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Westrock Coffee Company Reports Third Quarter 2023 Results
ソース: Nasdaq GlobeNewswire / 09 11 2023 15:05:00 America/Chicago
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.
