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Westrock Coffee Co (WEST)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered record net sales growth (+61% YoY) with consolidated adjusted EBITDA of $23.2M, driven by volume additions in single-serve cups (+85% YoY), roast & ground (+4% YoY), and strong SS&T performance; however, adjusted EBITDA was below Wall Street consensus while revenue significantly beat .
  • Management reaffirmed full-year 2025 guidance: consolidated adjusted EBITDA $60–$65M; Beverage Solutions $63–$68M; SS&T $14–$16M; and expects a 4.5x secured net leverage ratio (40 bps better than prior guidance) .
  • Liquidity de-risked via $30M 5.00% convertible notes due 2031 (initial conversion price $5.25) and a credit agreement amendment that extends covenant relief and raises leverage thresholds; ATM proceeds of ~$12M also supported working capital amid elevated coffee prices and tariffs .
  • Near-term catalysts: clarity on a large single-serve customer undergoing M&A (management modeled the downside in covenants), commercial start of the second can line in Q1, and potential entry into ultra-filtered milk-based high-protein products using Conway retort capacity .

What Went Well and What Went Wrong

What Went Well

  • Record quarterly performance: net sales +61% YoY; consolidated adjusted EBITDA +125% YoY, reflecting volume growth in core platforms and disciplined cost management .
  • Conway ramp milestones: key packaging lines near 80% of planned capacity; second can line installed (commercial production expected in Q1), with glass line producing commercial product in December .
  • Balance sheet reinforcement: $30M 5.00% convertible notes (initial conversion price $5.25; ~5.7M shares if fully converted; capped at ≤19.99% issuance), plus covenant realignment and $12M ATM raise to navigate elevated coffee prices and tariffs .

What Went Wrong

  • Adjusted EBITDA miss vs consensus: Street expected ~$17.6M; company delivered $23.2M adjusted EBITDA but SPGI-standard EBITDA (not management-adjusted) came in at ~$8.3M, reflecting scale-up costs and mix; EPS below consensus amid continued net loss (-$19.1M) during Conway scale-up *.
  • Single-serve customer uncertainty: one large customer involved in significant coffee category M&A, creating 2026 volume commitment uncertainty; management conservatively assumed loss of this volume in covenant reset .
  • Tariffs and coffee prices: persistently elevated coffee prices and 50% tariffs on Brazil weigh on working capital; while largely passed through, they increase inventory values and liquidity requirements near term .

Financial Results

Consolidated P&L and Margins (GAAP/SPGI)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD)$213.796M $280.859M $354.825M
Net Income ($USD)-$27.218M -$21.563M -$19.103M
Diluted EPS ($USD)-$0.29*-$0.23 -$0.20*
EBITDA ($USD)$0.484M*$2.480M*$8.304M*
EBIT ($USD)-$11.271M*-$12.536M*-$5.594M*
EBITDA Margin %0.2263%*0.883%*2.3403%*
EBIT Margin %-5.2718%*-4.4634%*-1.5765%*
Net Income Margin %-12.7308%*-7.6775%*-5.3837%*

Values marked with * retrieved from S&P Global.

Performance vs Wall Street (Q3 2025)

MetricQ3 2025 EstimateQ3 2025 Actual
Revenue ($USD)$281.540M*$354.825M
EBITDA ($USD)$17.580M*$8.304M*
Primary EPS ($USD)-$0.1025*-$0.20*

Values marked with * retrieved from S&P Global.

Key implications:

  • Strong revenue beat vs consensus; EBITDA and EPS below consensus due to scale-up costs and margin mix *.

Segment Breakdown (Management Adjusted EBITDA)

Segment Adjusted EBITDA ($USD Millions)Q1 2025Q2 2025Q3 2025
Beverage Solutions$9.6 $19.7 $20.4
Sustainable Sourcing & Traceability (SS&T)$1.9 $3.3 $5.8
Consolidated Adjusted EBITDA$8.2 $15.3 $23.2

KPIs and Growth Drivers

KPIQ1 2025Q2 2025Q3 2025
Roast & Ground Volume Growth (YoY)+7.6% +13.7% +4%
Single-Serve Cups Volume Growth (YoY)—+21.1% +85%
Flavors/Extracts/Ingredients Sales Growth (YoY)—+14% —

Additional operating metrics:

  • CapEx: ~$41M in Q1 (Conway-heavy), ~$20M in Q2, ~$18M in Q3; ~$15M remaining on Conway build-out over next two quarters .
  • Liquidity: ~$86M unrestricted cash & revolver availability (Q1); ~$72M (Q2); ~$52M (Q3, pre-$30M notes) .
  • ATM proceeds ~$12M in Q3; $30M convertible notes issued; covenant amendment completed .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Adjusted EBITDA ($USD)FY 2025$60–$65M (begin-year) $60–$65M Maintained
Beverage Solutions Segment-Adj. EBITDA ($USD)FY 2025Unchanged from earlier 2025 framework $63–$68M Maintained
SS&T Segment-Adj. EBITDA ($USD)FY 2025Unchanged from earlier 2025 framework $14–$16M Maintained
Secured Net Leverage Ratio (Beverage Solutions)FY 2025 YEPrior not explicitly quantified; company indicates -0.40pp vs prior ~4.5x Improved (beat prior by 40 bps)
Conway CapEx Remaining ($USD)Q4 2025–Q1 2026Complete by end FY2025 ~$15M over next 2 quarters Timing refined
2026 Outlook (Consolidated Adj. EBITDA & Run-Rate)FY 2026Shared earlier in 2025; not updated Premature to update; potential single-serve customer M&A uncertainty Watch for update in Q4

