LITTLE ROCK, Ark., Nov. 09, 2023 (GLOBE NEWSWIRE) -- Westrock Coffee Company (Nasdaq: WEST) (“Westrock Coffee” or the “Company”) today reported financial results for the third quarter ended September 30, 2023.

Scott T. Ford, CEO and Co-founder stated, “Our third quarter performance was a mix of positives and negatives, the most important, unfortunately, being the rapid fall off in volume demand for our traditional roast and ground coffee products during the early part of the quarter, which drove weaker than projected Adjusted EBITDA results for the period. While hot coffee volumes have since stabilized and we continue to see great progress in monetizing our flavors, extracts and ingredients and single serve product portfolios, the negative impact of July and August in hot coffee was too much for the other parts of our business to overcome in the quarter. This will be less true next summer as our new extract and ready-to-drink facility in Conway, Arkansas is on schedule to begin production in the second quarter of 2024.”

Third Quarter Highlights

  • Consolidated net sales were $219.6 million for the third quarter of 2023, a decrease of $10.7 million, or 4.6%, compared to the third quarter of 2022.
  • Consolidated gross profit for the third quarter of 2023 was $35.1 million and included $1.8 million of out-of-period charges and $1.2 million of non-cash mark-to-market losses, compared to consolidated gross profit of $41.1 million for the third quarter of 2022, which included $0.5 million of non-cash mark-to-market losses.
  • Net income for the period was $16.6 million, compared to a net loss of $13.0 million for the third quarter of 2022. The $16.6 million net income for the third quarter of 2023 included $3.1 million of acquisition, restructuring and integration expense, $3.0 million of start-up costs related to our Conway, AR extract and ready-to-drink facility, and $25.1 million of non-cash gains from the change in fair value of warrant liabilities. Net loss of $13.0 million for the third quarter of 2022 included $4.0 million of acquisition, restructuring and integration expense and $5.2 million of non-cash expense from the change in fair value of warrant liabilities.
  • Adjusted EBITDA was $11.6 million for the third quarter of 2023, a decrease of $6.3 million, compared to the third quarter of 2022.
  • Beverage Solutions segment contributed $176.8 million of net sales and $9.9 million of Adjusted EBITDA for the third quarter of 2023, compared to $173.5 million and $15.9 million, respectively, for the third quarter of 2022.
  • SS&T segment, net of intersegment revenues, contributed $42.8 million of net sales and Adjusted EBITDA of $1.7 million for the third quarter of 2023, compared to $56.8 million and $2.0 million, respectively, for the third quarter of 2022.

2023 Outlook

The Company expects its 2023 outlook for Adjusted EBITDA to fall below its previously issued guidance range of flat to 10% over 2022. The Company will provide further details on its outlook on its third quarter conference call.

The Company is not readily able to provide a reconciliation of forecasted Adjusted EBITDA to forecasted GAAP net income without unreasonable effort because certain items that impact such figure are uncertain or outside the Company’s control and cannot be reasonably predicted. Such items include the impacts of non-cash gains or losses resulting from mark-to-market adjustments of derivatives and the change in fair value of warrant liabilities, among others.

Conference Call Details

Westrock Coffee will host a conference call and webcast at 4:30 p.m. ET today to discuss this release. To participate in the live earnings call and question and answer session, please register at https://register.vevent.com/register/BI4fa3f978f6c641cc967a237a95250f87 and dial-in information will be provided directly to you. The live audio webcast will be accessible in the “Events and Presentations” section of the Company’s Investor Relations website at https://investors.westrockcoffee.com/. An archived replay of the webcast will be available shortly after the live event has concluded and will be available for a minimum of 14 days.

About Westrock Coffee

Westrock Coffee is a leading integrated coffee, tea, flavors, extracts, and ingredients solutions provider in the United States, providing 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 around the world. With offices in 10 countries, the company sources coffee and tea from 35 origin countries.

