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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 158 added, 231 removed, 146 unchanged (73% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations describes the principal factors affecting the results of operations, financial condition, and changes in financial condition for the three and nine months ended September 30, 2024.

This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements, and the notes thereto set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q and our December 31, 2024 Audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K filed with the U.S.

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Our platform is built upon four fundamental pillars that enable us to positively impact the coffee, tea, flavors, extracts, and ingredients ecosystems from crop to cup:

(i) we operate a fully transparent supply chain, (ii) we develop innovative beverage solutions tailored to our customers’ specific needs, (iii) we deliver a high quality and comprehensive set of products to our customers, and (iv) we leverage our scaled international presence to serve our blue-chip customer base.

(i) we operate a transparent supply chain, (ii) we develop innovative beverage solutions tailored to our customers’ specific needs, (iii) we deliver a high quality and comprehensive set of products to our customers, and (iv) we leverage our scaled international presence to serve our blue-chip customer base.

These four tenets comprise the backbone of our platform and position us as a leading provider of value-added beverage solutions.

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Through this segment, we combine our product innovation and customer insights to provide value-added beverage solutions, including coffee, tea, flavors, extracts, and ingredients.

We provide products in a variety of packaging, including branded and private label coffee in bags, fractional packs, and single serve cups, as well as extract solutions to be used in products such as cold brew and ready-to-drink offerings.

We provide products in a variety of packaging, including branded and private label coffee in bags, fractional packs, single serve cups, multi-serve bottles and ready-to-drink bottles and cans, as well as extract solutions to be used in products such as cold brew and ready-to-drink offerings.

Currently, we serve customers in the United States, Europe, and Asia through the retail, food service and restaurant, convenience store and travel center, non-commercial account, CPG and hospitality industries.

Sustainable Sourcing & Traceability :

Through this segment, we utilize our proprietary technology and digitally traceable supply chain to directly impact and improve the lives of our farming partners, tangible economic empowerment and an emphasis on environmental accountability and farmer literacy.

Revenues primarily relate to the physical delivery and settlement of forward sales contracts for green coffee.

Key Business Metrics

We use Consolidated Adjusted EBITDA to evaluate our performance, identify trends, formulate financial projections, and to make strategic decisions.

Consolidated Adjusted EBITDA

We refer to EBITDA and Consolidated 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 Consolidated 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.

The Company believes that providing these non-GAAP

financial measures 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, provision for income taxes and depreciation and amortization.

We define “Consolidated Adjusted EBITDA” as EBITDA before equity-based compensation expense and the impact, which may be recurring in nature, of transaction, 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 non-capitalizable costs necessary to place the Conway extract and ready-to-drink facility into commercial production, 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 Consolidated Adjusted EBITDA are important supplemental measures to net (loss) income because they provide additional information to evaluate our operating performance on an unleveraged basis.

Since EBITDA and Consolidated 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 Consolidated Adjusted EBITDA may not be comparable to that reported by other companies that define EBITDA and Consolidated Adjusted EBITDA differently than we do.

The reconciliation of our net (loss) income to EBITDA and Consolidated Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Net (loss) income

Interest expense

Income tax expense (benefit)

Depreciation and amortization

Transaction, restructuring and integration expense

Change in fair value of warrant liabilities

Management and consulting fees (S&D Coffee, Inc.

Equity-based compensation

Impairment charges

Conway extract and ready-to-drink facility pre-production costs

Mark-to-market adjustments

Loss on disposal of property, plant and equipment

Consolidated Adjusted EBITDA

The Company presents Consolidated Adjusted EBITDA as excluding certain Conway extract and ready-to-drink facility start-up costs (“Conway Start-up Costs”).

Prior to the third quarter of 2024, Conway Start-up Costs included two categories:

(i) non-capitalizable costs necessary to place production and packaging capabilities into commercial production (“pre-production costs”), and (ii) recurring operating costs incurred once a capability is placed into commercial production but before completion of the production scale up (“scale up operating costs”).

Beginning in the third quarter of 2024, the Company no longer excludes scale up operating costs in the determination of Consolidated Adjusted EBITDA.

Consolidated Adjusted EBITDA for the three and six months ended June 30, 2024 has been revised to exclude the impact of scale up operating costs, as follows:

Three Months Ended

Six Months Ended

June 30, 2024

Consolidated Adjusted EBITDA, as presented

Conway extract and ready-to-drink facility scale-up costs

Consolidated Adjusted EBITDA, as revised

Through this segment, we utilize our proprietary technology and digitally traceable supply chain to directly impact and improve the lives of our farming partners, provide tangible economic empowerment and emphasize environmental accountability and farmer literacy.

Revenues primarily consist of sales from commodity contracts related to forward sales of green coffee.

Significant Developments

Warrant Exchange

On August 28, 2024, the Company announced that it had commenced an exchange offer (the “Offer”) and consent solicitation (the “Consent Solicitation”) relating to its outstanding (i) public warrants to purchase shares of common stock of the Company, par value $0.01 per share (the “Common Shares”), which warrants trade on The Nasdaq Global Market (the “Nasdaq”) under the symbol “WESTW” (the “Westrock Public Warrants”), and (ii) private placement warrants to purchase common shares (the “Westrock Private Warrants” and, together with the Westrock Public Warrants, the “Westrock Warrants”).

The Company offered to all holders of the Westrock Warrants the opportunity to receive 0.290 common shares in exchange for each of the Westrock Warrants tendered pursuant to the Offer.

Concurrently with the Offer, the Company also solicited consents from the holders of each of the Westrock Public Warrants and the Westrock Private Warrants to amend that certain Warrant Agreement, dated as of August 25, 2022, by and between the Company and Computershare Inc., a Delaware corporation, and its affiliate, Computershare Trust Company, N.A., a federally chartered trust company, as warrant agent (the “Warrant Agent”), which governs all of the Warrants (the “Warrant Agreement”), to permit the Company to require that (x) each Westrock Public Warrant that is outstanding upon the closing of the Offer be exchanged for 0.261 common shares, which is a ratio 10% less than the exchange ratio applicable to the Offer and (y) each Westrock Private Warrant that is outstanding upon the closing of the Offer be exchanged for 0.261 common shares, which is a ratio 10% less than the exchange ratio applicable to the Offer (such amendment, the “Warrant Amendment”).

