Q4 2025 Swiss Water Decaffeinated Coffee Inc Earnings Call

March 16, 2026

Operator 2: Good afternoon and welcome to the Swiss Water Decaffeinated Coffee Inc. Q4 2026 Conference Call. At this time, all participants are in a listen-only mode, and the floor will be open for questions following the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. Before Swiss Water Decaffeinated Coffee Inc. conference call starts, they are required to remind you that certain information in today's presentation is forward-looking in nature. Any such forward-looking information or statement are based on assumptions that they consider reasonable at the time the information was prepared. Such information involves known and unknown risks, uncertainties, and other factors outside our control that could cause actual results to differ materially from those expressed in the forward-looking information. Swiss Water Decaffeinated Coffee Inc.

Operator: Good afternoon and welcome to the Swiss Water Decaffeinated Coffee Inc. Q4 2026 Conference Call. At this time, all participants are in a listen-only mode, and the floor will be open for questions following the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. Before Swiss Water Decaffeinated Coffee Inc. conference call starts, they are required to remind you that certain information in today's presentation is forward-looking in nature. Any such forward-looking information or statement are based on assumptions that they consider reasonable at the time the information was prepared. Such information involves known and unknown risks, uncertainties, and other factors outside our control that could cause actual results to differ materially from those expressed in the forward-looking information. Swiss Water Decaffeinated Coffee Inc.

Speaker #2: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. Before the Swiss Water Decaffeinated Coffee Incorporated conference call starts, they are required to remind you that certain information in today's presentation is forward-looking in nature.

Speaker #2: Any such forward-looking information or statements are based on assumptions that they consider reasonable at the time the information was prepared. Such information involves known and unknown risks, uncertainties, and other factors outside our control.

Speaker #2: That could cause actual results to differ materially from those expressed in the forward-looking information. Swiss Water Decaffeinated Coffee Incorporated does not assume responsibility for the accuracy and completeness of the forward-looking information.

Operator 2: Does not assume responsibility for the accuracy and the completeness of the forward-looking information. Similarly, they do not undertake any obligation to publicly revise this forward-looking information to reflect subsequent events or circumstances, except as required by law. Please refer to Swiss Water Decaffeinated Coffee Inc. Management's discussion and analysis posted on the SEDAR, S-E-D-A-R, and Swiss Water's website for a full discussion regarding forward-looking statements and the risks therein. I will now turn the conference over to your host, Frank Dennis, President and CEO of Swiss Water Decaffeinated Coffee. The floor is yours.

Operator: Does not assume responsibility for the accuracy and the completeness of the forward-looking information. Similarly, they do not undertake any obligation to publicly revise this forward-looking information to reflect subsequent events or circumstances, except as required by law. Please refer to Swiss Water Decaffeinated Coffee Inc. Management's discussion and analysis posted on the SEDAR, S-E-D-A-R, and Swiss Water's website for a full discussion regarding forward-looking statements and the risks therein. I will now turn the conference over to your host, Frank Dennis, President and CEO of Swiss Water Decaffeinated Coffee. The floor is yours.

Speaker #2: Similarly, they do not undertake any obligation to publicly revise this forward-looking information to reflect subsequent events or circumstances, except as required by law. Please refer to Swiss Water Decaffeinated Coffee Incorporated's management's discussion and analysis posted on the SEDAR and Swiss Water's website for a full discussion regarding forward-looking statements and the risks therein.

Speaker #2: I will now turn the conference over to your host, Frank Dennis, President and CEO of Swiss Water Decaffeinated Coffee. The floor is yours.

Speaker #1: Thank you, Jenny. And good afternoon, everyone. Thank you for joining us today. I'm Frank Dennis, President and CEO of Swiss Water Decaffeinated Coffee. Joining me on the call is Ian Carswell, our CFO.

Frank Dennis: Thank you, Jenny, and good afternoon, everyone. Thank you for joining us today. I'm Frank Dennis, President and CEO of Swiss Water Decaffeinated Coffee, and joining me on the call is Iain Carswell, our CFO. As usual, I'll begin with a brief overview of our performance and the operating environment. Iain will then walk through the financial results in more detail, and I'll come back at the end with a few closing comments before we open the line for questions. 2025 was an unusually volatile year for the global coffee market, and Q4 reflected that. We dealt with extreme movements in coffee futures prices, a deeply inverted market structure for much of the year, shifting tariff conditions, and as the year progressed, increasing pressure on consumer demand, particularly in the US grocery channel.

Speaker #1: As usual, I'll begin with a brief overview of our performance and the operating environment. Ian will then walk through the financial results in more detail.

Speaker #1: And I'll come back at the end with a few closing comments before we open the line for questions. 2025 was an unusually volatile year for the global coffee market.

Speaker #1: And the fourth quarter reflected that. We dealt with extreme movements in coffee futures prices, a deeply inverted market structure for much of the year, shifting tariff conditions, and, as the year progressed, increasing pressure on consumer demand, particularly in the US grocery channel.

Speaker #1: Despite that environment, the business performed very well, and we delivered solid results for the year. Processed volumes were up 2% for the year. The small volume decline in the fourth quarter was largely driven by what we saw late in the quarter on the consumer side.

Frank Dennis: Despite that environment, the business performed very well and we delivered solid results for the year. Processed volumes were up 2% for the year. The small volume decline in Q4 was largely driven by what we saw late in the quarter on the consumer side. Retail coffee prices reached levels where consumers began to push back, and we saw that clearly in third-party US grocery data as consumption softened, purchase frequency declined, and consumers traded down. That consumer behavior flowed back through the supply chain. Roasters became more cautious, inventory coverage shortened, and order timing became less predictable. While we would have preferred a stronger finish to the year from a volume standpoint, the decline was measured and operationally the business remained stable throughout. From a revenue perspective, results were meaningfully higher year-over-year, driven primarily by the elevated NYC price flowing through green coffee revenue.

