SunOpta, Inc.

Greetings, ladies and gentlemen, and welcome to SunOpta's fourth quarter 2022 earnings conference call. All participants are currently in a listen-only mode. However, a question and answer session will follow the prepared remarks. And as a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Reed Anderson with ICR. Please go ahead, sir.

Good afternoon, and thank you for joining us on SunOpta's fourth quarter fiscal 2022 earnings conference call. On the call today are Joe Ennin, Chief Executive Officer, and Scott Huckins, Chief Financial Officer. By now, everyone should have access to the earnings press release that was issued earlier this afternoon and is available on the investor relations page on Synopta's website. 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 Synopta's 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 a more detailed discussion of the factors that could cause actual results to differ materially from those projections and any forward-looking statements. 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 as 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. The 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 U.S. dollars and are occasionally rounded to the nearest million. I'd like to now turn the call over to Joe.

Good afternoon and thank you for joining us today. We had another very strong performance in the fourth quarter with revenues in line with guidance while profitability was significantly above, reflecting solid execution against our key priorities of driving strong, profitable growth in plant-based and fruit snacks and continuing the optimization of frozen fruit profitability. Please note my prepared remarks will generally exclude the impact of our sunflower business, which was divested at the beginning of the fourth quarter. Let me offer some key takeaways before we begin unpacking the results. Q4 success was achieved much the same way we have driven the business all year. strong broad-based revenue growth and plant-based from both pricing and real volume growth fruit snacks continues to experience incredible growth and frozen fruit saw continued improvement in profitability linked to better execution q4 adjusted ebitda of 23.5 million was up 123 percent and was the highest quarter in company history on a normalized basis as we continue to efficiently scale our business and optimize performance across our entire portfolio. In plant-based, revenue growth remains incredibly broad-based. Oat, almond, soy, and coconut all grew double digits, with double-digit increases in retail and over 30% growth in food service. We also saw double digit growth in each of our top three customers. Additionally, all the ways in which we go to market were up double digits, led by our own branded portfolio, which was up 40%. This broad growth is a testament to our competitive advantages and shows we have numerous ways to win with the business model we have built. Our plant-based growth was supported by solid gains in volume in addition to pricing. Customer demand in the quarter was very strong, very steady, and very consistent, and as I mentioned, very broad-based. We continue to see profit improvements in the fruit segment resulting from the strategies we have talked about extensively. Mixed shift to value-added products and network optimization along with better execution are delivering results with fruit segment gross profit up 95%. We continue to recover almost all inflationary costs with customer pricing adjustments. We continue to deliver outstanding customer service with case fill rates in plant-based over 98% and fruit-based over 97%. We continue to make gains in business development as our value proposition and competitive advantages continue to attract new customers as well as growing with existing customers. We continue to execute on our capital expansion plan with our 285,000 square foot greenfield plant in Texas now in operation. We went from first bulldozer to first production in less than 16 months. Lastly, solid execution in 2022 has created durable momentum for the business and we are well positioned for another strong year in 2023. Now we'll turn to our segment results, starting with plant-based, where we remain focused on three strategic priorities. Number one, strengthening and fortifying our competitive advantages. Number two, winning in oatmeal. And number three, building a balanced, multi-pronged go-to-market business that includes co-manufacturing, private label, and owned brands. Plant-based revenues were up 23% in the fourth quarter to $136 million, with growth split approximately 60-40 between pricing and volume, with both factors of double digits. These results once again underscore the competitive strength of our platform and why we are frequently a partner of choice. We support customers across the full spectrum of channels and categories with industry-leading capabilities and innovation, providing multiple pathways for driving profitable, sustainable growth. Within the segment, core plant-based milk revenue increased 22% and accounted for over 60% of the total segment revenue. Our tea business also continued to deliver outstanding results with the growth rate accelerating further to 57%, driven by strong customer demand. Finally, broth sales grew 10%, a solid recovery from the third quarter, in part driven by promotional efforts at select customers. Focusing on plant-based milks, we continue to see broad strength across the portfolio, as four of our five product types experienced double-digit growth rates. oat continues to be a strong driver of our plant-based growth, and revenue from all oat products was up 37%. Coconut milk was up 30%, reflecting gains in food service, and soy milk was up mid-teens, with almond milk up low double digits. Next, I'll provide some context on the plant-based milk category and its recent performance based on retail scan data. As a