The Offer and Consent Solicitation expired on September 26, 2024 (the “Expiration Date”).

As of the Expiration Date, (x) 16,676,541 outstanding Westrock Public Warrants were validly tendered and not validly withdrawn in the Offer and Consent Solicitation, representing approximately 97.42% of the Westrock Public Warrants and (y) 2,026,046 outstanding Westrock Private Warrants were validly tendered and not validly withdrawn in the Offer and Consent Solicitation, representing 100% of the Westrock Private Warrants.

On September 30, 2024, the Company issued 5,423,681 Common Shares in exchange for the tendered Westrock Warrants.

In addition, pursuant to the Consent Solicitation, the Company received the approval of holders of approximately 97.42% of the outstanding Westrock Public Warrants and 100% of the outstanding Westrock Private Warrants to adopt the Warrant Amendment, which exceeded (x) the 50% threshold of the outstanding Westrock Public Warrants required to amend the Warrant Agreement with respect to the Westrock Public Warrants and (y) the 50% threshold of the outstanding Westrock Private Warrants required to amend the Warrant Agreement with respect to the Westrock Private Warrants.

Accordingly, the Company and the Warrant Agent entered into the Warrant Amendment, dated September 30, 2024.

On September 30, 2024, the Company announced that it would exercise its right, in accordance with the terms of the Warrant Amendment, to exchange each Westrock Public Warrant that is outstanding following the closing of the Offer for 0.261 common shares per warrant (the “Post-Offer Exchange”).

In lieu of issuing fractional shares, any holder of warrants who would otherwise have been entitled to receive fractional shares, after aggregating all such fractional shares of such holder, was paid in cash (without interest) in an amount equal to such fractional part of a share multiplied

The Company fixed the date for the Post-Offer Exchange as October 15, 2024.

On October 16, 2024, the Company issued 115,220 Common Shares for the untendered Westrock Public Warrants.

Following the completion of the Offer and Post-Offer Exchange, no Westrock Warrants remain outstanding.

Accordingly, the Westrock Public Warrants were suspended from trading on the Nasdaq as of the close of business on October 15, 2024, and were delisted.

Credit Agreement Amendments

On January 15, 2025, the Company, entered into an Incremental Assumption Agreement and Amendment No.

4 (the “Fourth Amendment”) to the Credit Agreement (as defined herein).

The Fourth Amendment expanded the syndicate to include member banks from the Farm Credit System and increased the amount of revolving facility commitments (the “Existing Revolving Facility Commitments”, and any loans thereunder, the “Existing Revolving Loans”) available to the Borrower (as defined herein) under the Credit Agreement by $25.0 million (the “Incremental Revolving Facility Commitments” and any loans thereunder, the “Incremental Revolving Loans”).

The amount of revolving facility commitments available to the Borrower under the Credit Agreement, as amended, is $200.0 million.

The Incremental Revolving Facility Commitments and the Incremental

Revolving Loans are subject to the same interest rates, commitment fees, maturity dates and other terms as the Existing Revolving Facility Commitments and the Existing Revolving Loans.

The proceeds from any Incremental Revolving Loans will be used by the Company to fund the previously announced installation of a second ready-to-drink can line at the Conway Facility, and for general corporate purposes.

The Fourth Amendment also modified the secured net leverage ratio that the Company must comply with during the Covenant Relief Period (as defined herein) to increase the maximum secured net leverage ratio to (a) 6.00x for the test period ending June 30, 2025, (b) 5.50x for the test period ending September 30, 2025, and (c) 5.25x for the test period ending December 31, 2025.

In addition, the minimum liquidity covenant will not apply after the Covenant Relief Period (as defined herein) ends.

As of the date of this Quarterly Report on Form 10-Q, the Company was in compliance with its financial covenants.

Falcon Credit Agreement Amendment

On August 21, 2024, Falcon Coffees Limited, a wholly owned subsidiary of the Company, amended its working capital trade finance facility.

The amendment increased the facility size from $55.0 million to $75.0 million.

The interest rates and maturity date were unchanged as a result of the amendment.

See Note 11 to our Condensed Consolidated Financial Statements for additional discussion related to the working capital trade finance facility.

On March 7, 2025, Falcon Coffees Limited (“Falcon”), our subsidiary, renewed its working capital trade finance facility with multiple institutions.

The facility size was increased from $75.0 million to $85.0 million and remains uncommitted and repayable on demand, with certain of Falcon’s assets pledged as collateral against the facility.

The facility will mature one year from inception.

Borrowings under the facility will bear interest at the borrower’s option at a rate equal to (a) Term SOFR plus a margin of 4.00% plus a liquidity premium set by the lender at the time of borrowing or (b) the Base Rate (determined by reference to the greatest of (i) the Prime Rate, as defined in the facility, at such time, (ii) one-half of 1.00% in excess of the Federal Funds Effective Rate, as defined in the facility, at such time, and (iii) Term SOFR for a one-month tenor in effect at such time plus 1.00%).

Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table sets forth our results of operations expressed as dollars and as a percentage of total revenues for the periods indicated:

(Dollars in Thousands)

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Costs of sales

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Transaction, restructuring and integration expense

Impairment charges

Loss on disposal of property, plant and equipment

(Gain) loss on disposal of property, plant and equipment

Total operating expenses

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Net (loss) income

Net (loss) income attributable to shareholders

Participating securities' share in earnings

Accretion of Series A Convertible Preferred Shares

Net (loss) income attributable to common shareholders

Three Months Ended September 30,

Beverage Solutions

Sustainable Sourcing & Traceability 1

Total net sales

(1) Net of intersegment revenues.

Net Sales from our Beverage Solutions segment were $164.0 million for the three months ended September 30, 2024, compared to $176.8 million for the three months ended September 30, 2023, a decrease of approximately 7.2%.

The decrease was primarily due to a $16.4 million decrease in the sale of coffee and tea products, driven by a 6.4% decrease in roast and ground coffee volumes and a 24.4% decrease in single serve cup volumes, partially offset by a $3.1 million increase in the sale of flavors, extracts and ingredients products, driven by an 18.5% increase in flavors, extracts and ingredients volumes.

Net Sales from our SS&T segment, net of intersegment revenues, totaled $56.9 million for the three months ended September 30, 2024, increasing 32.8% compared to $42.8 million for the three months ended September 30, 2023.