Speaker #1: Retail coffee prices reached levels where consumers began to push back. We saw that clearly in third-party U.S. grocery data, as consumption softened, purchase frequency declined, and consumers traded down.

Speaker #1: That consumer behavior flowed back through the supply chain. Roasters became more cautious. Inventory coverage shortened, and order timing became less predictable. While we would have preferred a stronger finish to the year from a volume standpoint, the decline was measured, and operationally the business remained stable throughout.

Speaker #1: From a revenue perspective, results were meaningful, higher year over year, driven primarily by the elevated NYC price flowing through green coffee revenue. As we've been very consistent about saying, we're careful not to overinterpret that—in this environment, headline revenue growth is largely a function of commodity pricing rather than a structural change in underlying demand.

Frank Dennis: As we've been very consistent about saying, we're careful not to overinterpret that. In this environment, headline revenue growth is largely a function of commodity pricing rather than a structural change in underlying demand. What matters more to us is execution, how we support customers, how we manage volatility, and how we position the business for when conditions normalize. Operationally, our Delta facility continued to perform in line with our expectations throughout the year. With both production lines now operating at steady state, we're seeing continued improvements in consistency, quality, and throughput. A lot of work over the past year has gone into process control and optimization, particularly around drying and yield, and that's translating into an even higher quality coffee for our customers. From a capacity standpoint, we are well-positioned to support incremental growth as demand rebuilds without near-term constraints.

Speaker #1: What matters more to us is execution—how we support customers, how we manage volatility, and how we position the business for when conditions normalize.

Speaker #1: Operationally, our Delta facility continued to perform in line with our expectations throughout the year. With both production lines now operating at steady state, we're seeing continued improvements in consistency, quality, and throughput.

Speaker #1: A lot of work over the past year has gone into process control and optimization, particularly around drying and yield. And that's translating into an even higher quality coffee for our customers.

Speaker #1: From a capacity standpoint, we're well positioned to support incremental growth as demand rebuilds without near-term constraints. Strategic inventory positioning remained a key differentiator for us in 2025.

Frank Dennis: Strategic inventory positioning remains a key differentiator for us in 2025. In a market where many importers stepped back from holding coffee due to inversion costs and price risk, our ability to carry inventory and place it where customers needed it allowed us to continue serving both large and small roasters reliably. That reliability continues to matter in volatile markets and remains a core part of our value proposition. Tariffs added another layer of complexity during the year. The escalation of US tariffs on Brazilian coffee in Q3 caused meaningful disruption across the industry, forcing rapid shifts in sourcing and blend composition. While those tariffs were ultimately removed late in the year, the interim uncertainty affected order timing and contributed to broader market hesitation. Throughout that period, we operated within the applicable framework, pass-through costs were required, and stayed focused on continuity of supply for customers.

Speaker #1: In a market where many importers step back from holding coffee due to inversion costs and price risk, our ability to carry inventory and place it where customers needed it allowed us to continue serving both large and small roasters reliably.

Speaker #1: That reliability continues to matter in volatile markets, and it remains a core part of our value proposition. Tariffs added another layer of complexity during the year.

Speaker #1: The escalation of U.S. tariffs on Brazilian coffee in the third quarter caused meaningful disruption across the industry, forcing rapid shifts in sourcing and blend composition.

Speaker #1: While those tariffs were ultimately removed late in the year, the interim uncertainty affected order timing and contributed to broader market hesitation. Throughout that period, we operated within the applicable framework, passed through costs where required, and stayed focused on continuity of supply for customers.

Speaker #1: From a balance sheet standpoint, we continue to make progress strengthening the business. Over the course of the year, we reduced leverage, expanded our operating credit facility, and completed the repurchase and cancellation of the Mill Road warrants.

Frank Dennis: From a balance sheet standpoint, we continue to make progress strengthening the business. Over the course of the year, we reduced leverage, expanded our operating credit facility, and completed the repurchase and cancellation of the Mill Road warrants. Taken together, those actions improved our financial flexibility and put us in a stronger position to navigate volatility while remaining disciplined on capital allocation. Looking ahead, while market conditions remain dynamic, we are cautiously encouraged by what we're seeing early in 2026. Coffee futures prices have come off recent highs. The front month inversion has flattened significantly, and we're beginning to see early signs of improved purchasing activity as customers start to refill pipelines. That process tends to be gradual, and we expect inventory discipline to remain part of the landscape for some time. A more normalized future structure is constructive for volume growth over the medium term.

Speaker #1: Taken together, those actions improved our financial flexibility and put us in a stronger position to navigate volatility, while remaining disciplined on capital allocation. Looking ahead, while market conditions remain dynamic, we are cautiously encouraged by what we're seeing early in Q1 2026.

Speaker #1: Coffee futures prices have come off recent highs. The front-month inversion has flattened significantly, and we're beginning to see early signs of improved purchasing activity as customers start to refill pipelines.

Speaker #1: That process tends to be gradual, and we expect inventory discipline to remain part of the landscape for some time. But a more normalized future structure is constructive for volume growth over the medium term.

Speaker #1: More broadly, the long-term fundamentals of our business remain intact. Demand for chemical-free decaffeination continues to build. Consumer awareness continues to increase, and regulatory and health-driven scrutiny of chemical-based processes continues to support the category.

Frank Dennis: More broadly, the long-term fundamentals of our business remain intact. Demand for chemical-free decaffeination continues to build, consumer awareness continues to increase, and regulatory and health-driven scrutiny of chemical-based processes continues to support the category. Our focus in 2026 is straightforward. Support customers as volumes rebuild with the right coffees, continue to optimize our operations, and convert improved financial flexibility into sustainable, profitable growth over time. With that, I'll turn the call over to Iain to walk through the financial results in more detail. Iain?