Credit agreement amendment highlights:

  • Covenant relief period extended; maximum secured net leverage ratio ceilings stepped down through 2026 (e.g., 5.50x for period ending Dec 31, 2025 → 4.00x by Dec 31, 2026); interest coverage floors adjusted (≥1.50x through Dec 31, 2025) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/Technology (Palantir)Palantir-enabled process, data intelligence, and risk mitigation driving margin and supply chain benefits Continued cost controls and optimization contribute to results Improving execution
Supply Chain OptimizationDisciplined expense management; ramp of Conway lines; visibility improving Lines near 80% capacity; customers caught up; glass line commercial in Dec Ramping as planned
Tariffs/Macro50% tariff on Brazil introduced; pass-through to customers but working capital strain; monitoring consumer demand Elevated tariffs and prices persist; liquidity bolstered via ATM and notes Headwind managed
Single-Serve StrategySecond facility launched; capacity modular; pipeline wins in private label & brands +85% YoY volume; one large customer M&A uncertainty; confident in backfill over time Mixed: growth with customer risk
RTD/Conway RampFivefold Q2 line sales; second can line install; glass line trials progressed Second can line installed (production Q1); glass line commercial Dec; added water/tank capacity Positive ramp
New Products (Ultra-filtered Milk)Not previously highlightedEarly-stage opportunity; $5–$6M enabling capex; retort lines suitable; 12-month dev cycle Emerging optionality
Liquidity/Capital MarketsStronger leverage than guided; tariff-driven WC strain; levers available $12M ATM; $30M converts; covenant amendment; do not anticipate further capital markets response De-risking

Management Commentary

  • “We ended the third quarter with… combined segment-adjusted EBITDA of $26.2 million, up 14% over the second quarter and up 84% over the same quarter last year… driven by… Conway plants… and… Palantir” .
  • “Net sales increased 61%… consolidated adjusted EBITDA was $23.2 million… Beverage Solutions segment-adjusted EBITDA grew 74% to $20.4 million… SS&T… $5.8 million” .
  • “We now estimate consolidated adjusted EBITDA… $60–$65 million… Beverage Solutions… $63–$68 million… SS&T… $14–$16 million… secured net leverage ratio… 4.5x, a 40 bps beat” .
  • “$12 million via ATM… $30 million convertible notes… amendment realigns financial covenants… we believe we now have… capacity needed to navigate… and do not anticipate any additional capital markets activity” .
  • “Second can line… commercial production in Q1… glass line… commercial product for sale starting in December” .
  • “Ultra-filtered milk… demand… retort lines… $5–$6M of capital to fully enable… 12-month process” .

Q&A Highlights

  • Production ramp: Main can lines running at 80–125% of standard volumes; customers caught up; glass line selling in December .
  • New adjacencies: Ultra-filtered high-protein milk opportunity leveraging retort capacity; modest enabling capex ($5–$6M) required; demand potentially sizable over 2–4 years .
  • Tariff management: 60% of coffee sourced from Brazil; blend optimization and capital raise intended to withstand elevated tariffs and prices .
  • Single-serve visibility: Customer undergoing M&A was included in original 2026 guidance; covenants reset assuming that volume off platform by year-end; management confident in backfill over time .
  • Free cash flow path: Conway expected to be EBITDA profitable and FCF positive in first half of next year; company targeting rapid FCF positivity after debt service .

Estimates Context

  • Q3 2025 revenue beat: Actual $354.825M vs $281.540M consensus (significant beat), driven by volume growth and pass-through pricing *.
  • Q3 2025 EBITDA miss: Actual ~$8.304M (SPGI) vs $17.580M consensus, reflecting continued scale-up costs and margin mix despite strong management-adjusted EBITDA *.
  • Q3 2025 EPS miss: Actual -$0.20 vs -$0.1025 consensus, consistent with continued net loss during ramp *.

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Strong top-line momentum with a substantial revenue beat; however, EBITDA/EPS below consensus underscores lingering ramp costs—expect margin normalization as Conway lines mature *.
  • Liquidity position materially improved (ATM + converts), and covenants realigned—reduces financing risk amid tariff-driven working capital needs .
  • Watch near-term catalysts: Q4 clarity on single-serve customer M&A outcome, second can line commercial start in Q1, and early moves into ultra-filtered milk retort products .
  • Guidance maintained for FY25; secured net leverage ratio now expected at ~4.5x—monitor potential 2026 guidance update next quarter given customer uncertainty .
  • Segment strength: Beverage Solutions and SS&T adjusted EBITDA trending up; sustained single-serve growth and RTD scale should drive improved profitability .
  • Operational execution remains key: continued supply chain optimization and Palantir-enabled analytics have been tangible contributors—look for incremental margin capture .
  • Trading stance: positive sentiment on revenue beat and de-risked balance sheet, tempered by profitability misses and customer volume uncertainty—stock likely to be event-driven around M&A clarity and Conway ramp milestones .

Appendix: Capital Markets and Covenants

  • $30M 5.00% convertible notes due 2031; initial conversion price $5.25 (≈190.48 shares/$1,000), ≈5.7M shares at initial terms; ≤19.99% issuance cap; senior unsecured; customary events of default; settlement in cash/stock/mix at company’s election .
  • Credit amendment permits convertible issuance, modifies covenant relief through Oct 1, 2026, increases secured net leverage ceiling to 5.50x (Dec 31, 2025 test period) and steps down thereafter; interest coverage minimums adjusted to ≥1.50x through Dec 31, 2025 .

Values marked with * retrieved from S&P Global.