The increase is driven by an increase in sales volume, which increased 35.9% compared to the three months ended September 30, 2023.

Costs of Sales

Three Months Ended September 30,

Beverage Solutions

Sustainable Sourcing & Traceability

Total costs of sales

In our Beverage Solutions segment, costs of sales decreased to $131.8 million for the three months ended September 30, 2024, from $144.9 million for the three months ended September 30, 2023.

The decrease in costs of sales was primarily driven by a decrease in the sale of coffee and tea products and single serve cup volumes for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

In our SS&T segment, costs of sales increased $12.4 million to $52.0 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

This increase is primarily due to an increase in green coffee sales volume.

Costs of sales in our SS&T segment for the three months ended September 30, 2024 included $0.5 million of net unrealized losses on forward sales and purchase contracts and mark-to-market adjustments on green coffee inventory compared to $1.2 million of net unrealized losses for the three months ended September 30, 2023.

Selling, General and Administrative Expense

Three Months Ended September 30,

(Dollars in Thousands)

Beverage Solutions

Sustainable Sourcing & Traceability

Total selling, general and administrative expense

Total selling, general and administrative expenses in our Beverage Solutions segment increased $8.5 million to $43.1 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

increase is primarily due to an $8.9 million increase in expenses associated with the start-up of our extract and ready-to-drink facility in Conway, Arkansas.

In our SS&T segment, selling, general and administrative costs were relatively unchanged compared to the three months ended September 30, 2023.

Transaction, Restructuring and Integration Expense

Transaction, restructuring and integration expenses for the three months ended September 30, 2024 were $2.5 million, approximately $1.4 million of which related to professional and legal costs associated with the Westrock Warrant exchange and $1.0 million of which related to plant closure costs.

During the three months ended September 30, 2023, we incurred $3.1 million of transaction, restructuring and integration expenses, approximately $1.2 million of which related to the costs associated with the integration of our new enterprise resource planning system, including internal and external costs related to post go-live system support and duplicative system costs and $1.0 million of which primarily related to non-capitalizable costs associated with registration statements.

Interest Expense

Three Months Ended September 30,

Interest expense

Term loan and delayed draw term loan facilities

Revolving credit facility

Convertible notes payable

Convertible notes payable - related party

Supply chain finance program

International trade finance lines

International notes payable

Total cash interest

Amortization of deferred financing costs

Capitalized interest

Total non-cash interest

Total interest expense

Interest expense for the three months ended September 30, 2024 was $6.9 million compared to $7.8 million for the three months ended September 30, 2023.

Interest expense associated with our revolving credit facility increased $1.4 million, primarily due to higher outstanding borrowings, and interest on our Convertible Notes increased $0.9 million.

During the three months ended September 30, 2024, the Company capitalized approximately $4.0 million of interest costs associated with the build-out of our extract and ready-to-drink facility in Conway, Arkansas, compared to $1.0 million of such interest for the three months ended September 30, 2023.

Change in Fair Value of Warrant Liabilities

Warrant liabilities are adjusted to fair value at each reporting period, with any change in fair value recognized in the Condensed Consolidated Statement of Operations.

The change in fair value of warrant liabilities for the three months ended September 30, 2024 resulted in recognition of $5.5 million of gains compared to recognition of $25.1 million of gains during the three months ended September 30, 2023.

Income Tax Expense (Benefit)

Income tax expense for the three months ended September 30, 2024 was $0.1 million, resulting in an effective tax rate of (0.6%).

The effective tax rate for the current period differs from the federal statutory rate primarily due to an increase in

the valuation allowance against domestic deferred tax assets.

Income tax benefit for the three months ended September 30, 2023 was $5.2 million, resulting in an effective tax rate of (45.7%).

Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table sets forth our results of operations expressed as dollars and as a percentage of total revenues for the periods indicated:

Nine Months Ended

(Dollars in Thousands)

September 30, 2024

September 30, 2023

Costs of sales

Selling, general and administrative expense

Transaction, restructuring and integration expense

Impairment charges

Loss on disposal of property, plant and equipment

Total operating expenses

Loss from operations

Other (income) expense

Interest expense

Change in fair value of warrant liabilities

Loss before income taxes and equity in earnings from unconsolidated entities

Income tax expense (benefit)

Equity in (earnings) loss from unconsolidated entities

Net income (loss) attributable to non-controlling interest

Net loss attributable to shareholders

Accretion of Series A Convertible Preferred Shares

Net loss attributable to common shareholders

Nine Months Ended September 30,

Three Months Ended March 31,

Beverage Solutions

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(1) Net of intersegment revenues.

Net Sales from our Beverage Solutions segment were $485.3 million for the nine months ended September 30, 2024, compared to $547.7 million for the nine months ended September 30, 2023, a decrease of approximately 11.4%.

The decrease was primarily due to a $75.9 million decrease in the sale of coffee and tea products, driven by a 17.8% decrease in roast and ground coffee volumes and a 15.0% decrease in single serve cup volumes, partially offset by an $11.2

million increase in the sale of flavors, extracts and ingredients products, driven by a 28.9% increase in flavors, extracts and ingredients volumes.

Net Sales from our SS&T segment, net of intersegment revenues, totaled $136.4 million for the nine months ended September 30, 2024, increasing 33.7% compared to $102.0 million for the nine months ended September 30, 2023.

The increase is driven by an increase in sales volume, which increased 43.9%, partially offset by a 7.7% decrease in average sales price per pound for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The decrease in the average sales price per pound is directly correlated to the global commodities price.

Net Sales from our Beverage Solutions segment were $164.1 million for the three months ended March 31, 2025, increasing 3.8% compared to $158.1 million for the three months ended March 31, 2024.

The increase was primarily due to a 7.6% increase in core roast and ground coffee volumes, partially offset by a 29.3% decrease in single serve cup volumes, and the year over year growth in coffee commodity prices, which are passed through to our customers.

Net Sales from our SS&T segment, net of intersegment revenues, were $49.7 million for the three months ended March 31, 2025, increasing 44.4% compared to $34.4 million for the three months ended March 31, 2024.

The increase is driven by an increase in the average sales price per pound, which increased 54.2% for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase in the average sales price per pound is directly correlated to the global commodities price.