Forward-Looking Statements

Certain statements in this press release that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended from time to time. Forward-looking statements generally are accompanied by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "plan," "predict," "potential," "seem," "seek," "future," "outlook," and similar expressions that predict or indicate future events or trends or that are not statements of historical matters, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements include, but are not limited to, our 2023 financial outlook, certain plans, expectations, goals, projections, and statements about the timing and benefits of the build-out, and our ability to sell or commit the capacity prior to commencement of commercial production, of the Company's Conway, Arkansas extract and ready-to-drink facility, the plans, objectives, expectations, and intentions of Westrock Coffee, and other statements that are not historical facts. These statements are based on information available to Westrock Coffee as of the date hereof and Westrock Coffee is not under any duty to update any of the forward-looking statements after the date of this communication to conform these statements to actual results. These statements are based on various assumptions, whether or not identified in this communication, and on the current expectations of the management of Westrock Coffee as of the date hereof and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as and should not be relied on by an investor, or others, as a guarantee, an assurance, a prediction, or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Westrock Coffee. These forward-looking statements are subject to a number of risks and uncertainties, including, but not limited to, changes in domestic and foreign business, market, financial, political, and legal conditions; risks relating to the uncertainty of the projected financial information with respect to Westrock Coffee; risks related to the rollout of Westrock Coffee's business and the timing of expected business milestones; the effects of competition on Westrock Coffee's business; the ability of Westrock Coffee to issue equity or equity-linked securities or obtain debt financing in the future; the risk that Westrock Coffee fails to fully realize the potential benefits of acquisitions or has difficulty successfully integrating acquired companies; the availability of equipment and the timely performance by suppliers involved with the build-out of the Conway, Arkansas facility; the loss of significant customers or delays in bringing their products to market; and those factors discussed in Westrock Coffee’s Annual Report on Form 10-K, which was filed with the United States Securities and Exchange Commission (the “SEC”) on March 21, 2023, in Part I, Item 1A “Risk Factors” and other documents Westrock Coffee has filed, or will file, with the SEC. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Westrock Coffee does not presently know, or that Westrock Coffee currently believes are immaterial, that could also cause actual results to differ from those contained in the forward-looking statements. In addition, the forward-looking statements reflect Westrock Coffee's expectations, plans, or forecasts of future events and views as of the date of this communication. Westrock Coffee anticipates that subsequent events and developments will cause Westrock Coffee's assessments to change. However, while Westrock Coffee may elect to update these forward-looking statements at some point in the future, Westrock Coffee specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as a representation of Westrock Coffee's assessments as of any date subsequent to the date of this communication. Accordingly, undue reliance should not be placed upon the forward-looking statements.

Contacts

Media:

ICR for Westrock: Westrock@icrinc.com

Investor Relations:

ICR for Westrock: WestrockCoffeeIR@icrinc.com


Westrock Coffee Company
Condensed Consolidated Balance Sheets
(Unaudited)

      
(Thousands, except par value) September 30, 2023 December 31, 2022
ASSETS      
Cash and cash equivalents $44,407  $16,838 
Restricted cash  4,408   9,567 
Accounts receivable, net of allowance for credit losses of $3,301 and $3,023, respectively  99,564   101,639 
Inventories  161,346   145,836 
Derivative assets  15,159   15,053 
Prepaid expenses and other current assets  14,712   9,166 
Total current assets  339,596   298,099 
       
Property, plant and equipment, net  287,763   185,206 
Goodwill  116,353   113,999 
Intangible assets, net  125,062   130,886 
Operating lease right-of-use assets  14,496   11,090 
Other long-term assets  7,801   6,933 
Total Assets $891,071  $746,213 
       
LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY      
Current maturities of long-term debt $9,293  $11,504 
Short-term debt  53,045   42,905 
Accounts payable  62,393   116,675 
Supply chain finance program  67,466   — 
Derivative liabilities  5,098   7,592 
Accrued expenses and other current liabilities  24,855   37,459 
Total current liabilities  222,150   216,135 
       