reminder, we would estimate retail scan data only captures roughly one-third of total shell-stable plant-based milks, with untracked food service and club representing two-thirds of the volume. We continue to see solid growth in the overall plant-based milk category. In the 13 weeks that coincide with our fourth quarter, total plant-based milk dollars grew 12% while units declined 4%. Category growth continues to be led by oat milk, with dollars growing 23% and units growing 4%. Looking beyond scan channels, our business results would suggest very strong growth in food service and better than retail growth in clubs. Looking at Synopto's results by customer channel, total retail was up 17%, reflecting strong growth in mass and club, along with further growth from a large command customer. which includes our biggest customer, had a very strong performance. The channel sales increased 32%, reflecting significant gains in our dream branded oat milk. Dream oat milk and food service helped propel our overall branded business up 40% in the fourth quarter, making brands our top performing go-to-market approach. In addition, we continue to see some resurgence in soy milk, led by younger consumers. Our Westlife brand of non-GMO soy products was the fastest growing brand in the shelf stable category in the last 13 weeks, fueled by product innovation, distribution gains, and consumer interest in the superior protein content and nutrition profile of soy milk. While not a huge base, it shows our ability to work the edges of the category with innovation. Private label was also very strong, up 35%, driven by broth and new distribution. Command revenue rose 14%, reflecting pricing and broad-based gains across major customers and channels. As it relates to capacity expansion projects, all six of our projects needed to double capacity are now complete. These projects have been instrumental in fueling our growth. Plant-based segment revenue and gross profit has doubled since 2018, including 40% growth in the last 24 months. Our greenfield plant in Midlothian, Texas was completed on time and on budget, which is an amazing feat given the macro volatility experienced over the past 16 months around the availability of everything from steel to equipment to labor. We've hired over 100 employees and many of them have been cross-training at our other plants for months. We are currently manufacturing saleable product and expect volumes to ramp steadily over the next six months. Maybe even more exciting is that commissioning is nearing completion on our 330 milliliter protein shake line, and we expect to begin initial production in Q2 as planned. Over the past several months, we've hosted visits with many of our top current and prospective customers, and their reactions have been overwhelmingly positive. Overall, business development continues to go quite well as we will be onboarding several new customers in 2023, and just as importantly, expanding business with existing customers. These wins were enabled by Texas, both from a capacity standpoint as well as its attractive geographic location for both Synopta and our customers. 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. becoming the low-cost operator in frozen fruit through automation, footprint reengineering, and aggressive cost takeouts, and three, evolving the portfolio via mixed shift and innovation towards more value-added offerings. Fourth quarter results in fruit fully reflect execution of these three strategies. We saw surging growth in fruit snacks partially offset by expected moderation in frozen fruit as we continue to shift the mix. Segment revenues were up over 4% driven by a 56% increase in fruit snacks. Impressively, nearly 80% of this growth came from volume, reflecting a continuation of the strong consumer demand trends we've seen all year. This core growth is combined with our ability to leverage key innovations and increased capacity across major retail and CPG customers points to a continued bright future for snacks. Importantly, we delivered significant margin expansion across the entire fruit-based portfolio as we captured scale-related efficiencies in fruit snacks and benefited from our reduced manufacturing cost base and portfolio rationalization in frozen fruit. Gross profit dollars in our fruit-based segment nearly doubled in the fourth quarter, and margin improvement followed a similar trajectory. Turning to our ESG initiatives, we made significant progress in the year. We continue to make real progress towards zero waste in our plants. We joined CEDEX to enhance transparency in our supply chain, and we have made significant progress towards sustainable packaging solutions. As we outlined at Investor Day, one of our goals is to be and be recognized as a sustainability food and beverage company. In 2022, we improved our CDP score to a B-, above the food and beverage industry average of a C. For those not familiar, CDP is a nonprofit company which runs a disclosure system for investors, companies, and governments to manage their environmental impacts. additionally our most recent sustainability report clearly outlines our multi-year goals and plans for operating the business consistent with our sustainability heritage in summary 2022 was a very good year for synoptic as we significantly expanded capacity continued to reshape our portfolio and again delivered significant growth in revenues and profitability we enter 2023 in a very strong competitive position with numerous tailwinds that will propel our business, further leverage our strong platform to capture additional share, and expand our addressable market. Our outlook for 2023 is largely unchanged from what we first shared with you several quarters ago at our investor day in June of 2022. 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 I'll turn the call over to Scott to take us through the rest of the financials. Scott?