SS&T sales volume decreased 5.3% for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Costs of Sales

Nine Months Ended September 30,

Three Months Ended March 31,

Beverage Solutions

1 unchanged sentence

Total costs of sales

In our Beverage Solutions segment, costs of sales decreased to $383.5 million for the nine months ended September 30, 2024, from $452.9 million for the nine months ended September 30, 2023.

The decrease in costs of sales was primarily driven by a decrease in the sale of coffee and tea products and single serve cup volumes for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

In our SS&T segment, costs of sales increased $30.7 million to $122.5 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

This increase is primarily due to an increase in green coffee sales volume.

Costs of sales in our SS&T segment for the nine months ended September 30, 2024 included $2.7 million of net unrealized gains on forward sales and purchase contracts and mark-to-market adjustments on green coffee inventory compared to $1.0 million of net unrealized gains for the nine months ended September 30, 2023.

In our Beverage Solutions segment, costs of sales increased $16.3 million to $141.4 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

The increase in costs of sales was primarily driven by an increase in the coffee commodity prices for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

In our SS&T segment, costs of sales increased $13.2 million to $43.4 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

This increase is primarily due to an increase in green coffee costs driven by an increase in underlying commodities pricings.

Costs of sales in our SS&T segment for the three months ended March 31, 2025 included $2.1 million of net unrealized gains on forward sales and purchase contracts and mark-to-market adjustments on green coffee inventory compared to $1.6 million of net unrealized gains for the three months ended March 31, 2024.

Selling, General and Administrative Expense

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in Thousands)

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Total selling, general and administrative expense

Total selling, general and administrative expenses in our Beverage Solutions segment increased $36.1 million to $133.9 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

The increase is primarily due to a $28.7 million increase in expenses associated with the start-up of our extract and ready-to-drink facility in Conway, Arkansas.

In our SS&T segment, selling, general and administrative costs were relatively unchanged compared to the nine months ended September 30, 2023.

Total selling, general and administrative expenses in our Beverage Solutions segment decreased $4.4 million to $37.6 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

is primarily due to a decrease in start-up costs associated with the Conway Facility.

In our SS&T segment, selling, general and administrative costs were relatively unchanged compared to the three months ended March 31, 2024.

Transaction, Restructuring and Integration Expense

Transaction, restructuring and integration expenses for the nine months ended September 30, 2024 were $9.9 million, approximately $3.5 million of which related to severance and other employee termination and benefit costs associated with the elimination of various positions as part of cost reduction objectives, $2.4 million of which related to the establishment of our at-the-market common stock offering program and $1.4 million of which related to professional and legal costs associated with the Westrock Warrant exchange.

During the nine months ended September 30, 2023, we incurred $12.7 million of transaction, restructuring and integration expenses, approximately $9.7 million of which related to the costs associated with the integration of our new enterprise resource planning system, including internal and external costs related to post go-live system support and duplicative system costs and $2.0 million of non-capitalizable costs associated with acquisitions and registration statements.

Transaction, restructuring and integration expenses for the three months ended March 31, 2025 were $1.8 million, approximately $0.9 million of which related to plant closure costs and $0.5 million of which related to employee severance payments.

During the three months ended March 31, 2024, we incurred $3.0 million of transaction, restructuring and integration expenses, approximately $2.2 million of which related to the ATM Program (as defined herein).

Interest Expense

Nine Months Ended September 30,

Three Months Ended March 31,

Interest expense

11 unchanged sentences

Total interest expense

Interest expense for the nine months ended September 30, 2024 was $21.9 million compared to $21.2 million for the nine months ended September 30, 2023.

$4.1 million of the increase is attributable to interest expense associated with our term loan and delayed draw term loan facilities, primarily due to higher outstanding borrowings, and $2.3 million of the increase is due to interest on our Convertible Notes.

In addition, we incurred $4.9 million in interest on our supply chain finance program borrowings for the nine months ended September 30, 2024, compared to $1.2 million of such

interest for the nine months ended September 30, 2023.

Furthermore, during the nine months ended September 30, 2024, the Company capitalized approximately $11.1 million of interest costs associated with the build-out of our extract and ready-to-drink facility in Conway, Arkansas, compared to $1.0 million of such interest for the nine months ended September 30, 2023.

Change in Fair Value of Warrant Liabilities

The change in fair value of warrant liabilities for the nine months ended September 30, 2024 resulted in recognition of $7.1 million of gains compared to recognition of $18.8 million of gains during the nine months ended September 30, 2023.

Interest expense for the three months ended March 31, 2025 was $12.6 million compared to $7.6 million for the three months ended March 31, 2024.

Interest expense associated with our revolving credit facility increased $2.8 million, primarily due to higher outstanding borrowings.

During the three months ended March 31, 2025, the Company capitalized approximately $0.2 million of interest costs associated with the build-out of our Conway Facility, compared to $2.8 million of such interest costs for the three months ended March 31, 2024.

Income Tax Expense (Benefit)

Income tax expense for the nine months ended September 30, 2024 was $1.3 million, resulting in an effective tax rate of (2.3%).

Income tax expense for the three months ended March 31, 2025 was $1.8 million, resulting in an effective tax rate of (7.2)%.

The effective tax rate for the current period differs from the federal statutory rate primarily due to an increase in the valuation allowance against domestic deferred tax assets.

Income tax benefit for the nine months ended September 30, 2023 was $3.3 million, resulting in an effective tax rate of 18.7%.

Income tax expense for the three months ended March 31, 2024 was $5.8 million, resulting in an effective tax rate of (32.6)%.

Critical Accounting Estimates

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We believe the current assumptions and other considerations used to estimate amounts reflected in our financial statements are appropriate.

However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our financial statements, the resulting changes could have a material adverse effect on our results of operations and, in certain situations, could have a material adverse effect on our financial condition.

However, if actual experience differs from the assumptions and other considerations used in

estimating amounts reflected in our financial statements, the resulting changes could have a material adverse effect on our results of operations and, in certain situations, could have a material adverse effect on our financial condition.

For further information on our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the notes to our audited financial statements included in our Annual Report on Form 10-K filed with the SEC on March 12, 2025.

As of September 30, 2024, there have been no material changes to these estimates.

As of March 31, 2025, there have been no material changes to these estimates.

Key Business Metrics

We use Consolidated Adjusted EBITDA to evaluate our performance, identify trends, formulate financial projections, and to make strategic decisions.

Consolidated Adjusted EBITDA

The Company believes that providing these non-GAAP financial measures 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, provision for income taxes and depreciation and amortization.

