Executive Summary

Q3 2025 delivered strong top-line and profitability with revenues up 46.9% YoY to $778.3M and net income up to $18.9M; management raised FY25 guidance for sales to $2.40–$2.55B and Adjusted EBITDA to $205–$215M on improved visibility and execution .
Gross margin percent fell YoY (15.0% vs 17.5%) on regional mix/El Niño, but improved vs Q2 (15.0% vs 13.3%) as value-added and mix initiatives supported gross profit per kilo (+9.6% YoY to $0.91) .
Working capital and credit metrics improved: operating cycle accelerated by 20 days; LTM leverage improved to 4.6x (from 4.8x YoY) and interest coverage at 1.5x; Q3 Adjusted Free Cash Flow was $144.5M .
Management sees larger South American/selected African crops in FY26 and better margin profile as volumes normalize; mix benefits and throughput expected to help margins next year .

What Went Well and What Went Wrong

What Went Well
- Revenue growth: Q3 sales rose 46.9% YoY on higher average price per kilo and volumes; Adjusted EBITDA rose to $80.5M (vs $64.5M) .
- Mix/value-add: Average gross profit per kilo increased to $0.91 (from $0.83) driven by more favorable customer mix and value-added businesses; on the call, CFO clarified the value-added driver was cut rag (not e‑liquids) .
- Guidance raise: FY25 sales guidance lifted to $2.40–$2.55B (from $2.15–$2.35B) and Adjusted EBITDA to $205–$215M (from $175–$195M) .
What Went Wrong
- Margin compression YoY: Gross margin % declined to 15.0% (from 17.5%) due to regional mix and El Niño impact on South America .
- Processing margin pressure: “Processing and other” gross profit in Q3 fell YoY ($3.9M vs $9.2M) and margin % dropped (12.0% vs 32.2%) .
- Financing intensity persists: Interest coverage remains low at 1.5x LTM; seasonal working capital still requires significant short-term financing, though leverage improved YoY .

Financial Results

Headline metrics vs prior year and prior quarter

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Millions)	$529.8	$566.3	$778.3
Net Income Attributable to PYYX ($USD Millions)	$3.8	$(3.2)	$18.9
Diluted EPS ($)	$0.15	$(0.12)	$0.74
Gross Profit ($USD Millions)	$92.5	$75.5	$116.4
Gross Margin %	17.5%	13.3%	15.0%
SG&A ($USD Millions)	$42.4	$38.9	$46.5
Operating Income ($USD Millions)	$47.8	$33.1	$66.1
Adjusted EBITDA ($USD Millions, non‑GAAP)	$64.5	$44.3	$80.5

Segment revenue and key unit economics (Q3)

Segment / KPI	Q3 2024	Q3 2025
Leaf Product Revenues ($USD Millions)	$500.5	$742.9
Kilos Sold (Millions)	100.0	123.5
Avg Price per Kilo ($)	$5.01	$6.02
Avg Gross Profit per Kilo ($)	$0.83	$0.91
Processing & Other Revenues ($USD Millions)	$28.6	$32.4
Processing & Other Gross Profit ($USD Millions)	$9.2	$3.9
All Other Sales ($USD Millions)	$0.7	$3.0

Operational KPIs (leaf) across quarters

KPI	Q3 2024	Q2 2025	Q3 2025
Kilos Sold (Millions)	100.0	86.0	123.5
Avg Price per Kilo ($)	$5.01	$6.00	$6.02
Avg Gross Profit per Kilo ($)	$0.83	$0.80	$0.91

Cash flow and balance sheet highlights (Q3 vs prior year)

Metric	Q3 2024	Q3 2025
Adjusted Free Cash Flow ($USD Millions, non‑GAAP)	$81.5	$144.5
Processed Tobacco Inventory ($USD Millions)	$659.0	$603.3
Uncommitted Inventory ($USD Millions)	$32.3	$21.9
LTM Leverage (Net Debt/Adj. EBITDA)	4.8x	4.6x
LTM Interest Coverage (Adj. EBITDA/Interest)	1.6x	1.5x

Estimates vs Actuals

S&P Global consensus for Q3 2025 (revenue, EPS, EBITDA) was unavailable at time of analysis due to data access limits; therefore, no beat/miss determination is provided. Values from S&P Global were unavailable.