Speaker #1: Our focus in 2026 is straightforward: support customers as volumes rebuild with the right coffees, continue to optimize our operations, and convert improved financial flexibility into sustainable, profitable growth over time.

Speaker #1: With that, I'll turn the call over to Ian to walk through the financial results in more detail. Ian?

Speaker #2: Thank you, Frank. And good afternoon, everyone. I just want to remind everybody that all figures are in Canadian dollars unless otherwise stated. As Frank mentioned, Q4 and full year 2025 results reflect steady execution in a market defined by elevated coffee prices, persistent volatility, and tariff-related disruption during the second half of the year.

Iain Carswell: Thank you, Frank, and good afternoon, everyone. Just want to remind everybody that all figures are in CAD unless otherwise stated. As Frank mentioned, Q4 and full year 2025 results reflect steady execution in a market defined by elevated coffee prices, persistent volatility, and tariff-related disruption during the second half of the year. Despite those dynamics and the uneven ordering patterns we saw at times, the underlying business remained stable, supported by consistent operations in Delta and continued demand for our chemical-free decaffeination process. Total shipped volumes for the quarter decreased by 2% and increased by 2% for the year when compared with the prior year. The decrease in volumes during Q4 reflects the lumpiness we saw across the broader coffee market. With consumer prices rising, roasters continued to cautiously approach the timing of their orders.

Speaker #2: Despite those dynamics, and the uneven ordering patterns we saw at times, the underlying business remained stable, supported by consistent operations in Delta and continued demand for our chemical-free decaffeination process.

Speaker #2: Total shipped volumes for the quarter decreased by 2%, and increased by 2% for the year when compared with the prior year. The decrease in volumes during the fourth quarter reflects the lumpiness we saw across the broader coffee market, with consumer prices rising.

Speaker #2: Roasters continue to cautiously approach the timing of their orders. The increase in volume shipped during the year reflects our strategic approach to inventory and enduring demand for a premium, chemical-free coffee through continued volatility and inversion in the NYC.

Iain Carswell: The increase in volume shipped during the year reflects our strategic approach to inventory and enduring demand for premium chemical-free coffee through continued volatility and inversion in the NYC. Looking at volumes by customer type, shipments to importers, those customers who resell our coffees to roasters when and where they need it, were down 10% in the quarter, up 3% for the year. Our shipments to roasters, those customers who roast packaged coffee to sell to consumers and their own coffee shops, or for home and office consumption, were up by 2% in the quarter, down 1% for the year. As we previously mentioned, many of our customers have moved to a more conservative just-in-time operating model for inventory management, and that impacted the distribution of quarterly growth rates in 2025.

Speaker #2: Looking at volumes by customer type, shipments to importers—those customers who resell our coffees to roasters, when and where they need it—were down 10% in the quarter, up 3% for the year.

Speaker #2: Our shipments to roasters—those customers who roast packaged coffee to sell to consumers and their own coffee shops or for home and office consumption—were up by 2% in the quarter, down 1% for the year.

Speaker #2: As we've previously mentioned, many of our customers have moved to a more conservative, just-in-time operating model for inventory management, and that impacted the distribution of quarterly growth rates in 2025.

Speaker #2: Looking at our customer channels another way, specialty volumes were down 5% in the quarter and up 6% for the year. These accounts serve the out-of-home consumer, primarily in cafés and restaurants in our key geographic markets.

Iain Carswell: Looking at our customer channels another way, specialty volumes were down 5% in the quarter and up 6% for the year. These accounts serve the out-of-home consumer, primarily in cafes and restaurants in our key geographic markets. Commercial volumes were up 2% in the quarter, down 1% for the year. Q4 revenue was up 34% to CAD 66 million, compared to CAD 49.2 million in Q4 2024. Full year revenue was CAD 258.7 million, up 49%. The primary driver of the increase in revenue in both the quarter and for the year was the elevated coffee prices, with the NYC continuing to trade well above historic averages, which flows through to our green coffee revenue.

Speaker #2: Commercial volumes were up 2% in the quarter, down 1% for the year. Q4 revenue was up 34% to $66 million, compared to $49.2 million in Q4 2024.

Speaker #2: Full-year revenue was $258.7 million, up 49%. The primary driver of the increase in revenue in both the quarter and for the year was the elevated coffee prices, with the NYC continuing to trade well above historic averages.

Speaker #2: Which flows through to our green coffee revenue. Increased volume shipped, tariff recovery expense, and increased distribution revenue at our logistics subsidiary, C4th, further amplified the growth in revenue for the year.

Iain Carswell: Increased volume shipped, tariff recovery expense, and increased distribution revenue at our logistics subsidiary, Seaforth, further amplified the growth in revenue for the year. Moving on to our costs. Q4 cost of sales was CAD 58 million, up 37% year-over-year. Full-year cost of sales was CAD 231.7 million, up 58% year-over-year. For the quarter, the increase is primarily attributed to the elevated FX fluctuations in the US dollar and tariffs, offset slightly by a minor decrease in volume shipped. For the full year, the impact of elevated FX, higher volume shipped, and tariffs was partially offset by fluctuations in the US dollar. Green coffee costs averaged $3.83 per pound compared to $2.83 per pound in Q4 2024, an increase of 35%.

Speaker #2: Moving on to our costs, Q4 cost of sales was $58 million, up 37% year-over-year. Full-year cost of sales was $231.7 million, up 58% year-over-year.

Speaker #2: For the quarter, the increase is primarily attributed to the elevated NYC, fluctuations in the US dollar, and tariffs, offset slightly by a minor decrease in volume shipped.