We define “Consolidated Adjusted EBITDA” as EBITDA before equity-based compensation expense and the impact, which may be recurring in nature, of transaction, restructuring and integration related costs, impairment charges, changes in the fair value of warrant liabilities, non-cash mark-to-market adjustments, certain non-capitalizable costs necessary to place the Conway extract and ready-to-drink facility (the “Conway Facility”) into commercial production, 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).

The reconciliation of our net (loss) income to EBITDA and Consolidated Adjusted EBITDA for the three months ended March 31, 2025 and 2024 is as follows:

Three Months Ended March 31,

Interest expense

Income tax expense (benefit)

Depreciation and amortization

Transaction, restructuring and integration expense

Change in fair value of warrant liabilities

Equity-based compensation

Conway extract and ready-to-drink facility pre-production costs

Mark-to-market adjustments

(Gain) loss on disposal of property, plant and equipment

Consolidated Adjusted EBITDA

Liquidity and Capital Resources

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Our ability to generate cash provided by operating activities is dependent on several factors, including our ability to generate net sales and manage costs in line with our expectations.

Failure to meet our financial targets, including any adverse impact from changes or further delays in the estimated timing and volume of products to be commercialized in our extract and ready-to-drink manufacturing facility in Conway, Arkansas, may restrict our liquidity and capital resources and our ability to maintain compliance with our financial covenants and may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions, which could have a material adverse effect on our business, operating results, financial condition, covenant compliance and ability to achieve our intended business objectives.

Where possible, we seek to recover inflation-impacted costs by passing these costs onto our customers through periodic pricing increases.

Failure to meet our financial targets, including any adverse impact from changes or further delays in the estimated timing and volume of products to be commercialized in our Conway Facility, may restrict our liquidity and capital resources and our ability to maintain compliance with our financial covenants and may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions, which could have a material adverse effect on our business, operating results, financial condition, covenant compliance and ability to achieve our intended business objectives.

Green coffee, which is our primary raw material, is an exchange traded agricultural commodity that is subject to price fluctuations, the reasons for which are outside of the control of the Company.

During the year ended December 31, 2024, the exchange traded “C” market price of green coffee increased approximately 70%, and from January 1, 2025 through the date of this Quarterly Report on Form 10-Q, the “C” market price has continued to increase, at times surpassing $4.00 per pound of green coffee, reaching all-time highs.

This increase impacts the entire coffee supply chain, as exporters, traders, suppliers, and roasters require increased working capital to fund rising green coffee costs, and without having access to sufficient working capital, supply chain disruptions may emerge.

In addition, our liquidity may be negatively impacted by recently enacted and/or proposed tariffs and trading restrictions that, absent an exemption, would be applied to imported equipment, commodities and packaging materials.

A persistent increase in coffee costs or tariff-impacted equipment or material costs, could adversely affect consumer demand as producers attempt to pass higher costs down the supply chain.

Where possible, we will seek to recover tariff- and inflation-impacted costs by passing these costs onto our customers through periodic pricing increases.

However, our pricing increases often lag our cost increases, including increases in commodity costs.

The persistence of these negative effects on our business could adversely impact our ability to reach our revenue and other financial targets.

A prolonged increase in “C” market prices, and/or tariff-impacted costs, may require us to evaluate our allocation of working capital, and if we are not able to effectively manage our working capital, or do not have access to sufficient working capital to meet our purchasing needs for green coffee, other commodity inputs, ingredients or supplies (such as materials used in our packaging), we may need to access the debt or equity capital markets, and there is no assurance that we will be able to do so on terms that are favorable to the Company or at all.

In addition, we may be

required to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions, which could have a material adverse effect on our business, operating results, financial condition, covenant compliance and ability to achieve our intended business objectives.

Credit Agreement

The Company is party to a credit agreement (the “Credit Agreement”) among the Company, Westrock Beverage Solutions, LLC, as the borrower (the “Borrower”), Wells Fargo Bank, N.A., as administrative agent, collateral agent, and swingline lender, Wells Fargo Securities, LLC, as sustainability structuring agent, and each issuing bank and lender party thereto.

The Credit Agreement includes (a) a senior secured first lien revolving credit facility in an initial aggregate principal amount of $175.0 million (the “Revolving Credit Facility”), (b) a senior secured first lien term loan facility in an initial aggregate principal amount of $175.0 million (the “Term Loan Facility”), and (c) incremental term loan commitments in the form of a senior secured delayed draw term loan credit facility (the “Delayed Draw Term Loan Facility”) in the aggregate principal amount of $50.0 million.

The Company is party to a credit agreement (as amended, modified or supplemented, the “Credit Agreement”) among the Company, Westrock Beverage Solutions, LLC, as the borrower (the “Borrower”), Wells Fargo Bank, N.A., as administrative agent, collateral agent, and swingline lender, Wells Fargo Securities, LLC, as sustainability structuring agent, and each issuing bank and lender party thereto.

The Credit Agreement includes (a) a senior secured first lien revolving credit facility in an aggregate principal amount of $200.0 million (the “Revolving Credit Facility”), (b) a senior secured first lien term loan facility in an aggregate principal amount of $175.0 million (the “Term Loan Facility”), and (c) incremental term loan commitments in the form of a senior secured delayed draw term loan credit facility (the “Delayed Draw Term Loan Facility”) in the aggregate principal amount of $50.0 million.

The Revolving Credit Facility, the Term Loan Facility and the Delayed Draw Term Loan Facility will mature on August 29, 2027.

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Borrowings under the Revolving Credit Facility, the Term Loan Facility and the Delayed Draw Term Loan Facility will bear interest, at the Borrower’s option, initially at an annual rate equal to (a) term SOFR plus a credit spread adjustment of 0.10% for loans with an interest period of one month, 0.15% for loans with an interest period of three months and 0.25% for loans with an interest period of six months, as applicable, (the “Adjusted Term SOFR”) or (b) the base rate (determined by reference to the greatest of (i) the rate of interest last quoted by The Wall Street Journal in the United States as the prime rate in effect, (ii) the NYFRB Rate from time to time plus 0.50% and (iii) the Adjusted Term SOFR for a one month interest period plus 1.00%, (the “Base Rate”)), in each case plus an applicable margin.

