10-Q: Westrock Coffee Reports Q3 Loss Amid Revenue Growth, Debt Refinancing

Westrock Coffee Company reported a wider net loss for Q3 and the nine months ended September 30, 2025, despite significant revenue growth, while also announcing new convertible notes and amended credit facility covenants to manage liquidity.

Summary

• Net sales for the three months ended September 30, 2025, increased by 60.6% to $354.8 million, up from $220.9 million in the prior year period.
• Net sales for the nine months ended September 30, 2025, increased by 36.6% to $849.5 million, up from $621.7 million in the prior year period.
• The company reported a net loss of $19.1 million for the three months ended September 30, 2025, compared to a net loss of $14.3 million for the same period in 2024.
• The net loss for the nine months ended September 30, 2025, was $67.9 million, compared to $55.7 million for the same period in 2024.
• Gross profit margin decreased to 11.7% for the three months ended September 30, 2025, from 16.8% in the prior year, and to 13.2% for the nine months, from 18.6%.
• Consolidated Adjusted EBITDA significantly improved, reaching $23.2 million for Q3 2025 (up 125.5%) and $46.7 million for the nine months (up 38.0%).
• Interest expense more than doubled for the three-month period to $14.0 million and increased by 81.3% to $39.7 million for the nine-month period.
• Net cash used in operating activities increased substantially to $55.7 million for the nine months ended September 30, 2025, from $16.0 million in the prior year.
• The company completed the majority of capital expenditures for its Conway, Arkansas facility, with approximately $15.0 million remaining.
• A new $30.0 million aggregate principal amount of 5.00% convertible senior notes due 2031 was issued on November 4, 2025, with related parties participating.
• The Credit Agreement's Covenant Relief Period was extended to October 1, 2026, and financial covenants (secured net leverage ratio and interest coverage ratio) were modified.
• A new customer, whose single-serve cup volumes contributed to 2025 growth, is involved in a pending acquisition by a competitor, creating uncertainty for future commitments.
• The company entered into a Rwandan export operations joint venture on April 1, 2025, contributing its Rwanda Trading Company ownership and $100,000 cash for a 49.9% interest, recognizing a $2.3 million gain on de-consolidation.

Sentiment

Score: 4

Explanation: While revenue growth and Adjusted EBITDA are positive, the significant widening of net losses, sharp decline in gross profit margin, and substantial increase in cash used in operations indicate underlying financial strain. The repeated amendments to credit covenants and ongoing capital raises, coupled with specific customer uncertainty, suggest persistent challenges in achieving sustainable profitability and managing liquidity, despite management's stated confidence in future cash flows.

Positives

• Net sales for the three months ended September 30, 2025, increased by 60.6% to $354.8 million, driven by strong volume growth in Beverage Solutions and increased average sales price in Sustainable Sourcing & Traceability.
• Beverage Solutions segment net sales increased by 60.4% to $263.0 million for Q3 2025, with single-serve cup volumes up 84.8% and core roast and ground coffee volumes up 4.1%.
• Sustainable Sourcing & Traceability segment net sales increased by 61.5% to $91.8 million for Q3 2025, with sales volume up 15.3% and average sales price per pound up 43.1%.
• Consolidated Adjusted EBITDA saw a significant increase of 125.5% to $23.2 million for Q3 2025 and 38.0% to $46.7 million for the nine months ended September 30, 2025.
• Loss from operations improved to $(8.6) million for Q3 2025 from $(12.7) million in Q3 2024, and to $(36.7) million for the nine months from $(39.3) million in the prior year.
• The company recognized a $2.3 million gain from the de-consolidation of Rwanda Trading Company as part of a strategic joint venture.
• The Falcon Coffees Limited working capital trade finance facility was increased from $85.0 million to $102.5 million on July 23, 2025, enhancing international liquidity.

Negatives

• Net loss widened to $19.1 million for Q3 2025 from $14.3 million in Q3 2024, and to $67.9 million for the nine months from $55.7 million in the prior year.
• Gross profit margin declined significantly from 16.8% to 11.7% for Q3 2025 and from 18.6% to 13.2% for the nine months, primarily due to increased coffee commodity prices and tariffs not fully passed through or lagging cost increases.
• Interest expense more than doubled for Q3 2025 to $14.0 million and increased by 81.3% to $39.7 million for the nine months, driven by higher outstanding borrowings and reduced capitalized interest.
• Net cash used in operating activities increased substantially to $55.7 million for the nine months ended September 30, 2025, from $16.0 million in the prior year, indicating higher cash burn.
• The company continues to incur significant pre-production and scale-up operating costs for the Conway Facility, totaling $5.2 million for Q3 2025 and $18.8 million for the nine months in pre-production costs, plus $3.0 million for Q3 and $14.0 million for the nine months in scale-up costs.
• A new customer, contributing to 2025 single-serve cup volume growth, is subject to a pending acquisition by a competitor, creating uncertainty regarding future commitments and potential negative impact on net sales.
• The company's secured net leverage ratio was 4.58x at September 30, 2025, close to the amended maximum allowable ratio of 5.50x for December 31, 2025, indicating high leverage.