Long-term debt, net  205,767   162,502 
Deferred income taxes  12,620   14,355 
Warrant liabilities  36,175   55,521 
Other long-term liabilities  13,879   11,035 
Total liabilities  490,591   459,548 
       
Commitments and contingencies      
       
Series A Convertible Preferred Shares, $0.01 par value, 24,000 shares authorized, 23,512 shares and 23,588 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively, $11.50 liquidation value  274,303   274,936 
       
Shareholders' Equity      
Preferred stock, $0.01 par value, 26,000 shares authorized, no shares issued and outstanding  —   — 
Common stock, $0.01 par value, 300,000 shares authorized, 88,039 shares and 75,020 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively  880   750 
Additional paid-in-capital  469,167   342,664 
Accumulated deficit  (342,573)  (328,042)
Accumulated other comprehensive loss  (1,297)  (6,103)
Total shareholders' equity attributable to Westrock Coffee Company  126,177   9,269 
Non-controlling interest  —   2,460 
Total shareholders' equity  126,177   11,729 
       
Total Liabilities, Convertible Preferred Shares and Shareholders' Equity $891,071  $746,213 


Westrock Coffee Company
Condensed Consolidated Statements of Operations
(Unaudited)

             
  Three Months Ended September 30, Nine Months Ended September 30,
(Thousands, except per share data) 2023
 2022
 2023
 2022
Net sales $219,612  $230,308  $649,748  $640,149 
Costs of sales  184,546   189,169   544,707   521,681 
Gross profit  35,066   41,139   105,041   118,468 
             
Selling, general and administrative expense  37,050   31,223   105,275   101,332 
Acquisition, restructuring and integration expense  3,137   3,959   12,682   8,746 
Loss on disposal of property, plant and equipment  248   459   1,145   748 
Total operating expenses  40,435   35,641   119,102   110,826 
Income (loss) from operations  (5,369)  5,498   (14,061)  7,642 
             
Other (income) expense            
Interest expense, net  7,803   13,404   21,216   30,265 
Change in fair value of warrant liabilities  (25,105)  5,215   (18,833)  5,215 
Other, net  510   325   1,323   (785)
Income (loss) before income taxes and equity in earnings from unconsolidated entities  11,423   (13,446)  (17,767)  (27,053)
Income tax expense (benefit)  (5,212)  (428)  (3,331)  (3,511)
Equity in (earnings) loss from unconsolidated entities  14   —   80   — 
Net income (loss) $16,621  $(13,018) $(14,516) $(23,542)
Net income (loss) attributable to non-controlling interest  —   (22)  15   43 
Net income (loss) attributable to shareholders  16,621   (12,996)  (14,531)  (23,585)
Participating securities' share in earnings  (3,912)  —   —   — 
Accretion of Series A Convertible Preferred Shares  93   —   (249)  — 
Loss on extinguishment of Redeemable Common Equivalent Preferred Units, net  —   (2,870)  —   (2,870)
Common equivalent preferred dividends  —   (4,380)  —   (4,380)
Accumulating preferred dividends  —   —   —   (13,882)
Net income (loss) attributable to common shareholders $12,802  $(20,246) $(14,780) $(44,717)
             
Earnings (loss) per common share:            
Basic $0.15  $(0.41) $(0.19) $(1.12)
Diluted $0.15  $(0.41) $(0.19) $(1.12)
             
Weighted-average number of shares outstanding:            
Basic  83,437   49,795   78,203   39,819 
Diluted  107,080   49,795   78,203   39,819 


Westrock Coffee Company
Condensed Consolidated Statements of Cash Flows
(Unaudited)