At September 30, 2024, we had $107.5 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 8.8% and we had $2.6 million of standby letters of credit outstanding.

At September 30, 2024 the interest rate applicable to our Term Loan Facility was 8.0% and the interest rate applicable to our Delayed Draw Term Loan Facility was 8.9%.

At March 31, 2025, we had $147.5 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 8.3% and we had $2.6 million of standby letters of credit outstanding.

At March 31, 2025 the interest rate applicable to our Term Loan Facility was 8.2% and the interest rate applicable to our Delayed Draw Term Loan Facility was 8.3%.

On February 15, 2024, the Borrower entered into Amendment No.

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After the Covenant Relief Period, the applicable margin for any term SOFR rate loan will range from 2.00% to 3.00% and for any ABR loan will range from 1.00% to 2.00%, in each case depending on the secured net leverage ratio.

The Credit Agreement, as amended, requires the Borrower to maintain compliance with (i) a secured net leverage ratio at levels ranging from 4.50:1.00 to 6.25:1.00 and stepping down to 4.50:1.00 by April 2026 and (ii) an interest coverage ratio of at least 1.50:1.00 on and prior to September 30, 2025 and at least 2.00:1.00 on December 31, 2025 and thereafter.

The Credit Agreement, as amended, also includes (i) a minimum liquidity covenant requiring the Borrower not to permit its liquidity, measured as of the last business day of each calendar month commencing March 29, 2024, to be less than $15 million and (ii) an anti-cash hoarding covenant, which shall be effective only during the Covenant Relief Period, requiring the Borrower to have no more than $20 million of unrestricted cash on the last day of each calendar month when revolving loans or letters of credit are outstanding or on the date of borrowing of a revolving loan.

Failure to comply with these covenants or make payments when due could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations under the Credit Agreement and could result in a default and acceleration under other agreements containing cross-default provisions.

The Credit Agreement, as amended through the Third Amendment, required the Borrower to maintain compliance with (i) a secured net leverage ratio at levels ranging from 4.50:1.00 to 6.25:1.00 and stepping down to 4.50:1.00 by April 2026 (which has been further amended by the Fourth Amendment, as discussed below) and (ii) an interest coverage ratio of at least 1.50:1.00 on and prior to September 30, 2025 and at least 2.00:1.00 on December 31, 2025 and thereafter.

The Credit Agreement, as amended through the Third Amendment, also included (i) a minimum liquidity covenant requiring the Borrower not to permit its liquidity, measured as of the last business day of each calendar month commencing March 29, 2024, to be less than $15.0 million and (ii) an anti-cash hoarding covenant, which shall be effective only during the Covenant Relief Period, requiring the Borrower to have no more than $20.0 million of unrestricted cash on the last day of each calendar month when revolving loans or letters of credit are outstanding or on the date of borrowing of a revolving loan.

Failure to comply with these covenants or make payments when due could result in an event of default,

which, if not cured or waived, could accelerate our repayment obligations under the Credit Agreement and could result in a default and acceleration under other agreements containing cross-default provisions.

Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations.

As of the date of this Quarterly Report on Form 10-Q, the Company was in compliance with its financial covenants.

The Company believes that its secured net leverage under the Credit Agreement is important to the understanding of the Company’s financial condition and liquidity.

At March 31, 2025, the Company’s secured net leverage ratio was 5.31:1.00, compared to a maximum allowable ratio of 6.00:1.00, with such calculation set forth below:

(Thousands, except leverage ratio)

Trailing Twelve-Months

Beverage Solutions Segment Adjusted EBITDA

Permissible credit agreement adjustments 1

Trailing Twelve-Months Credit Agreement Adjusted EBITDA

End of period:

Term loan facility

Delayed draw term loan facility

Revolving credit facility

Letters of credit outstanding

Beverage Solutions unrestricted cash and cash equivalents

Secured net debt

Beverage Solutions Credit Agreement secured net leverage ratio

1 – Primarily consists of $5.3 million of pro forma run-rate impact of cost savings initiatives, as permitted by the Credit Agreement.

The Term Loan Facility and Delayed Draw Term Loan Facility require quarterly principal payments totaling approximately $2.8 million (1.25% of the original principal balance).

Quarterly payments increase to approximately $4.2 million and $5.6 million (1.875% and 2.5% of the original principal balance) during the final two years of the agreements, respectively.

We incurred a total of $2.4 million in financing fees in connection with the Third Amendment.

Approximately $1.3 million of the fees were allocated to the Term Loan Facility and are being amortized over the remaining term of the Term Loan Facility utilizing the frozen effective yield method based on the interest rate in place at the issuance of the Term Loan Facility.

Approximately $1.0 million of the fees were allocated to the Revolving Credit Facility, are reported within other long-term assets on the Condensed Consolidated Balance Sheets and are being amortized ratably over the remaining term of the Revolving Credit Facility.

On January 15, 2025, the Company entered into an Incremental Assumption Agreement and Amendment No.

4 (the “Fourth Amendment”) to the Credit Agreement.

The Fourth Amendment expanded the syndicate to include member banks from the Farm Credit System and increased the amount of revolving facility commitments (the “Existing Revolving Facility Commitments”, and any loans thereunder, the “Existing Revolving Loans”) available to the Borrower under the Credit Agreement by $25.0 million (the “Incremental Revolving Facility Commitments” and any loans thereunder, the “Incremental Revolving Loans”).

The amount of revolving facility commitments available to the Borrower under the Credit Agreement, as amended, is $200.0 million.

The Incremental Revolving Facility Commitments and the Incremental Revolving Loans are subject to the same interest rates, commitment fees, maturity dates and other terms as the Existing Revolving Facility Commitments and the Existing Revolving Loans.

The Fourth Amendment also modified the secured net leverage ratio that the Company must comply with during the Covenant Relief Period to increase the maximum secured net leverage ratio to (a) 6.00x for the test period ending June 30, 2025, (b) 5.50x for the test period ending September 30, 2025, and (c) 5.25x for the test period ending December 31, 2025.

In addition, the minimum liquidity covenant will not apply after the Covenant Relief Period ends.

As of the date of this Quarterly Report on Form 10-Q, the Company was in compliance with its financial covenants.

We incurred a total of $1.4 million in financing fees in connection with the Fourth Amendment.

The fees were allocated to the Revolving Credit Facility, are reported within other long-term assets on the Condensed Consolidated Balance Sheets and are being amortized ratably over the remaining term of the Revolving Credit Facility.