Speaker #2: For the full year, the impact of elevated NYC, higher volume shipped, and tariffs was partially offset by fluctuations in the US dollar. Green coffee costs averaged US$3.83 per pound compared to US$2.83 per pound in Q4 2024, an increase of 35%.

Speaker #2: For the year, green coffee prices averaged US$3.36 per pound, compared to US$2.35 per pound in 2024—an increase of 55%. This reflects a modest decrease from the Q3 2025 average of US$3.37.

Iain Carswell: For the year, green coffee prices averaged $3.36 per pound compared to $2.35 per pound in 2024, an increase of 55%. This reflects a modest increase from the Q3 2025 average of $3.37. Customers continued to manage inventory cautiously during the Q4, reflecting elevated retail pricing and ongoing volatility in the coffee market. Ordering patterns remained uneven in the quarter as larger buyers, including importers, remained conservative in their purchasing decisions and limited inventory commitments. At the same time, we saw increased activity from smaller and specialty roasters, particularly as pricing stabilized towards the end of the quarter. These customers tend to operate with shorter planning horizons and were more responsive to near-term needs, which contributed to variability in order, timing, and mix.

Speaker #2: Customers continue to manage inventory cautiously during the fourth quarter, reflecting elevated retail pricing and ongoing volatility in the coffee market. Ordering patterns remained uneven in the quarter, as larger buyers, including importers, remained conservative in their purchasing decisions and limited inventory commitments.

Speaker #2: At the same time, we saw increased activity from smaller and specialty roasters, particularly as pricing stabilized towards the end of the quarter.

Speaker #2: These customers tend to operate with shorter planning horizons and were more responsive to near-term needs, which contributed to variability in order timing and mix.

Speaker #2: Overall, customer behavior in the quarter reflected continued discipline around inventory management rather than a change in underlying demand. Exchange rates between the US and Canadian dollar continue to influence our reported results and cash flows in the quarter and for the full year. As a reminder, most of the revenues are earned in US dollars, while a meaningful proportion of our costs are incurred in Canadian dollars.

Iain Carswell: Overall, customer behavior in the quarter reflected continued discipline around inventory management rather than a change in underlying demand. Exchange rates between the US and Canadian dollar continued to influence our reported results and cash flows in the quarter and for the full year. As a reminder, most of the revenues are earned in US dollars, while a meaningful proportion of our costs are incurred in Canadian dollars. We also carry US dollar receivables and payables on our balance sheet. During the year, movements in the exchange rate resulted in a foreign exchange gain, largely reflecting the revaluation of those US dollar balances at period end. We continue to monitor this exposure closely and use hedging tools where appropriate to manage our underlying currency risk. In Q4, the US dollar averaged 1.39 CAD compared to an average of 1.40 CAD in Q4 2024.

Speaker #2: And we also carry U.S. dollar receivables and payables on our balance sheet. During the year, movements in the exchange rate resulted in a foreign exchange gain, largely reflecting the revaluation of those U.S. dollar balances at period end.

Speaker #2: We continue to monitor this exposure closely and use hedging tools where appropriate to manage our underlying currency risk. In Q4, the US dollar averaged $1.39 Canadian, compared to an average of $1.40 Canadian in Q4 2024.

Speaker #2: For the full year, the US dollar averaged $1.40 Canadian, compared to an average of $1.37 Canadian in 2024. Turning now to operating expenses, Q4 operating expenses decreased 9% year over year to $3.5 million. Full year operating expenses decreased 1% to $14.9 million.

Iain Carswell: For the full year, the US dollar averaged 1.40 CAD compared to an average of 1.37 CAD in 2024. Turning now to operating expenses. Q4 operating expenses decreased 9% year-over-year to CAD 3.5 million. Full year operating expenses decreased 1% to CAD 14.9 million. Administrative expenses were down 11% for the quarter, driven by lower non-cash stock-based compensation and a reduction in accrued bonuses. Full year results were flat with a decrease of 1%. Q4 net income was CAD 1.2 million compared to CAD 2 million in Q4 2024. Full year net income was CAD 1.6 million compared to CAD 1.3 million in 2024.

Speaker #2: Administrative expenses were down 11% for the quarter, driven by lower non-cash stock-based compensation and a reduction in accrued bonuses. Full-year results were flat, with a decrease of 1%.

Speaker #2: Q4 net income was $1.2 million compared to $2.0 million in Q4 2024. Full-year net income was $1.6 million compared to $1.3 million. In 2024, aside from the items we've just discussed, the increase in non-operating or other loss for the year was driven by a $6.4 million loss on risk management activities.

Iain Carswell: Aside from the items we've just discussed, the increase in non-operating or other loss for the year was driven by a CAD 6.4 million loss on risk management activities. This came down to timing, specifically the lag between the cost of rolling our hedge positions forward and recovering those costs through customer invoicing in the context of a persistently inverted NYC market. We continue to price for the cost of the inversion consistent with how the industry approaches this. We expect those costs to be recovered through customer collections over the coming months. We also recorded mark-to-market adjustments this year, reflecting both commodity price movements and the strength of the US dollar. Taken together, these results are consistent with our structured approach to managing pricing, volatility, protecting against risk exposure, and staying aligned with our supply commitments.

Speaker #2: This came down to timing, specifically the lag between the cost of rolling our hedge positions forward and recovering those costs through customer invoicing. In the context of a persistently inverted NYC market, we continue to price for the cost of the inversion, consistent with how the industry approaches this.

Speaker #2: We expect those costs to be recovered through customer collections over the coming months. We also recorded mark-to-market adjustments this year, reflecting both commodity price movements and the strength of the US dollar.

Speaker #2: Taken together, these results are consistent with our structured approach to managing pricing volatility, protecting against risk exposure, and staying aligned with our supply commitments.

