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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-08 · 195 added, 93 removed, 211 unchanged (58% 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 months ended March 31, 2025.

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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Significant Developments

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 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%).

Equity Method Investment and De-Consolidation of Rwanda Trading Company

On April 1, 2025, the Company entered into an agreement with ETC Holdings SA (“ECOM”) that combines Westrock’s and ECOM’s Rwandan export operations (the “Rwandan JV”).

This strategic partnership, which was established to trade Arabica coffee from Rwanda and commercially operate wet mill and storage facilities, allows Westrock to scale its operations in Rwanda, improve profitability, and strengthen our ability to provide smallholder farmers and their families the ability to advance their quality of life and economic well-being.

The Company contributed its ownership interest in Rwanda Trading Company (“RTC”) and $100,000 in cash in exchange for a 49.9% ownership interest in the Rwandan JV.

At June 30, 2025, the Company’s investment and maximum exposure to loss is $1.6 million, which is recorded in other long-term assets on the Condensed Consolidated Balance Sheets.

As a result of the transaction, the Company has de-consolidated RTC, de-recognizing $9.3 million of assets, including approximately $2.9 million of cash and cash

equivalents, and $10.3 million of liabilities that were previously reported within our Sustainable Sourcing & Traceability segment.

Upon de-consolidation, the Company recognized a $2.3 million gain during the three months ended June 30, 2025, which is recorded in other, net on the Condensed Consolidated Statements of Operations.

Results of Operations

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

Comparison of the Three Months Ended June 30, 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)

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

Costs of sales

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Transaction, restructuring and integration expense

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

Impairment charges

Loss on disposal of property, plant and equipment

Total operating expenses

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Change in fair value of warrant liabilities

(Loss) income before income taxes and equity in earnings from unconsolidated entities

Loss before income taxes and equity in earnings from unconsolidated entities

Income tax expense (benefit)

Equity in (earnings) loss from unconsolidated entities

Net (loss) income

Accretion of Series A Convertible Preferred Shares

Net (loss) income attributable to common shareholders

Three Months Ended March 31,

Amortization of Series A Convertible Preferred Shares

Net loss attributable to common shareholders

Three Months Ended June 30,

Beverage Solutions

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(1) Net of intersegment revenues.

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.

Net Sales from our Beverage Solutions segment were $208.8 million for the three months ended June 30, 2025, increasing 27.9% compared to $163.3 million for the three months ended June 30, 2024.

The increase was primarily due to a $38.9 million increase in the sale of coffee and tea products, driven by a 21.1% increase in single serve cup volumes and a 13.7% increase in core roast and ground coffee volumes, and the year over year growth in coffee commodity prices, which are passed through to our customers.

In addition, sales of flavors, extracts & ingredients products increased $6.6 million, driven by the ramp up in operations of our Conway, Arkansas extract and ready-to-drink manufacturing facility (the “Conway Facility”).

Net Sales from our SS&T segment, net of intersegment revenues, were $72.0 million for the three months ended June 30, 2025, increasing 59.6% compared to $45.1 million for the three months ended June 30, 2024.

The increase is driven by an increase in the average sales price per pound, which increased 50.1% for the three months ended June 30, 2025, compared to the three months ended June 30, 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.

SS&T sales volume increased 10.3% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Costs of Sales

Three Months Ended March 31,

Three Months Ended June 30,

Beverage Solutions

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Total costs of sales

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.

In our Beverage Solutions segment, costs of sales increased $47.9 million to $174.5 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

The increase in costs of sales was primarily driven by an increase in sales volumes and an increase in the coffee commodity prices for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

In our SS&T segment, costs of sales increased $24.6 million to $64.9 million for the three months ended June 30, 2025, compared to the three months ended June 30, 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.

Costs of sales in our SS&T segment for the three months ended June 30, 2025 included $1.4 million of net unrealized gains on forward sales and purchase contracts and mark-to-market adjustments on green coffee inventory compared to $1.5 million of net unrealized gains for the three months ended June 30, 2024.