Convertible Notes

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The Convertible Notes are carried at amortized cost and are recorded in long-term debt, net and convertible notes payable – related party, net on the Condensed Consolidated Balance Sheets.

At September 30, 2024, the carrying value of the Convertible Notes was $71.6 million, of which $49.7 million was from related parties.

At March 31, 2025, the carrying value of the Convertible Notes was $71.6 million, of which $49.7 million was from related parties.

We incurred a total of $0.5 million of financing fees in connection with the Convertible Notes, which were ratably allocated to the convertible notes payable and the convertible notes payable – related party, respectively, and are being amortized into interest expense over the remaining term of the Convertible Notes utilizing the effective interest rate method.

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International Debt and Lending Facilities

On March 21, 2023, we entered into a $70 million working capital trade finance facility with multiple financial institutions through our subsidiary, Falcon Coffees Limited (“Falcon”).

The facility was set to mature one year from inception.

Borrowings under the facility bore interest at the borrower’s option at a rate equal to (a) term SOFR, as defined in the facility, plus a margin of 4.00% plus a liquidity premium set by the lender at the time of borrowing or (b) the Base Rate (determined by reference to the greatest of (i) the Prime Rate, as defined in the facility, at such time, (ii) one-half of 1.00% in excess of the Federal Funds Effective Rate, as defined in the facility, at such time, and (iii) Term SOFR for a one-month tenor in effect at such time plus 1.00%).

On March 8, 2024, Falcon renewed its working capital trade finance facility with multiple institutions.

The facility size was reduced from $70.0 million to $55.0 million and remains uncommitted and repayable on demand, with certain of

Falcon’s assets pledged as collateral against the facility.

The facility size was reduced from $70.0 million to $55.0 million and was uncommitted and repayable on demand, with certain of Falcon’s assets pledged as collateral against the facility.

The facility matured one year from inception.

Borrowings under the facility bore interest at the borrower’s option at a rate equal to (a) Term SOFR plus a margin of 4.00% plus a liquidity premium set by the lender at the time of borrowing or (b) the Base Rate (determined by reference to the greatest of (i) the Prime Rate, as defined in the facility, at such time, (ii) one-half of 1.00% in excess of the Federal Funds Effective Rate, as defined in the facility, at such time, and (iii) Term SOFR for a one-month tenor in effect at such time plus 1.00%).

On August 21, 2024, Falcon amended its working capital trade finance facility, increasing the facility size from $55.0 million to $75.0 million.

The interest rates and maturity date were unchanged as a result of the amendment.

On March 7, 2025, Falcon renewed its working capital trade finance facility with multiple institutions.

The facility size was increased from $75.0 million to $85.0 million and remains uncommitted and repayable on demand, with certain of Falcon’s assets pledged as collateral against the facility.

The facility will mature one year from inception.

On August 21, 2024, Falcon amended its working capital trade finance facility.

The amendment increased the facility size from $55.0 million to $75.0 million.

The interest rates and maturity date were unchanged as a result of the amendment.

At September 30, 2024, there was $48.5 million of outstanding borrowings under the facility, which is recorded in short-term debt in the Condensed Consolidated Balance Sheets.

Falcon’s facility contains certain restrictive financial covenants which require Falcon to maintain certain levels of working capital, debt, and net worth.

Falcon was in compliance with these financial covenants as of September 30, 2024.

On September 28, 2023, we entered into a $5.0 million unsecured working capital trade finance facility with responsAbility Climate Smart Agriculture & Food Systems Fund through our subsidiary, Falcon.

At March 31, 2025, there was $58.8 million of outstanding borrowings under the facility, which is recorded in short-term debt in the Condensed Consolidated Balance Sheets.

Falcon’s facility contains certain restrictive financial covenants

which require Falcon to maintain certain levels of working capital, debt, and net worth.

Falcon was in compliance with these financial covenants as of March 31, 2025.

On September 28, 2023, we entered into a $5.0 million unsecured working capital trade finance facility with responsAbility Climate Smart Agriculture & Food Systems Fund through Falcon.

The facility will mature on December 31, 2026, and requires stepped repayments of $0.5 million on December 31, 2024, $1.0 million on December 31, 2025 and $3.5 million on December 31, 2026.

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or (b) the most recent applicable Term SOFR (as of the Quotation Day) for the shortest period (for which Term SOFR is available) which exceeds the applicable interest period of that loan, in each case plus the applicable margin.

At September 30, 2024, there was $5.0 million of outstanding borrowings under the facility, of which $4.5 million and $0.5 million, is recorded in long-term debt, net and current maturities of long-term debt, respectively, on the Condensed Consolidated Balance Sheets.

At March 31, 2025, there was $4.5 million of outstanding borrowings under the facility, of which $3.5 million and $1.0 million, is recorded in long-term debt, net and current maturities of long-term debt, respectively, on the Condensed Consolidated Balance Sheets.

Falcon’s facility contains certain restrictive financial covenants which require Falcon to maintain certain levels of working capital, debt, and tangible net worth.

Falcon was in compliance with these financial covenants as of September 30, 2024.

Westrock Coffee International, LLC, through its subsidiary Rwanda Trading Company, maintains two mortgage and inventory-backed lending facilities with a local bank in Rwanda:

(a) a short-term trade finance facility with a balance of $6.6 million at September 30, 2024 and (b) a long-term note payable with a balance of $0.8 million at September 30, 2024.

Additionally, Rwanda Trading Company maintains two short-term futures contract-based lending facilities from international institutions with outstanding balances of $0.6 million and $2.4 million at September 30, 2024.

Falcon was in compliance with these financial covenants as of March 31, 2025.

Supply Chain Finance Program

The Company is party to a supply chain finance program (the “Program”) with a third-party financing provider to provide better working capital usage by deferring payments for certain raw materials.

Under the Program, the financing provider remits payment to the Company’s suppliers for approved invoices, and the Company repays the financing provider the amount of the approved invoices, plus a financing charge, on 180-day terms.

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Due to the extension of payment terms beyond the original due date of approved invoices, obligations under the Program are recorded outside of accounts payable, within our supply chain finance program, on our Condensed Consolidated Balance Sheets.

As of September 30, 2024, there were $70.9 million obligations outstanding under the Program.

