SunOpta, Inc.

and welcome to Synopta's second quarter 2022 earnings conference call. By now, everyone should have access to the earnings press release that was issued this afternoon and is available on the investor relations page on Synopta's website at www.synopta.com. This call is being webcast and its transcription will also be available on the company's website. As a reminder, Please note that the prepared remarks which will follow contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. We refer you to all risk factors contained in Synoptys press release issued this afternoon, the company's annual report filed on Form 10-K, and other filings with the Securities and Exchange Commission for more detailed discussions of the factors that could cause actual results to differ materially from those projections and any forward-looking statement. The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances, except this may be required under applicable securities laws. Finally, we would like to remind listeners that the company may refer to certain non-GAAP financial measures during this teleconference. A reconciliation of these non-GAAP financial measures was included with the company's press release issued earlier today. Also, please note that unless otherwise stated, all figures discussed today are in US dollars and are occasionally rounded to the nearest million. I'd like to now turn the conference over to the SunOpto CEO, Joe Ennen.

Good afternoon, and thank you for joining us today.

With me on the call is Scott Huckins, our Chief Financial Officer. The second quarter was one of the strongest in company history, with quarterly sales, gross profit, and adjusted EBITDA all at or near record levels. I'm particularly pleased with the quality of the quarter as it demonstrates the potential of our strategic plan, showcases the depth of our competitive advantages, and highlights our culture of execution. In addition, these results reflect favorably on the actions we took in late 2021 and early 2022 to mitigate inflation and improve operational performance. It is exciting to know that we are just getting started in realizing our long-term goals. As a reminder from our investor day, we outlined five strategic imperatives. Transforming the portfolio, fortifying our competitive advantages, leveraging our competencies to expand the total addressable market of the business, be and be recognized as a sustainability company, and codifying our culture. Before we begin unpacking the results in detail, let me offer some key takeaways from the quarter. On a total company basis, our 20% revenue growth was very balanced with both volume growth and pricing growth. 60% of the consolidated gain came from pricing and 40% from volume. In our plant-based business unit, revenue grew 31% fueled by strong gains in both volume and price. Growth in plant-based was exceptionally broad. with nearly every major customer up double digits, every channel up double digits, every product type up double digits, and every go-to-market business up double digits. Gross margin rate improved 130 basis points versus last year to 14.3% and was up 260 basis points sequentially. This gain was despite a headwind of 140 points of margin rate solution related to the effect of pricing inflation. Gross profit improved 33% versus a year ago, driven by strong management of all the gross profit levers, from revenue to production output to cost control. While the consumer landscape is always dynamic, we have not seen any abrupt changes in consumer behavior. Given how balanced our portfolio is, we feel we are well positioned to evolve with any future changes in purchase patterns. It is worth pointing out that we have not seen a significant change in consumer behavior as it relates to trade down in our core categories. Production output in our plant-based facilities was once again excellent, with Q2 production levels plus 20% to prior year and similar to our record-setting Q1. demonstrating the strength of our operational and technical competencies. All our major manufacturing plant expansion projects are on track, and we continue to make progress lining up customers for our new capacity. In terms of the impact of inflation, similar to the first quarter, higher customer pricing helped us recover over 95 percent of the inflation we incurred during the second quarter. We saw $25 million of year-over-year inflation in Q2, up a bit versus what we experienced in Q1. There are some indications of lower crop prices headed into 2023. However, we expect inflation to remain stubbornly high in other areas like packaging, wages, and utilities. Lastly, based on the strength of the first half, we are raising revenue and adjusted EBITDA guidance for 2022 to reflect our strong first half results. and we remain confident in the long-term growth targets we shared with you at Investor Day. At the same time, we acknowledge that there are consumer uncertainties with real pressure on consumer spending. Now I'll turn to our segments, starting with plant-based. I would like to remind listeners that we have three strategic priorities within plant-based. Number one, strengthening and fortifying our competitive advantages. Number two, winning in oat milk to capitalize on this consumer trend and increase our participation in refrigerated beverages. And three, building