Speaker #2: Earlier this year, we reached an agreement with Mill Road Capital to repurchase and cancel their outstanding warrants. The repurchase price was $700,000. As a result of that cancellation, we no longer recognize a gain or loss on the fair value of the embedded option.

Iain Carswell: Earlier this year, we reached an agreement with Mill Road Capital to repurchase and cancel their outstanding warrants. The repurchase price was CAD 700 thousand. As a result of that cancellation, we no longer recognize a gain or loss on the fair value of the embedded option. For the full year, we recognized a CAD 1.7 million gain compared to a loss of CAD 1 million in 2024. There was a CAD 300 thousand decrease in finance expense in Q4, CAD 2.1 million reduction for the year, largely attributable to the elimination of the interest related to the Mill Road debenture, which was fully repaid in Q4 2024. Additionally, there was a decrease in the interest on long-term borrowings, reflecting our principal repayments and decreasing interest rates compared with 2024.

Speaker #2: For the full year, we recognized a $1.7 million gain compared to a loss of $1.0 million in 2024. There was a $300,000 decrease in finance expense in the fourth quarter, and a $2.1 million reduction for the year, largely attributable to the elimination of the interest related to the Mill Road debenture, which was fully repaid in Q4 2024.

Speaker #2: Additionally, there was a decrease in the interest on long-term borrowings, reflecting our principal repayments and decreasing interest rates compared with 2024. Q4 adjusted EBITDA was $4.2 million, down from $4.9 million, or 14% year over year.

Iain Carswell: Q4 adjusted EBITDA was CAD 4.2 million, down from CAD 4.9 million or 14% year-over-year. Adjusted EBITDA for the full year was CAD 11.3 million, down from CAD 14.3 million or 21% compared with the prior year. Fluctuations in adjusted EBITDA were primarily driven by losses on the risk management activities, which, as we've just discussed, we expect to be fully recovered through customer collections. Turning now to inventories. Our inventory balance increased 3% to CAD 46 million compared with the prior year. While volumes held decreased slightly, higher green coffee costs resulted in an increase. The increase was mitigated somewhat by the hedge accounting component of inventory. Inventory management remains a core part of how we operate.

Speaker #2: Adjusted EBITDA for the full year was $11.3 million, down from $14.3 million, or 21% compared with the prior year. Fluctuations in adjusted EBITDA were primarily driven by losses on the risk management activities, which, as we've just discussed, we expect to be fully recovered through customer collections.

Speaker #2: Turning now to inventories, our inventory balance increased 3% to $46 million compared with the prior year. While volumes held decreased slightly, higher green coffee costs resulted in an increase.

Speaker #2: The increase was mitigated somewhat by the hedge accounting component of inventory. Inventory management remains a core part of how we operate. We take a deliberate, forward-looking approach to holding inventory, making sure we're well positioned to meet anticipated customer demand and keep delivery running smoothly.

Iain Carswell: We take a deliberate, forward-looking approach to holding inventory, making sure we're well positioned to meet anticipated customer demand and keep delivery running smoothly. At year-end, Swiss Water held CAD 6.6 million in cash, compared with CAD 8.5 million at the end of 2024. Net working capital of CAD 42.3 million compared with CAD 4 million at the end of 2024. In 2024, the operating credit facility of CAD 35.4 million was classified as current borrowings. In June 2025, the facility was renegotiated, and the balance was reclassified to long-term borrowings. During Q4, we made total debt repayments of CAD 1.4 million, CAD 5.4 million for the year, made up of principal repayments on our long-term borrowings, primarily related to construction of our Delta facility and on our operating credit line.

Speaker #2: At year-end, Swiss Water held $6.6 million in cash compared with $8.5 million at the end of 2024. Net working capital was $42.3 million compared with $4 million at the end of 2024.

Speaker #2: In 2024, the operating credit facility of $35.4 million was classified as current borrowings. In June 2025, the facility was renegotiated, and the balance was reclassified to long-term borrowings.

Speaker #2: During the fourth quarter, we made total debt repayments of $1.4 million, and $5.4 million for the year, made up of principal repayments on our long-term borrowings, primarily related to construction of our Delta facility and on our operating credit line.

Speaker #2: With that, I will turn the call back to Frank.

Iain Carswell: With that, I will turn the call back to Frank.

Speaker #1: Thank you, Ian. Before we open the line up for questions, I'll just make a few brief comments to wrap up. While the coffee market remains volatile, our focus hasn't changed.

Frank Dennis: Thank you, Iain. Before we open the line up for questions, I'll just make a few brief comments to wrap up. While the coffee market remains volatile, our focus hasn't changed. We're staying disciplined on execution, supporting our customers through a challenging pricing environment and managing the business with a long-term view. The strategy we've put in place, particularly around inventory positioning, operational consistency, and financial flexibility, is doing what it's designed to in a complex market. We're encouraged by early signs that market conditions are beginning to normalize, but we're also realistic about the pace of that recovery. Our approach remains measured. We'll continue to prioritize reliability, competitiveness, and operational efficiency while staying focused on prudent capital allocation and improved balance sheet strength through debt reduction.

Speaker #1: We're staying disciplined on execution, supporting our customers through a challenging pricing environment, and managing the business with a long-term view. The strategy we've put in place, particularly around inventory positioning, operational consistency, and financial flexibility, is doing what it's designed to do in a complex market.

Speaker #1: We're encouraged by early signs that market conditions are beginning to normalize, but we're also realistic about the pace of that recovery. Our approach remains measured.

Speaker #1: We'll continue to prioritize reliability, competitiveness, and operational efficiency, while staying focused on prudent capital allocation and improved balance sheet strength through debt reduction. The long-term fundamentals of chemical-free decaffeination remain intact, and we believe Swiss Water is well positioned to navigate near-term variability and build on that foundation over time.