As of March 31, 2025, there were $95.4 million obligations outstanding under the Program.

Green Coffee Repurchase Program

The Company is party to a master commodity purchase and sale agreement (the “Commodity Program”) with a third-party financing provider whereby the Company may enter into commodities purchase and sales, including transactions in which the Company sells green coffee to the financing provider, but retains a right, or obligation, to re-purchase the green coffee at the original sales price, plus a finance charge (“Repo Transactions”).

The Commodity Program is uncommitted and may be canceled by the financing provider at any time.

At March 31, 2025 and December 31, 2024, the Company had a right, or obligation, to repurchase $13.6 million and $0, respectively, of green coffee from the financing provider.

The liability for Repo Transactions is recorded within accrued expenses and other current liabilities on the Company’s Condensed Consolidated Balance Sheets.

Cash flows related to Repo Transactions are recorded within financing activities in our Condensed Consolidated Statements of Cash Flows.

At-the-Market Common Stock Offering Program

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Under the Registration Statement, we have established an at-the-market common stock offering program (the “ATM Program”) to sell shares of common stock not to exceed 5,000,000 Common Shares in the aggregate.

During the nine months ended September 30, 2024, the Company sold 60,000 Common Shares under the ATM Program, resulting in net proceeds of $0.6 million.

This program is intended to provide additional financial

flexibility and an alternative mechanism to access the capital markets at an efficient cost as and when we need financing, including for acquisitions.

During the three months ended March 31, 2025, the Company had no sales of Common Shares under the ATM Program.

This program is intended to provide additional financial flexibility and an alternative mechanism to access the capital markets at an efficient cost as and when we need financing, including for acquisitions.

Current and Long-Term Liquidity

A key component of our long-term growth strategy is to complete the build-out of our extract and ready-to-drink manufacturing facility in Conway, Arkansas, which utilizes state-of-the-art equipment specifically designed to efficiently manufacture and package a wide range of beverages, such as canned or bottled cold brew coffees, lattes, assorted teas, and juice-based products.

During the second quarter of 2024, we commenced commercial production in a portion of the facility.

We are continuing to build out the remaining portions of the facility and expect that the material capital expenditures related to the facility will be completed by the first quarter of 2025.

We believe proceeds from the Delayed Draw Term Loan Facility, Convertible Notes, cash from operations and borrowings available under the Revolving Credit Facility will provide sufficient cash on-hand to fund our near-term growth strategies, which include, (i) extending and enhancing product offerings through innovation, (ii) expanding our customer base, (iii) expanding geographically, (iv) funding accretive acquisitions, (v) continuing to drive margin expansion and (vi) completing the build-out of our extract and ready-to-drink manufacturing facility in Conway, Arkansas.

Our liquidity needs are to fund operating expenses, meet debt service obligations, and fund both current and long-term investment activities, which include capital expenditures.

A key component of our long-term growth strategy is to complete the commercialization of our Conway Facility, which utilizes state-of-the-art equipment specifically designed to efficiently manufacture and package a wide range of beverages, such as canned or bottled cold brew coffees, lattes, assorted teas, and juice-based products.

We are continuing to build out the remaining portions of the facility and expect that the material capital expenditures will be completed by the end of third quarter of 2025.

We believe cash from operations and borrowings available under the Revolving Credit Facility will provide sufficient cash on-hand to fund our near-term growth strategies, which include, (i) extending and enhancing product offerings through innovation, (ii) expanding our customer base and (iii) continuing to drive margin expansion.

However, the Company will continuously evaluate its liquidity needs, and may seek to opportunistically access additional liquidity, including through either the debt or equity capital markets.

If it is determined that we have insufficient liquidity to fund the Conway facility build-out or fund our acquisition strategy, we may delay the build-out of the Conway facility and/or modify the scope of the build-out and we may reprioritize our strategy to focus on organic growth opportunities, which may have an adverse impact on our ability to achieve our growth objectives.

If it is determined that we have insufficient liquidity to fund our near-term growth strategies, we may delay and/or reprioritize our near-term growth strategies, which may have an adverse impact on our ability to achieve our growth objectives.

We believe that cash from operations, borrowings available under the Revolving Credit Facility and our ability to obtain future financing will provide sufficient cash on hand to fund our long-term growth strategies, which include (i) expanding geographically and (ii) finding accretive acquisitions.

Redemptions of Series A Preferred Shares

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Our Term Loan Facility and Delayed Draw Term Loan Facility require quarterly principal payments of 1.25% of the original principal.

Quarterly payments increase 1.875% and 2.5% of the original principal balance during the fourth and fifth years of the Credit Agreement, respectively.

Quarterly payments increase 1.875% and 2.5% of the original principal balance during the fourth and fifth years of the Credit Facility respectively.

We have no other material obligations to pay principal amounts of our long-term debt obligations prior to their maturity.

Future purchase obligations of $266.8 million as of September 30, 2024 consist of commitments for the purchase of inventory over the next 12 months.

Future purchase obligations of $409.2 million as of March 31, 2025 consist of commitments for the purchase of inventory over the next 12 months.

These obligations represent the minimum contractual obligations expected under the normal course of business.

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We have future obligations to repurchase $0.5 million of inventory associated with repurchase agreements in which the Company’s SS&T segment has sold inventory to a third party and from whom the Company’s Beverage Solution segment has an obligation to repurchase.

At March 31, 2025 we had a right or obligation to repurchase $13.6 million of inventory associated with Repo Transactions, for which the liability is recorded within accrued expenses and other current liabilities on the Company’s Condensed Consolidated Balance Sheets.

Capital Expenditures

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Customer beverage equipment represents Company-owned equipment that is deployed in our customers’ locations.

Capital expenditures for the nine months ended September 30, 2024 and 2023 were as follows:

Nine months ended September 30, 2024

Nine months ended September 30, 2023

During the remainder of 2024, we expect to invest approximately $30.0 million to continue the build out of our extract and ready-to-drink product manufacturing facility in Conway, Arkansas.

Capital expenditures for the three months ended March 31, 2025 and 2024 were as follows:

Three months ended March 31, 2025

Three months ended March 31, 2024

We expect to complete the build-out of our Conway Facility by the end of the third quarter of 2025.

If circumstances warrant, we may need to take measures to conserve cash, which may include a suspension, delay, or reduction in growth and/or maintenance capital expenditures.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis