Westrock Coffee Company, LLC (NASDAQ:WEST) Q2 2023 Earnings Call Transcript

Whether or not the weather holds, etc, on the distribution center that’s almost 90% under roof, that’s the last thing that has to come under roof. I think we are on track now. Now, where it could go bumpy is every product that comes through here has to be — first of all has to be created or matched, then it has to go through the commercialization process. Every product has to go through the regulatory process, every line that we turn on has to go through the regulatory process and everyone wants someone else to go first, right. Because these things are difficult to start up as everybody knows. So when we get towards the end of this year, we will give some view about what impact in EBITDA we expect in 2024. The 2025 [Phonetic] number is actually looking really good in terms of where we should be because most people are planning on coming in and taking their full allocation on an annual basis in the back half of 2024.

Should that waiver, we could have a startup EBITDA transition issue, but I don’t think we’re going to have a physical startup issue from where we sit today.

Sarang Vora: That’s great. And there’s one follow up question for Chris. Gross margin as such has been — this is more like a P&L question, but gross margin has been declining past few quarters with ERP conversion and systems and equipment and stuff. Do we expect to see a return in the back half of the year? I know you gave few reasons why gross margin should be improving but is it positive in the back half of the year in your estimate, just curious to know?

Chris Pledger: I do think you’ll see a turnaround. I think we’ll see a turnaround in gross margins. I think what you’re seeing is, if you go through and add back the specific one-times that we talked about related to the ERP conversion, the cost of the single-server platform, getting that where it needed to be and then some of the other costs that we’ve incurred kind of in the first half of the year, that will be out of our run rate in the back half of the year, when you start looking at that, you’ll start to see a shift in margin from the — going the wrong way to go in the right way and I think you’ll see that in the back half of the year.

Sarang Vora: That’s cool. Great. Thank you.

Operator: Thank you. One moment for next question. Our next question comes from the line of Todd Brooks from the Benchmark Company.

Todd Brooks: Hey, thanks. Good afternoon to you both.

Scott Ford: Hey, Todd

Todd Brooks: On Conway, and Scott, you kind of started to get at this question in the previous answer, but I just wanted to understand. So at one point, this was a very phased project, over three phases across that window into 2027, and now it seems like given the scale of the opportunity and the fact that you’ve been able to bring this additional capital in, it’s not really phased anymore. It’s really, okay, when three lines up, we’re matching with customer needs. What’s the right way to think about the EBITDA recognition of the opportunity, the 125 million to 150 million? Is the main bolus of that in 2025, 2026, with a tag end in 2027 and an initial piece of EBITDA in 2024? Just if you can help us match how these lines are envisioned to come on now with this EBITDA opportunity that would be a big help.