turn it back to Scott Ford for closing remarks. Speaker 200:25:00Thank you very much. Well, we appreciate everybody's interest. It's been a wild week in the market. I know everybody's busy, but we were thrilled with the quarter. Operationally, we've been working really hard at improving our metrics. Speaker 200:25:11We did. We beat our I think the median estimate for us by about 14%. We've got a lot of momentum moving into the back half of the year. We have a ton of new customers that are starting to do new lines of business with us even now in Q3. And we are excited about where we are. Speaker 200:25:29I think we are landing the brands that we wanted to land in the Conway facility. And I think you are going to see over the next 12 months an amazing development in that facility. And I just want to end this call with this is really a call to celebrate the people that have built that. And I appreciate what they've done. I'm amazed at what they've done. Speaker 200:25:55We've got to execute now and everybody on the team knows it and they're doing it. And I am looking forward to seeing everybody in the Q3 where we will be in a much better place at that juncture, both contractually to keep to post people on where we are and to give any really any kind of variance guidance we've got into the end of the year and the 1st part of next year. So thank you very much for your support. We continue to be head down delivering on a 5 year project that we're about midway through and I think we are on time and on schedule and I am super pleased. I hope that if you've got any questions, please feel free to follow back up with us and you have a good evening. Speaker 200:26:35Thanks, guys. Operator00:26:36Thank you. This does conclude the program and you may now disconnect.Read morePowered by