       
  Nine Months Ended September 30,
(Thousands) 2023
 2022
Cash flows from operating activities:      
Net loss $(14,516) $(23,542)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:       
Depreciation and amortization  18,419   17,782 
Equity-based compensation  6,297   1,184 
Paid-in-kind interest added to debt principal  —   295 
Provision for credit losses  278   1,286 
Amortization of deferred financing fees included in interest expense, net  1,560   1,350 
Write-off of unamortized deferred financing fees  —   4,296 
Loss on debt extinguishment  —   1,580 
Loss on disposal of property, plant and equipment  1,145   748 
Mark-to-market adjustments  (1,045)  793 
Change in fair value of warrant liabilities  (18,833)  5,215 
Foreign currency transactions  1,481   355 
Deferred income tax (benefit) expense  (3,331)  (3,511)
Other  1,443   — 
Change in operating assets and liabilities:      
Accounts receivable  1,993   (13,891)
Inventories  (14,153)  (61,180)
Derivative assets and liabilities  4,090   (14,661)
Prepaid expense and other assets  (8,469)  (14,944)
Accounts payable  (50,254)  29,834 
Accrued liabilities and other  (1,236)  7,477 
Net cash used in operating activities  (75,131)  (59,534)
Cash flows from investing activities:      
Additions to property, plant and equipment  (121,545)  (22,966)
Additions to intangible assets  (147)  (135)
Acquisition of business, net of cash acquired  (2,392)  — 
Acquisition of equity method investments and non-marketable securities  (1,385)  — 
Proceeds from sale of property, plant and equipment  198   3,300 
Net cash used in investing activities  (125,271)  (19,801)
Cash flows from financing activities:      
Payments on debt  (170,522)  (407,384)
Proceeds from debt  221,509   319,100 
Proceeds from supply chain financing program  69,787   — 
Payments on supply chain financing program  (2,321)  — 
Proceeds from related party debt  —   11,700 
Debt extinguishment costs  —   (1,580)
Payment of debt issuance costs  (3,023)  (6,007)
Proceeds from de-SPAC merger and PIPE financing  —   255,737 
Proceeds from common equity issuance  118,767   — 
Payment of common equity issuance costs  (1,000)  (24,220)
Payment of preferred equity issuance costs  —   (1,250)
Net proceeds from (repayments of) repurchase agreements  (8,553)  10,951 
Proceeds from exercise of stock options  848   — 
Proceeds from exercise of Public Warrants  2,632   — 
Common equivalent preferred dividends  —   (4,380)
Payment for purchase of non-controlling interest  (2,000)  — 
Payment for taxes for net share settlement of equity awards  (2,977)  (477)
Net cash provided by financing activities  223,147   152,190 
Effect of exchange rate changes on cash  (335)  (179)
Net increase in cash and cash equivalents and restricted cash  22,410   72,676 
Cash and cash equivalents and restricted cash at beginning of period  26,405   22,870 
Cash and cash equivalents and restricted cash at end of period $48,815  $95,546 
       
Supplemental non-cash investing and financing activities:      
Property, plant and equipment acquired but not yet paid $4,441  $596 
Issuance of common shares related to Public Warrant exercise  3,144   — 
Issuance of common shares related to restricted stock units vesting  3,320   — 
Issuance of common shares related to acquisitions  446   — 
Issuance of common shares related to conversion of Series A Preferred Shares  882   — 
Issuance of common shares related to purchase of non-controlling interest  475   — 
Accretion of convertible preferred shares  249   — 
Accumulating preferred dividends  —   13,882 
Exchange of Redeemable Common Equivalent Preferred Units for Series A Convertible Preferred Shares  —   271,539 
Exchange of Redeemable Common Equivalent Preferred Units for common shares  —   24,214 
Related party debt exchanged for common shares  —   25,000 
Loss on extinguishment of Common Equivalent Preferred Units  —   2,870 


Westrock Coffee Company
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA
(Unaudited)