a balanced, multi-pronged, go-to-market business that includes co-manufacturing, private label, and owned brands. Plant-based revenues surged 31% to $146 million in the second quarter, another record in our 15th consecutive quarter of revenue growth. The quality and structure of the growth was impressive. Volume accounted for over half of the revenue growth, while pricing made up the balance. As we mentioned on the Q1 call, there were some Q1 orders that didn't get out the door. Encouragingly, we are now fully caught up, resulting in a first-half growth rate of 22%. From a product category standpoint, as I mentioned earlier, every category delivered double-digit revenue growth. Plant-based milks, which are two-thirds of the overall plant-based business unit, had revenue growth of more than 30%. Our tea business remained strong with growth in the mid-40% range, reflecting strong customer demand. Finally, sunflower and broth each delivered double-digit growth in the quarter, reflecting strength throughout our portfolio. Drilling into the plant-based milks, growth was very broad-based. every single product format grew double digits. Oat, almond, rice, coconut, and even soy generated double-digit growth. Growth was led by over 40% increases in both almond milk and oat milk, with each having revenues of over $30 million. Growth in almond milk was fueled by both our existing customers and a sizable new customer. Oat milk growth continues to be supported by category growth, and the ongoing shared leadership position of the brands we support, limited only by our current capacity availability. Once again, Synoptic was privileged to work with several leading open-up brands, including the number one brand in measured channels for the last seven quarters. This is a strong testimony to the strength of our R&D and technical operations. From a channel standpoint, retail sales were up over 40% and total food service through 20%. Relative to our go-to-market strategies, our branded business continued to shine with year-over-year gains approaching 40%, including more than doubling of our revenue from Zone and Dream, driven by expanded distribution with our top food service customer. Our command business increased 31%, driven by continued strength in O&T, the ramp-up of a significant new customer, and catching up on a backlog of orders with several customers. Our private label business, which is mostly broth, grew 15%, benefiting principally from pricing. Our aggregate ingredients business grew 47%, driven by the continued success of selling oat base for use in refrigerated oat milk, ice cream, and yogurt. Additionally, our sunflower business grew more than 30%, driven by pricing and new customer development. As we also outlined at our investor day, we have a keen focus on innovation and using our expanding manufacturing capacity to attract new customers and develop new products. 25% of our growth in the quarter came from new customers or new products. I'd like to take a couple minutes and provide an update on the overall plant-based milks category based on what we see in retail scam data. Let me remind everybody that the plant-based milk category is over 40 years old, dating back to the early 1980s with the introduction of soy milk. The plant-based category has grown consistently and steadily year over year, driven by multiple consumer dynamics. In the last 13-week period, the combined refrigerated and shelf-stable plant-based milk category sales grew 9%. There has been some unit sales growth softening, but the consumer continues to spend more on the plant-based milk category. As it relates to private label, there has been no share gain in plant-based milks. In the latest 13 weeks, the category was up 9% and private label was up 1%. Even in the latest four-week period, private label is growing at half the pace of the total category. As it relates to product type, the big three, Almond, oat, and soy all grew. Almond continues to dominate the category with 61% of the sales and growing mid-single digits. Oat continues to grow and is now 20% of the plant-based milks category, resulting from a 33% increase in sales. Outside of tracked retail, we continue to see and benefit from plant-based milk growth in food service, e-commerce, and untracked retail channels and customers. Lastly, let me comment on the progress around some of our capacity expansion efforts. The additional line we are adding in Modesto is on schedule and will be online at the end of Q3, giving us some much-needed breathing room in support of our core West Coast business. We also recently started construction of a second oat extraction facility to provide additional capacity to support the growth of our current customers and enable the development of new customers and products. This new facility is strategically located on the West Coast and expected to open in the third quarter of 2023. Turning to Texas and our new Greenfield plant south of Dallas-Fort Worth. Despite all of the macro challenges involving obstacles like computer chip shortages, labor shortages, equipment backlogs, et cetera, we are still on time for our first saleable production run at the very end of the year. At this point, all of the major equipment is on site. We have hired the entire management team, and they have spent the summer training in our other facilities