Selling, General and Administrative Expense

Three Months Ended March 31,

Three Months Ended June 30,

(Dollars in Thousands)

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Total selling, general and administrative expense

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.

Total selling, general and administrative expenses in our Beverage Solutions segment increased $2.9 million to $51.7 million for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.

The increase is primarily due to an increase in operating 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 June 30, 2024.

Transaction, Restructuring and Integration Expense

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).

Transaction, restructuring and integration expenses for the three months ended June 30, 2025 were $2.5 million, approximately $1.9 million of which related to severance costs and $0.4 million of which related to fees related to the establishment of our accounts receivable factoring agreement.

During the three months ended June 30, 2024, we incurred $4.4 million of transaction, restructuring and integration expenses, approximately $4.1 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.

Interest Expense

Three Months Ended March 31,

Three Months Ended June 30,

Interest expense

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Total interest expense

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.

Interest expense for the three months ended June 30, 2025 was $13.1 million compared to $7.5 million for the three months ended June 30, 2024.

Interest expense associated with our term loan and delayed draw term loan decreased $0.7 million due to decreased outstanding balances, while interest on our revolving credit facility increased $2.5 million, primarily due to higher outstanding borrowings.

During the three months ended June 30, 2025, the Company capitalized approximately $0.4 million of interest costs associated with the build-out of our Conway Facility, compared to $4.3 million of such interest costs for the three months ended June 30, 2024.

Income Tax Expense (Benefit)

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

Income tax benefit for the three months ended June 30, 2025 was $0.4 million, resulting in an effective tax rate of 1.7%.

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

Income tax benefit for the three months ended June 30, 2024 was $4.6 million, resulting in an effective tax rate of 20.7%.

Comparison of the Six Months Ended June 30, 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:

Six Months Ended

(Dollars in Thousands)

June 30, 2025

June 30, 2024

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

Amortization of Series A Convertible Preferred Shares

Net loss attributable to common shareholders

Six Months Ended June 30,

Beverage Solutions

Sustainable Sourcing & Traceability (1)

Total net sales

(1) Net of intersegment revenues.

Net Sales from our Beverage Solutions segment were $372.9 million for the six months ended June 30, 2025, increasing 16.1% compared to $321.3 million for the six months ended June 30, 2024.

The increase was primarily due to a $40.8 million increase in the sale of coffee and tea products, driven by a 10.7% increase in roast and ground coffee volumes and the year over year growth in coffee commodity prices, which are passed through to our customers.

In addition, sales

of flavors, extracts & ingredients products increased $11.4 million, driven by the ramp up in operations of the Conway Facility.

Net Sales from our SS&T segment, net of intersegment revenues, were $121.8 million for the six months ended June 30, 2025, increasing 53.0% compared to $79.6 million for the six months ended June 30, 2024.

The increase is primarily driven by an increase in the average sales price per pound, which increased 52.3% for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.

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

Costs of Sales

Six Months Ended June 30,

Beverage Solutions

Sustainable Sourcing & Traceability

Total costs of sales

In our Beverage Solutions segment, costs of sales increased to $315.9 million for the six months ended June 30, 2025, from $251.7 million for the six months ended June 30, 2024.

The increase in costs of sales was primarily driven by an increase in the sales volumes, and the year over year growth in coffee commodity prices for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

In our SS&T segment, costs of sales increased $37.8 million to $108.3 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

This increase is primarily due to an increase in coffee commodity prices.

Costs of sales in our SS&T segment for the six months ended June 30, 2025 included $3.5 million of net unrealized gains on forward sales and purchase contracts and mark-to-market adjustments on green coffee inventory compared to $3.2 million of net unrealized gains for the six months ended June 30, 2024.

Selling, General and Administrative Expense

Six Months Ended June 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 and our SS&T segment were relatively unchanged compared to the six months ended June 30, 2024.

Transaction, Restructuring and Integration Expense

Transaction, restructuring and integration expenses for the six months ended June 30, 2025 were $4.3 million, approximately $2.4 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, $0.8 million of plant closure costs and $0.4 million of which related to fees related to the establishment of our accounts receivable factoring agreement.

During the six months ended June 30, 2024, we incurred $7.4 million of transaction, restructuring and integration expenses, approximately $4.1 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 and $2.2 million of which related to the establishment of our at-the-market common stock offering program.

Interest Expense

Six Months Ended June 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 six months ended June 30, 2025 was $25.7 million compared to $15.0 million for the six months ended June 30, 2024.

Interest expense associated with our term loan and delayed draw term loan facilities decreased due to a decrease in outstanding balances, while interest on our revolving credit facility increased $5.3 million, primarily due to higher outstanding borrowings.

During the six months ended June 30, 2025, the Company capitalized approximately $0.6 million of interest costs associated with the build-out of our Conway Facility, compared to $7.2 million of such interest costs for the six months ended June 30, 2024.

Income Tax Expense (Benefit)

Income tax expense for the six months ended June 30, 2025 was $1.5 million, resulting in an effective tax rate of (3.1)%.

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 expense for the six months ended June 30, 2024 was $1.2 million, resulting in an effective tax rate of (2.9)%.

Critical Accounting Estimates

We make certain judgements and use certain estimates and assumptions when applying accounting principles in the preparation of our financial statements.

We make certain judgments and use certain estimates and assumptions when applying accounting principles in the preparation of our financial statements.

The nature of those estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change.

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

As of June 30, 2025, there have been no material changes to these estimates.

Key Business Metrics

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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).

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 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.

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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 months ended March 31, 2025 and 2024 is as follows:

Three Months Ended March 31,

The reconciliation of our net (loss) income to EBITDA and Consolidated Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024 is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Interest expense

4 unchanged sentences

Equity-based compensation

Impairment charges

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

2 unchanged sentences

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 operating costs

Consolidated Adjusted EBITDA, as revised

Liquidity and Capital Resources

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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.

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 fluctuate, 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.

The uncertainty around the long-term tariff rates that could be applied to our importation of products into the U.S.

presents significant challenges to our operations and supply chain and may result in future results being significantly different than any outlook given.

We cannot predict what additional actions might be considered or implemented by the U.S.

or its trade partners, particularly in the current geopolitical environment.

The uncertainty could also cause disturbances in ocean shipping capacity that could affect our ability to secure ocean freight containers for our products, and create inflationary effects on our costs, in addition to the direct impact of tariffs.

For example, recent tariffs targeting Brazil and other coffee-producing nations could negatively impact our ability and the ability of competitors to source coffee and could lead to an increase in the cost of commodities and adversely affect our profitability.

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.

1 unchanged sentence

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

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.

A prolonged increase in “C” market prices and/or tariff-impacted costs combined with the near-term costs associated with continuing to build out the remaining portions of the Conway Facility, 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

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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 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%.

At June 30, 2025, we had $172.5 million of outstanding borrowings under the Revolving Credit Facility, with a weighted average interest rate of 8.2% and we had $2.6 million of standby letters of credit outstanding.

At June 30, 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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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.

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.

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:

At June 30, 2025, the Company’s secured net leverage ratio was 4.75:1.00, compared to a maximum allowable ratio of 6.00:1.00, with such calculation set forth below:

(Thousands, except leverage ratio)

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1 – Primarily consists of $8.8 million of pro forma run-rate impact of cost savings initiatives, as permitted by the Credit Agreement.

A reconciliation of trailing twelve-months Beverage Solutions Adjusted EBITDA is as follows:

Year ended December 31, 2024

Six months ended June 30, 2025

Six months ended June 30, 2024

Trailing Twelve-Months Beverage Solutions Adjusted EBITDA

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).

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

At June 30, 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.

Pursuant to the terms of the Convertible Notes, noteholders may convert their Convertible Notes at their option only in the following circumstances:

(i) during the period commencing on August 15, 2024, and prior to the close of business on the trading day immediately preceding August 15, 2028, if the closing price for at least 20 trading days (whether or not consecutive) during the period of any 30 consecutive trading days in the immediately preceding calendar quarter is equal to or greater than 130% of the conversion price;

to or greater than 130% of the conversion price;

(ii) during the period commencing on August 15, 2028, and prior to the close of business on the second scheduled trading day immediately preceding February 15, 2029, at any time;

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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.

At June 30, 2025, there was $75.2 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 June 30, 2025.

On July 23, 2025, Falcon amended its working capital trade finance facility with multiple institutions.

The facility size was increased from $8 5.0 million to $ 102.5 million and remains uncommitted and repayable on demand, with certain of Falcon’s assets pledged as collateral against the facility.

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.

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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 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 March 31, 2025.

At June 30, 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 June 30, 2025.

Supply Chain Finance Program

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

As of June 30, 2025, there were $98.3 million obligations outstanding under the Program.

Receivables Purchase Agreement

On June 27, 2025, the Company entered into a receivable purchase agreement (the “Factoring Agreement”) with a third-party financial institution (the “Factor”) through which the Company may sell up to $35.0 million of certain trade receivables on a nonrecourse basis to the Factor.

Transactions under the Factoring Agreement qualify for true-sale treatment in accordance with Accounting Standards Codification (“ASC”) 860, Transfers and Servicing (“ASC 860”), whereby receivables sold to the Factor are recorded as a reduction of accounts receivable in the Condensed Consolidated Balance Sheets.

As a part of the Factoring Agreement, we perform certain collection and administrative functions for the receivables sold.

During the six months ended June 30, 2025, the Company received $35.0 million of proceeds under the Factoring Agreement, and approximately $0.4 million of fees were incurred associated with these sales, which are recorded within selling, general and administrative expense on the Condensed Consolidated Statements of Operations.

Green Coffee Repurchase Program

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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.

At June 30, 2025 and December 31, 2024, the Company had a right, or obligation, to repurchase $9.9 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.

Cash flows related to Repo Transactions are reported as 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 three months ended March 31, 2025, the Company had no sales of Common Shares under the ATM Program.

During the three and six months ended June 30, 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.

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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 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.

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 the 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 operating expenses, debt service, near-term investment activities and 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, especially in light of “C” market price volatility and tariff and trading restrictions (as discussed above) 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 our operating expenses, debt service and near-term investment activities, 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 liquidity needs and growth strategies, which include (i) expanding geographically and (ii) finding accretive acquisitions.

Redemptions of Series A Preferred Shares

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Assuming that the liquidation preference of the Series A Preferred Shares remains $11.50 per share and all 23,510,527 Series A Preferred Shares remain outstanding after February 26, 2028, we estimate an aggregate redemption payment of at least approximately $270.4 million.

If Westrock was required by the holders to redeem a significant number of Series A Preferred Shares, Westrock may not have enough cash available (including through draws on its credit facility) for other purposes such as paying dividends on the Common Shares, repurchases of Common Shares, financing acquisitions or other expansions, paying employee incentives and executing its business strategy.

If Westrock was required by the holders to redeem a significant number of Series A Preferred Shares, Westrock may not have enough cash available (including through draws on its credit facility) for other purposes such as paying dividends on the Common Shares, repurchasing Common Shares, financing acquisitions or other expansions, paying employee incentives and/or executing its business strategy.

An outflow of a significant amount of cash from Westrock as a result of redemptions of the Series A Preferred Shares may cause a deterioration in the financial condition of Westrock and our ability to pay our other obligations and/or execute our business strategy.

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Our material contractual and other obligations include the payment of principal and interest under our debt obligations and future purchase of inventory obligations.

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 Facility respectively.

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

Quarterly payments increase to 1.875% and 2.5% of the original principal balance during the final two 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 $409.2 million as of March 31, 2025 consist of commitments for the purchase of inventory over the next 12 months.

Future purchase obligations of $422.1 million as of June 30, 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.

There are no material purchase obligations beyond 12 months.

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.

At June 30, 2025, we had a right or obligation to repurchase $9.9 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 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.

Capital expenditures for the six months ended June 30, 2025 and 2024 were as follows:

Six months ended June 30, 2025

Six months ended June 30, 2024

We expect that the material capital expenditures will be complete 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