             
  Three Months Ended September 30, Nine Months Ended September 30,
(Thousands) 2023
 2022
 2023
 2022
Net income (loss) $16,621  $(13,018) $(14,516) $(23,542)
Interest expense, net  7,803   13,404   21,216   30,265 
Income tax expense (benefit)  (5,212)  (428)  (3,331)  (3,511)
Depreciation and amortization  6,364   5,816   18,419   17,782 
EBITDA   25,576   5,774   21,788   20,994 
Acquisition, restructuring and integration expense  3,137   3,959   12,682   8,746 
Change in fair value of warrant liabilities  (25,105)  5,215   (18,833)  5,215 
Management and consulting fees (S&D Coffee, Inc. acquisition)  —   834   556   3,035 
Equity-based compensation  2,439   705   6,297   1,184 
Conway extract and ready-to-drink facility start-up costs  3,035   —   6,615   — 
Mark-to-market adjustments  1,160   543   (1,045)  793 
Loss on disposal of property, plant and equipment  248   459   1,145   748 
Other  1,105   424   2,153   1,885 
Adjusted EBITDA  $11,595  $17,913  $31,358  $42,600 


Westrock Coffee Company
Reconciliation of Segment Results
(Unaudited)

                 
  Three Months Ended September 30, Nine Months Ended September 30,
(Thousands) 2023 2022 2023 2022
Net Sales                
Beverage Solutions $176,818  $173,486  $547,746  $492,712 
Sustainable Sourcing & Traceability1  42,794   56,822   102,002   147,437 
Total of Reportable Segments $219,612  $230,308  $649,748  $640,149 


                 
  Three Months Ended September 30, Nine Months Ended September 30,
(Thousands) 2023 2022 2023 2022
Gross Profit                
Beverage Solutions $31,898  $37,120  $94,868  $108,395 
Sustainable Sourcing & Traceability  3,168   4,019   10,173   10,073 
Total of Reportable Segments $35,066  $41,139  $105,041  $118,468 


                 
  Three Months Ended September 30, Nine Months Ended September 30,
(Thousands) 2023 2022 2023 2022
Adjusted EBITDA                 
Beverage Solutions $9,884  $15,885  $29,965  $38,776 
Sustainable Sourcing & Traceability  1,711   2,028   1,393   3,824 
Total of Reportable Segments $11,595  $17,913  $31,358  $42,600 

1 - Net of intersegment revenues

Non-GAAP Financial Measures

We refer to EBITDA and Adjusted EBITDA in our analysis of our results of operations, which are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). While we believe that net (loss) income, as defined by GAAP, is the most appropriate earnings measure, we also believe that EBITDA and Adjusted EBITDA are important non-GAAP supplemental measures of operating performance as they contribute to a meaningful evaluation of the Company’s future operating performance and comparisons to the Company’s past operating performance. Additionally, we use these non-GAAP financial measures in evaluating the performance of our segments, to make operational and financial decisions and in our budgeting and planning process. The Company believes that providing these non-GAAP financial measures to investors helps investors evaluate the Company’s operating performance, profitability and business trends in a way that is consistent with how management evaluates such performance.

We define “EBITDA” as net (loss) income, as defined by GAAP, before interest expense, net, provision for income taxes and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA before equity-based compensation expense and the impact, which may be recurring in nature, of acquisition, restructuring and integration related costs, including management services and consulting agreements entered into in connection with the acquisition of S&D Coffee, Inc., impairment charges, changes in the fair value of warrant liabilities, non-cash mark-to-market adjustments, certain costs specifically excluded from the calculation of EBITDA under our material debt agreements, such as facility start-up costs, the write off of unamortized deferred financing costs, costs incurred as a result of the early repayment of debt, gains or losses on dispositions, and other similar or infrequent items (although we may not have had such charges in the periods presented). We believe EBITDA and Adjusted EBITDA are important supplemental measures to net (loss) income because they provide additional information to evaluate our operating performance on an unleveraged basis. In addition, Adjusted EBITDA is calculated similar to defined terms in our material debt agreements used to determine compliance with specific financial covenants.

Since EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, they should be viewed in addition to, and not be considered as alternatives for, net (loss) income determined in accordance with GAAP. Further, our computations of EBITDA and Adjusted EBITDA may not be comparable to that reported by other companies that define EBITDA and Adjusted EBITDA differently than we do.