Frank Dennis: The long-term fundamentals of chemical-free decaffeination remain intact, and we believe Swiss Water is well positioned to navigate near-term variability and build on that foundation over time. With that, if we can please open up the line for questions.

Speaker #1: With that, if we can please open up the line for questions.

Speaker #2: No problem. We are now opening the floor for our question and answer session. We do ask that you limit your questions to one per person, and you may rejoin the queue for any follow-ups.

Operator 2: No problem. We are now opening the floor for our question and answer session. We do ask that you limit your questions to one per person, and you may rejoin the queue for any follow-ups. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for questions. Thank you. Our first question is coming from Emily Marin of Zacks Small-Cap Research. Emily, your line is live.

Operator: No problem. We are now opening the floor for our question and answer session. We do ask that you limit your questions to one per person, and you may rejoin the queue for any follow-ups. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for questions. Thank you. Our first question is coming from Emily Marin of Zacks Small-Cap Research. Emily, your line is live.

Speaker #2: If you would like to ask a question, please press *1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue.

Speaker #2: You may press star two if you would like to remove your question from the queue. And for anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys.

Speaker #2: Please wait a moment while we poll for questions. Thank you. Our first question is coming from Emily Marin of Zach's Smallcap. Emily, your line is live.

Speaker #3: Thank you. So it seems that the way you laid out industry dynamics, several months ago, in terms of continued volatility, likely to persist in 2025 with optimism that there would be normalization starting in 2026, it seems as if that is playing out the way you originally sort of expected.

Emily Marin: Thank you. So it seems that the way you laid out, you know, industry dynamics several months ago, in terms of continued volatility likely to persist in 2025 with, you know, optimism that there would be normalization starting in 2026, it seems as if that is playing out the way you originally, you know, sort of expected. Obviously, you know, things could change, but it seems like things are finally moving in the right direction. You're being very strategic in terms of managing inventory.

Speaker #3: Obviously, things could change, but it seems like things are finally moving in the right direction. But in terms of—so you are being very strategic in terms of managing inventory.

Speaker #3: What I'm wondering is, given the source saying your sourcing of coffee and different geographic regions being more or less subject to potential tariff imposition in the US market, and also to differences just in terms of crop outputs, how much flexibility do you have in terms of reorienting some of your sourcing if the market normalization sort of gets interrupted?

Emily Marin: What I'm wondering is, given the sourcing, your sourcing of coffee and different, you know, geographic regions being more or less subject to potential tariff imposition in the US market and also to, you know, differences just in terms of crop outputs, how much flexibility do you have in terms of, you know, reorienting some of your sourcing, if the market doesn't if the market normalization sort of gets interrupted?

Speaker #1: Right. We move our sourcing quite rapidly when, basically, availability becomes constrained in a particular origin or if differentials become too high. We can rearrange pathways—well, I wouldn't necessarily say pathways.

Frank Dennis: Right. We move our sourcing quite rapidly when basically availability becomes constrained in a particular origin, or if differentials become too high, we can rearrange pathways. I wouldn't necessarily say pathways. I'd just say rebalance what origins we want to focus on. The interesting thing as a decaffeinator is generally the roaster kinda leads us that way anyways. The roaster will be seeing the balance of their business, the other 90% of their business, 'cause decaf's only 10%, let's say. The other 90% of their business, they're seeing the same thing happen.

Speaker #1: I'd just say, rebalance what origins we want to focus on. The interesting thing, as a decaffeinator, is generally the roaster kind of leads us that way anyways.

Speaker #1: The roaster will be seeing the balance of their business. The other 90% of their business is decaf—only 10%, let's say. The other 90% of their business, they're seeing the same thing happen, and they'll say, 'Hey, we want to maybe deprioritize a particular quality level of a Brazilian coffee and move to, let's say, a Central American coffee,' if it's available.

Frank Dennis: They'll say, "Hey, we, you know, we wanna maybe deprioritize a particular quality level of a Brazilian coffee and move to, let's say, a Central American coffee, if it's available." Now, you know, Brazil, of course, representing just so much overall worldwide capacity, it's tough to walk away from Brazil entirely. There are alternatives and there are alternative quality levels. That's really an important thing for us to focus on, is recognize that, you know, roasters can have different quality levels that they might accept at particular price points over time, while others, you know, are very, very firm on exactly the quality level they wanna maintain.

Speaker #1: Now, Brazil, of course, representing just so much overall worldwide capacity—it's tough to walk away from Brazil entirely. But there are alternatives, and there are alternative quality levels.

Speaker #1: And that's really an important thing for us to focus on, is to recognize that roasters can have different quality levels that they might accept at particular price points over time.

Speaker #1: While others are very, very firm on exactly the quality level they want to maintain. So it's our job as a decaffeinator to be very, very responsive to where the roaster is going—kind of within reason.

Frank Dennis: It's our job as a decaffeinator to be very, very responsive to where the roaster is going kinda within reason. We still have, you know, a rather lengthy supply chain to get coffee into Vancouver, so we already have, you know, coffee on the water, as it were. You can still be, you know, within 90 days have made some pretty significant changes if necessary.

Speaker #1: We still have a rather lengthy supply chain to get coffee into Vancouver. So we already have coffee on the water, as it were. But you can still be within 90 days and have made some pretty significant changes if necessary.

Emily Marin: Mm-hmm. Okay. Thank you. I have another question, but I guess I'll get back into queue for that.

Speaker #3: Okay. Thank you. I have another question, but I guess I'll get back into queue for that.

Speaker #1: Okay.

Frank Dennis: Okay.

Operator 2: We can probably take your follow-up, Emily.

Speaker #2: We can probably take your follow-up, Emily.

Operator: We can probably take your follow-up, Emily.