Non-GAAP note: Adjusted EBITDA and Adjusted Free Cash Flow are non‑GAAP measures; see company reconciliations in the Q3 press release/8‑K .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales	FY 2025	$2.15–$2.35B	$2.40–$2.55B	Raised
Adjusted EBITDA	FY 2025	$175–$195M	$205–$215M	Raised

Management rationale: visibility into committed inventory/shipments, stabilization in logistics, and mix/value‑added offsets to El Niño impacts .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 FY25)	Current Period (Q3 FY25)	Trend
Demand & Supply Balance	Healthy demand; El Niño shortened crops; customers relatively short duration; expect larger crops next year; aiming for strong 2H .	Demand remains healthy; South American crop ~30% larger YoY expected; better volumes and margin profile in FY26; Africa growing conditions “promising” .	Improving supply outlook into FY26.
Gross Profit per Kilo & Mix	GP/kilo improved; margin % pressured by South America mix; mitigation via regional/customer mix .	GP/kilo +9.6% YoY to $0.91; value-add cut rag cited as driver (not e-liquids) .	Mix benefits sustaining.
Logistics & Shipping	Container constraints and Red Sea/Panama impacts slowed allocation; mitigated via accelerated shipments from other regions .	Shipping stabilization aided Q3 volumes; timing consolidations benefited quarter .	Easing constraints.
Working Capital & Credit Profile	Peak inventory/seasonal lines in Q2; expect improvement as shipments convert to cash; exploring refinancing .	Operating cycle improved by 20 days; Adj FCF $144.5M in Q3; leverage 4.6x, interest coverage 1.5x; targeting lower borrowing costs .	Improving leverage; still focus area.
Capital Structure	Retired/repurchased long-term debt; evaluating options; potential rate reductions in FY26 .	Continuing to explore refinancing; management views equity undervalued vs peer multiples .	Ongoing optimization.
Non-combustibles/e‑liquids	E‑liquids mentioned as small segment .	E‑liquids “about flat”; value-add driver is cut rag .	Stable/small.

Management Commentary

CEO: “We are pleased to report a strong third quarter…drive both volume and margin…mitigate challenges, including a strong El Niño… and a destructive hurricane season in the U.S.” .
CFO: “Revenues…up 47% to $778 million…20% increase in average sales price and a 24% increase in volumes…Gross profit…mainly due to a 9.6% increase in average gross profit per kilo…We expect the same benefits to occur in the fourth quarter” .
Outlook: “South American crop…about 30% larger than last year…should give…better volumes and a better margin profile…Africa…so far, looking positive” .
Capital structure: “We are actively exploring opportunities to lower our borrowing costs as we improve our credit profile” .

Q&A Highlights

Value-added driver: Cut rag, not e‑liquids; e‑liquids flat .
Receivables spike: Tied to strong shipments/sales; normal cash cycle timing .
Cash flow in Q4: While no explicit cash flow guidance, CFO noted EBITDA add of $25–$35M in Q4 and later Brazilian purchasing improving cash flow vs last year .
FY26 setup: Larger South American crops and recovering third‑party processing expected to improve volumes and margins, assuming current conditions persist .
Valuation/capital: Management believes stock undervalued; considering refinancing to reduce interest burden .

Estimates Context

Wall Street consensus (S&P Global) for Q3 2025 revenue/EPS/EBITDA was unavailable at time of analysis due to data access limits; no estimate comparison or beat/miss determination is provided. Values from S&P Global were unavailable.

Key Takeaways for Investors

Guidance upgrade is the near-term catalyst: FY25 sales raised by ~11% at the midpoint and Adjusted EBITDA by ~17% vs prior guide, reflecting improved shipment visibility and mix execution .
Margin trajectory improving sequentially: Gross margin % recovered vs Q2, and GP/kilo improved YoY on customer mix and value-added cut rag; management expects similar benefits in Q4 .
FY26 setup constructive: Expectation of larger South American and African crops plus normalization in processing volumes suggests potential margin expansion alongside volume growth next year .
Balance sheet trend better but still a watch item: Leverage ticking down and strong Q3 Adj FCF reduce risk; low interest coverage and seasonal working capital intensity keep capital structure optimization in focus .
Mix and execution matter more than category growth: Despite El Niño and logistics headwinds, diversified footprint and regional mix allowed share capture/opportunistic sourcing; this playbook remains intact .
Governance/leadership note: CFO resignation announced post‑quarter with interim CFO appointed; watch continuity of capital structure initiatives .

Additional Context and Prior Quarters

Q2 FY25: Revenues $566.3M; Adjusted EBITDA $44.3M; gross margin 13.3%; guidance raised to $2.15–$2.35B sales and $175–$195M Adj EBITDA .
Q1 FY25: Revenues $634.9M; Adjusted EBITDA $55.0M; reiterated initial FY25 guide; noted elevated container costs and shipping constraints .

Sources: Q3 FY25 press release/8‑K and reconciliations ; Q3 FY25 earnings call transcript ; Q2 FY25 materials ; Q1 FY25 materials ; CFO departure press release .

PYXUS INTERNATIONAL, INC. (PYYX)·Q3 2025 Earnings Summary