to assure a strong startup of the plant. As a reminder, we broke ground on a dirt field in mid-September of last year, and we expect to have our certificate of occupancy in early October. I'm very proud of the team and how far we have come. This is Synoptat at our best, executing in the face of adversity. We are fortunate to have a dedicated team that is long on solutions and short on excuses. As mentioned, we are pleased with the business development efforts surrounding our added capacity, and we are excited to begin working with several new customers once Texas is online. Moving on to our fruit-based segment, recall our three strategic priorities are, one, de-risking the business through geographic diversification customer pricing programs, and better grower relations. Two, becoming the low-cost operator in frozen fruit through automation, footprint reengineering, and aggressive cost takeouts. And three, evolving the portfolio via mix shift and innovation towards more value-added offerings. In the second quarter, fruit-based revenues increased 7.4% to $98 million, all of which came from growth in our margin-advantaged fruit snacks business. This growth is a direct reflection of our third strategy focused on evolving the portfolio. Revenue from fruit snacks increased 48% versus last year. Impressively, the vast majority of this growth was volume-driven. Sales in fruit snacks were $24 million, generating a nearly $100 million run rate. By comparison, 24 months ago, Q2 sales were $10 million. Strong demand for our fruit snacks, as well as our new smoothie bowls, combined to deliver this impressive growth. By customer category, growth was broad-based, with both large CPG command customers and private labels showing strong double-digit increases. In Q1, we added capacity in our Ontario fruit snacks plant, which has helped fuel this growth. Our growth in fruit snacks continues to significantly outpace the broader category trends. Nielsen data for the 13 weeks that overlaps with our second quarter shows total fruit snacks up 9.5% in dollars, but down 11% in units. We have also been pleased with the early success of our smoothie bowls innovation, which is part of our fruit snacks business units. We have commercialized 12 SKUs so far, and the very early read on consumer takeaway is encouraging. We approached this launch very entrepreneurially, meaning we didn't put a lot of capex into automation as we wanted to see how the consumer responded. As we get more confident in the long-term success, we will have significant opportunity to improve the output and profitability to maximize the value of our innovation. As we also shared at Investor Day, We have started a significant expansion project in Washington State that will come online in a year to continue to fuel growth in fruit snacks. Net-net, the outlook for our fruit snacks business is very encouraging. Frozen fruit sales were fractionally lower versus a year ago, reflecting higher pricing and lower volumes. Revenue from our top five frozen customers increased 13% and represented over three-quarters of our total revenues. large mass and club customers had significant double-digit increases. This was partially offset by lower revenues from FKU rationalization efforts in 2021. From a category standpoint, frozen fruit sales grew 3.4% in the quarter, with private label growing 4.1% and unit volume down 6.5%. As a reminder, 70% of the category is private labels. What we see is retail customers are taking different approaches to passing on pricing, with some customers passing on all of the price increase and some only a portion. As a result, we see buying shifting away from the more premium retailers to more value-oriented retailers. We have materially wrapped up the California and Mexico strawberry processing season. We procured the pounds we needed, pricing was generally favorable, We ran efficiently. Mexico fruit quality was good, and California quality was just average. Net, we came out of the season in a solid position. As we have discussed many times, the multi-year efforts to reduce risk on this business is taking hold. California sourced fruit now represents less than 10% of our total pounds, with Mexico now functioning at the center of our fruit operations, helping to further de-risk the business. Mexico affords us lower costs and greater access to more fruit types. And we have a very strong management team in Mexico. In summary, we have substantial momentum across our business and our passionate team continues to execute extremely well against our strategic growth priorities. While the macro environment remains challenging, we've been able to offset the vast majority of inflation with pricing and our productivity initiatives continue to gain traction. Customer demand for our high-quality, unique products remains very strong, reflecting our leadership position in the fastest-growing plant-based and fruit-based categories. Our model is competitively advantaged from the perspectives of capacity and capability, and we expect to continue leveraging the power of our platform to rapidly scale. We remain committed to our long-term growth algorithm of annual double-digit plant-based revenue and profit increases and increasing returns on invested capital. Now we'll turn the call over to Scott to take us through the rest of the financials. Scott?