Speaker #1: Okay.

Frank Dennis: Okay.

Speaker #3: Okay. Thank you.

Emily Marin: Okay. Thank you.

Operator 2: Yeah, no problem.

Operator: Yeah, no problem.

Speaker #2: Yeah. No problem.

Emily Marin: Thank you. You know, you are, you know, very, you know, conservatively cautioning that while things seem to be normalizing, you are expecting the buyers to remain kind of conservative in their buying patterns, you know, for a while at least. Until the rebound or the uptick in overall purchase orders is likely to be kind of, you know.

Speaker #3: Thank you. So you are very conservatively cautioning that, while things seem to be normalizing, you are expecting the buyers to remain kind of conservative in their buying patterns.

Speaker #3: For a while, at least. And so, the rebound or the uptick in overall purchase orders is likely to be kind of a slow one, perhaps.

Frank Dennis: Yeah.

Emily Marin: a slow one, perhaps. Are you seeing any differences, you know, any kind of market differences in any specific, you know, regional markets, or is the buying patterns and the, you know, the caution that you're describing, is that across the board?

Speaker #3: Are you seeing any differences in the kind of market differences in any specific regional markets, or is the buying pattern and the caution that you're describing, is that across the board?

Frank Dennis: We're seeing it. It's quite intense in Europe in terms of, you know, the focus on coffee quality levels, pricing, competitive structure. There's probably a heightened focus in Europe in terms of cost management and reluctance to carry coffees. I think, you know, North America is slowly starting to kind of pipeline fill. That's positive. Still, you know, $2.85 futures market is still quite elevated for a lot of banking lines. I mean, that's really what it comes down to. It's how big is your banking line and how high is the futures market?

Speaker #1: We're seeing it's quite intense in Europe in terms of the focus on coffee quality levels, pricing, and competitive structure. And so, there's probably a heightened focus in Europe in terms of cost management and reluctance to carry coffees. I think North America is slowly starting to kind of pipeline fill.

Speaker #1: So that's positive. But still, $2.85 futures market is still quite elevated for a lot of banking lines. I mean, that's really what it comes down to.

Speaker #1: It's, how big is your banking line? And how high is the futures market? And not everyone doubled or tripled their banking lines through this period.

Frank Dennis: You know, not everyone, you know, doubled or tripled their banking lines through this period. You know, at 2.85, there's still constraints for sure.

Speaker #1: So at 2.85, there are still constraints, for sure.

Emily Marin: Mm-hmm. That makes sense. Okay. Thank you very much for taking my questions.

Speaker #3: That makes sense. Okay. Thank you very much for taking my questions.

Speaker #1: Thank you.

Frank Dennis: Thank you.

Speaker #2: Thank you very much. Just a reminder there, if there are any further questions, you can still join the queue now by pressing star one on your phone keypad.

Operator 2: Thank you very much. Just a reminder there, if there are any further questions, you can still join the queue now by pressing star one on your phone keypad. Let's see if anyone else jumps into the queue. Okay. We have a couple more questions come in, and our first one is coming from Mark Fenderman of Properly Investments. Mark, your line is live.

Operator: Thank you very much. Just a reminder there, if there are any further questions, you can still join the queue now by pressing star one on your phone keypad. Let's see if anyone else jumps into the queue. Okay. We have a couple more questions come in, and our first one is coming from Mark Fenderman of Properly Investments. Mark, your line is live.

Speaker #2: Let's see if anyone else jumps into the queue. Okay. And we have a couple more questions come in, and our first one is coming from Mark Venderman of Properly Investments.

Speaker #2: Mark, your line is live.

Speaker #4: Thanks. And thanks, guys. Thanks for taking the question today. Just a comment on the front end and then maybe a question afterwards. Great quarter.

Mark Fenderman: Thanks. Thanks, guys. Thanks for taking the question today. Just a comment on the front end and then maybe a question afterwards. Great quarter. We really appreciated all the hard work in a really challenging 2025 by the management team and all of our outstanding team members in the Delta, British Columbia facility. Thank you so much. Lots of news over the last six months, becoming the largest shareholder of Swiss Water and a lot of interest on our position. Just to be really clear on this, we are 100% behind you on this management team and again, the wonderful folks in Delta, BC. Question for you with regards to the balance sheet.

Speaker #4: We really appreciated all the hard work in a really challenging 2025 by the management team and all of our outstanding team members in the Delta, British Columbia facility.

Speaker #4: Thank you so much. There's been lots of news over the last six months about becoming the largest shareholder of Swiss Water, and a lot of interest in our position.

Speaker #4: Just to be truly clear on this, we are 100% behind you on this management team. And again, the wonderful folks in Delta, B.C.

Speaker #4: Question for you with regards to the balance sheet. As we've seen the price come down in Q1, how long does that take to start to unwind the working capital on the balance sheet?

Mark Fenderman: As we've seen the price come down in Q1, how long does that take to start to unwind the working capital on the balance sheet? Can you give us a bit of a sense of maybe not so much quantum, but at least direction on the balance sheet?

Speaker #4: And can you give us a bit of a sense of—maybe not so much quant(um), but at least direction—on the balance sheet?

Iain Carswell: Thanks for that question, Mark. I mean, generally we're running at about eight to 10 weeks inventory on our balance sheet. You know, it takes probably, I'd say, the best part of three months for us to start seeing a meaningful reduction in the levels of inventory sitting on our balance sheet. That would obviously, that's assuming all things equal, that you know, business is not rapidly growing or rapidly shrinking. With modest growth, I would expect in a falling coffee price market, you'd start to see some impact coming through after kind of three months, three to six months.