Risks

• The company has incurred net losses in the past and may incur net losses in the future, potentially not achieving profitability.
• Volatility and increases in the cost of green coffee, tea, other ingredients, and packaging, coupled with an inability to pass these costs on to customers, could negatively impact profitability.
• Inability to secure an adequate supply of key raw materials, including green coffee and tea, or disruption in the supply chain.
• Deterioration in general macroeconomic conditions and/or decreases in consumer spending on discretionary items.
• Disruption in operations at any of the company's, its suppliers', or co-manufacturers' production, distribution, or manufacturing facilities, or other loss of manufacturing capacity.
• Inability to anticipate customer preferences and successfully develop new products.
• Climate change may increase commodity costs, damage facilities, and disrupt production capabilities and the supply chain.
• Failure to retain key personnel or recruit qualified personnel.
• Inability to hedge commodity risks effectively.
• Consolidation among distributors and customers or the loss of any key customer, such as the new single-serve cup customer facing a pending acquisition.
• Complex and evolving U.S. and international laws and regulations, with noncompliance potentially leading to criminal or civil liability.
• Future acquisitions of businesses may divert management's attention, prove difficult to effectively integrate, and fail to achieve projected benefits.
• Inability to effectively manage the growth and increased complexity of the business.
• Inability to maintain or grow market share through continued product differentiation and competitive pricing.
• Inability to secure the additional capital needed to operate and grow the business.
• Future litigation or legal disputes, such as the DFA lawsuit, which could lead to significant liabilities and costs or harm the company's reputation.
• A material failure, inadequacy, or interruption of information technology systems.
• Unauthorized access, theft, use, or destruction of personal, financial, or other confidential information.
• The future level of indebtedness may reduce funds available for other business purposes and reduce operational flexibility.
• Inability to comply with the financial covenants in the credit agreement, which could accelerate repayment obligations.
• Inability to successfully build out operations, commercialize customers, and generate positive operating cash flows within the anticipated timeframe following the recent opening of the Conway, Arkansas facility, or incurring additional expenses in the process.
• The corporate structure and organization may prevent or delay attempts to acquire a controlling interest in the company.
• Largest shareholders (and certain management team members) own a significant percentage of stock and can exert significant control over shareholder approval matters.
• Impact of current global economic conditions, including tariffs, trade restrictions, economic slowdowns, global conflicts, inflation, interest rate environment, U.S. government shutdowns, and downgrades to the U.S. government's sovereign credit rating.
• Redemption risk of Series A Preferred Shares after February 26, 2028, potentially requiring an aggregate payment of at least $270.4 million, which could impact cash available for other business purposes and financial condition.

Future Outlook

The company anticipates that projected cash flow from operations, including from the Conway, Arkansas facility, and available borrowings will be sufficient to fund operations and maintain covenant compliance for at least the next twelve months. However, it acknowledges that its ability to raise additional capital or amend financial covenants cannot be assured. Management has committed to potentially delay growth capital expenditures and/or reduce operating expenses, including headcount, salary, and bonus reductions, if necessary, to ensure adequate liquidity and covenant compliance. The company will continue to evaluate its liquidity needs, especially given C market price volatility and tariff/trading restrictions, and may opportunistically access additional debt or equity capital markets. Long-term growth strategies include extending product offerings, expanding the customer base, driving margin expansion, geographic expansion, and pursuing accretive acquisitions.

Management Comments

• "The Company believes that projected cash flow from operations, including current projections of the timing and amount of cash flows to be generated from our Conway, Arkansas extract and ready-to-drink manufacturing facility (the Conway Facility), and available borrowings under its Credit Agreement, as amended, as described in Note 10, will be sufficient to fund operations and to maintain covenant compliance for at least the next twelve months."
• "However, as managements ability to raise additional capital or amend its financial covenants cannot be assured, if necessary, management has committed to delay growth capital expenditures and/or reduce operating expenses, including headcount, salary and/or bonus reductions, all of which are in the Companys control, as necessary, in order to have adequate liquidity and to remain in compliance with its debt covenants. If required, the Company will reduce operating costs to ensure compliance with its financial covenants."
• "The Company notes that single serve volumes have increased during 2025 in part due to the onboarding of a new customer. This customer is currently involved in a pending transaction in which it would be acquired by a competitor of ours within the coffee industry, which has created uncertainty around this customers near-term single serve cup commitments. As a result, there can be no assurances that single serve cup volumes reported during the three months ended September 30, 2025 will be achieved in future quarters, which could negatively impact net sales from our Beverage Solutions segment."
• "Management believes that the resolution of these matters [legal proceedings] will not have a material adverse effect on our financial position, results of operations, or cash flow."

Industry Context

The company operates in a global coffee and beverage market characterized by significant commodity price volatility, as evidenced by the C market price of green coffee fluctuating and reaching all-time highs. This volatility impacts working capital requirements across the supply chain. The industry also faces challenges from tariffs and trading restrictions, which can increase costs for imported equipment, commodities, and packaging materials. The company's strategy of passing through cost increases to customers often lags, affecting liquidity. The consolidation trend among distributors and customers, as highlighted by the risk of a key customer acquisition, indicates a competitive landscape where customer relationships and market share are critical.