Speaker #1: Thanks for that question, Mark. I mean, generally, we're seeing, generally, we're running at about 8 to 10 weeks' inventory on our balance sheet. So it takes probably, I'd say, the best part of three months for us to start seeing a meaningful reduction in the levels of inventory sitting on our balance sheet.

Speaker #1: And that would obviously—that's assuming all things equal, that the business is not rapidly growing or rapidly shrinking. So with modest growth, I would expect in a falling coffee price market, you'd start to see some impact coming through after kind of three months, three to six months.

Speaker #4: Awesome. And it must be a huge relief.

Mark Fenderman: Awesome. It must be a huge relief.

Speaker #1: Yeah, for sure. I mean, thankfully, we did a really good job of renegotiating our credit lines in the middle of last year, and so we did have some headroom to support the escalation in price.

Iain Carswell: Yeah, for sure. I mean, it's, thankfully, we did a really good job of renegotiating our credit lines in the middle of last year. We did have some headroom to support the escalation in price. Yeah, it's great when you see the C falling, and hopefully it gives a lot of our customers a lot more confidence to go a little bit longer in their inventories, which helps us grow faster.

Speaker #1: But yeah, it's great when you see the C falling, and hopefully it gives a lot of our customers a lot more confidence to go a little bit longer in their inventories, which helps us grow faster.

Speaker #4: Awesome. Thanks so much for that, Ian. And congratulations again, Frank. We look forward to seeing us come out of this period here over the next couple of years.

Mark Fenderman: Awesome. Thanks so much for that, Iain. Congratulations again, Frank, and we look forward to seeing us come out of this period here over the next couple of years.

Speaker #1: All right. Thank you, Mark.

Frank Dennis: Great. Thank you. Mark.

Speaker #2: Thank you very much. And our next question is coming from Emily Marin of Zach Smallcap. Emily, your line is live.

Operator 2: Thank you very much. Our next question is coming from Emily Marin of Zacks Small-Cap Research. Emily, your line is live.

Operator: Thank you very much. Our next question is coming from Emily Marin of Zacks Small-Cap Research. Emily, your line is live.

Speaker #3: Thank you. Okay, last question, I promise. One of the positive initiatives that you had been talking about, that I think you were really seeing some traction on, is opening up new markets or deepening your penetration in new markets.

Emily Marin: Thank you. Okay, last question, I promise. One of the initiatives that you had been talking about that I think you were really seeing some traction on is opening up new markets or deepening your penetration in new markets. You know, I think you talked about the Middle East being one that was very attractive. Given the volatile backdrop of the industry that we saw in 2025, given that, you know, buyer purchasing patterns are still somewhat cautious now, does that translate into a longer than usual sales cycle? Meaning, you know, the progress that you're making might not show up as quickly as it would otherwise if we were in a more normal cycle.

Speaker #3: I think you talked about the Middle East being one that was very attractive. Given the volatile backdrop of the industry that we saw in 2025, given that buyer purchasing patterns are still somewhat cautious now, does that translate into a longer-than-usual sales cycle?

Speaker #3: Meaning the progress that you're making might not show up as quickly as it would otherwise if we were in a more normal cycle?

Speaker #1: Yeah, I don't want to kind of put the Middle East thing into this mix right now. But I would say that an elevated NYC, an elevated futures market, it does slow down development.

Frank Dennis: Yeah, I don't wanna kinda put the Middle East thing in, you know, into this mix right now. I would say that an elevated NYC, an elevated futures market, it does slow down development. There's no doubt. Yeah, I mean, my history tells me that when the C is kind of on a maybe a downward curve and, you know, a recognized downward curve, towards, you know, maybe a lower stable level, that does help our overall development efforts. There's no doubt, because of how we have to price coffee, and the overall outright price of coffee. We can be much more competitive when we're at lower levels. There's no doubt.

Speaker #1: There's no doubt. And so, yeah, I mean, my history tells me that when the C is kind of on maybe a downward curve, and a recognized downward curve, towards maybe a lower stable level, that does help our overall development efforts.

Speaker #1: There's no doubt, because of how we have the price of coffee, and the overall outright price of coffee, we can be much more competitive when we're at lower levels.

Speaker #1: There's no doubt. So yeah, I mean, that's kind of one of the other reasons that we sort of like a lower C. It's not just because of working capital.

Frank Dennis: I mean, that's kind of one of the other reasons that we sort of like a lower C. It's not just because of working capital. It's, you know, we're one of the more expensive decaffeination alternatives out there. With that, when you add in, you know, the cost of coffee, the differences become a little bit more stark. We like a lower NYC.

Speaker #1: We're one of the more expensive decaffeination alternatives out there. And with that, when you add in the cost of coffee, the differences become a little bit more stark.

Speaker #1: And so, yeah, we like a lower NYC.

Emily Marin: Mm-hmm. Okay. Thank you.

Speaker #3: Okay. Thank you.

Frank Dennis: You're welcome.

Speaker #1: You're welcome.

Speaker #2: Thank you very much. Well, we appear to have reached the end of our question and answer session, so I will now hand back over to the management team for any closing comments.

Operator 2: Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now hand back over to the management team for any closing comments.

Operator: Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now hand back over to the management team for any closing comments.

Speaker #1: Okay. Well, thank you very much. Thank you for all of your comments, and thank you all for dialing in today. We will see you at our Q1 call.

Frank Dennis: Okay. Well, thank you very much. Thank you for all of your comments, and thank you all for dialing in today. We will see you at our Q1 call. Thank you very much.

Speaker #1: Thank you very much.

Speaker #2: Thank you so much, everybody. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. We thank you for your participation.

Operator 2: Thank you so much, everybody. This does conclude today's conference. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.

Operator: Thank you so much, everybody. This does conclude today's conference. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.

Q4 2025 Swiss Water Decaffeinated Coffee Inc Earnings Call

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Swiss Water Decaffeinated Coffee

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