Corporate Governance

Legal Proceedings

• Dairy Farmers of America, Inc. (DFA) filed a complaint on November 27, 2024, alleging trade secret misappropriation and civil conspiracy against the company and certain employees. An amended complaint added Westrock Beverage Company, LLC and a claim seeking to pierce the corporate veil. The court granted the company's motion to dismiss the veil-piercing claim on October 28, 2025. Discovery has commenced, and a trial date has not yet been set. The company intends to defend vigorously, and management believes the resolution will not have a material adverse effect on financial position or results of operations.

Related Party Transactions

• On February 15, 2024, the company sold and issued $50.0 million of the $72.0 million aggregate principal amount of 5.00% convertible senior notes due 2029 to Westrock Group, LLC, Wooster Capital, LLC, and HF Direct Investments Pool, LLC, all of which are related parties.
• On November 4, 2025, the company sold and issued $30.0 million in aggregate principal amount of 5.00% convertible senior notes due 2031 to purchasers including HF Direct Investments Pool, LLC (a holder of more than 10% of outstanding Common Shares), Jeffrey H. Fox Revocable Trust (an affiliate of a board director), and an affiliate of The Stephens Group, LLC (a holder of more than 5% of outstanding Common Shares).
• The company reimburses Westrock Group for corporate aircraft usage and shared administrative expenses, totaling $0.2 million for the nine months ended September 30, 2025.
• Falcon Coffees Limited, a subsidiary, purchased $4.1 million of green coffee from the Rwandan JV (in which the company holds a 49.9% interest) during the nine months ended September 30, 2025.

Stakeholder Impact

• **Shareholders**: Experience continued net losses and dilution risk from the ATM program and convertible notes. The Series A Preferred Shares redemption obligation poses a future cash outflow risk. The uncertainty around a key customer's future commitments could impact revenue and share price.
• **Employees**: Potential for operating expense reductions, including headcount, salary, and bonus reductions, if liquidity challenges persist.
• **Customers**: May face periodic pricing increases to offset rising commodity costs and tariffs, potentially impacting demand. The company's ability to maintain supply chain stability is crucial for customer satisfaction.
• **Suppliers**: The supply chain finance program and green coffee repurchase program help manage working capital for raw material payments, but commodity price volatility and tariffs could still impact sourcing relationships.
• **Creditors**: The company's high indebtedness and the need for multiple credit agreement amendments indicate elevated financial risk. Compliance with modified covenants is critical to avoid default and acceleration of repayment obligations.

Next Steps

• Continue the build-out of operations at the Conway, Arkansas facility, with approximately $15.0 million in capital expenditures remaining.
• Monitor and manage compliance with amended financial covenants under the Credit Agreement, including secured net leverage and interest coverage ratios, through October 1, 2026.
• Defend vigorously against the ongoing trade secret misappropriation lawsuit filed by Dairy Farmers of America, Inc.
• Evaluate the impact of the pending acquisition of a key single-serve cup customer by a competitor on future sales volumes and commitments.
• Implement strategies to recover tariff and inflation-impacted costs through periodic pricing increases, while managing the lag between cost and pricing adjustments.
• Potentially delay growth capital expenditures and/or reduce operating expenses, including headcount, salary, and bonus reductions, if required to maintain liquidity and covenant compliance.
• Continue to evaluate liquidity needs and opportunistically access additional debt or equity capital markets if necessary.
• Pursue long-term growth strategies including extending and enhancing product offerings through innovation, expanding the customer base, driving margin expansion, geographic expansion, and finding accretive acquisitions.

Key Dates

Recommendation

Westrock Coffee Company exhibits strong top-line growth and improved Adjusted EBITDA, indicating operational expansion and efficiency in certain areas. However, the significant widening of net losses, declining gross profit margins, and substantial increase in cash used in operating activities raise concerns about underlying profitability and cash flow generation. The company's high leverage, evidenced by the secured net leverage ratio and the need for multiple credit agreement amendments, including an extension of the covenant relief period, suggests ongoing financial strain and reliance on external financing. While the recent convertible note offering provides some liquidity, the long-term redemption obligation of Series A Preferred Shares and the uncertainty surrounding a key customer's future commitments add to the risk profile. Given the mixed financial signals, the high debt burden, and the need for continued operational improvements to achieve sustainable profitability, a 'hold' recommendation is appropriate. Investors should monitor the company's ability to improve gross margins, generate positive operating cash flow, and manage its debt covenants effectively, especially as the Conway facility ramps up and the extended covenant relief period approaches its new end date.

Keywords

Coffee, Tea, Beverage Solutions, Sustainable Sourcing, Traceability, SEC Filing, 10-Q, Financial Results, Net Sales, Net Loss, EBITDA, Convertible Notes, Credit Agreement, Covenants, Liquidity, Capital Expenditures, Conway Facility, Commodity Prices, Tariffs, Supply Chain, Risk Factors, Debt Financing, Equity Offering, Rwanda Trading Company, Joint Venture, Trade Receivables, Factoring