SunOpta, Inc.

Sonali Mode. A question and answer session will follow the prepared remarks. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ree Anderson, for ICR. Thank you. You may begin.

Good afternoon, and thank you for joining us on Synopta's first quarter fiscal 2024 earnings conference call. On the call today are Brian Cooker, Chief Executive Officer, and Greg Gaba, 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 of Synopta's website at www.synopta.com. This call is being webcast and its transcription will 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. A reconciliation of these non-GAAP financial measures was included with the company's press release issued earlier today. Also, please note in the prepared remarks to follow, unless otherwise stated, the company will be referring to a continuing operations portion of the business, and all figures are in U.S. dollars, occasionally rounded to the nearest million. Now, I'll turn the call over to Brian to begin. Brian?

Good afternoon and thank you for joining us today. We are eager to announce our results for Q1 and look forward to providing you more insight into our plan for sustainable revenue and EBITDA growth. In short, we are thrilled by our continued and accelerating revenue growth, encouraged with our first quarter performance, and yet still see the opportunity for future growth and improvement. For today's call, I'll start with the highlights from Q1, along with an update on business trends and key priorities. Greg will follow with a review of the financials and our outlook. Then we'll take your questions. Quarter 1's headlines include 18% revenue growth, supported by improvements in throughput at our plans. That translated to 21% EBITDA growth and adjusted EBITDA of $22.6 million. For the second quarter in a row, we are growing at a rate approximately three times faster than the categories in which we serve, and that growth drove the increase in the bottom line. Greg will have more financial details in his section. However, I'm proud of the quarter we delivered and even more proud of the manner in which we delivered. On the Q4 call at the end of February, we told you we were focused on three key areas. Top line growth, supply chain efficiency, and spending capital wisely. We made progress across every one of our initiatives as we again delivered top and bottom line results that exceeded guidance. Let me offer some insights on our key levers for revenue growth. First, the revenue growth you see today is a reflection of our business development activities from 2023 and early 2024. and remains broad-based as we expand with existing customers, reap the benefits of new customer launches, and leverage our TAM expansion capacity in the rapidly growing protein shake category. Volume drove our excellent revenue growth of 18% to $183 million. A further sequential acceleration from the 14% increase we delivered in Q4 and the 6% increase in Q3 of last year. The revenue growth was also a testament to our broad and diverse portfolio across channels, customers, and products. In fact, our food service channel grew by 11% year over year. Every product category in which we operate grew in the quarter, and in fact, our top three customers all grew double digits in the quarter. Secondly, The addressable market we serve is growing. For shelf-stable plant-based milks in tracked and untracked channels, based on the latest publicly available data and our own proprietary sales order data, we estimate the category volume will grow mid-single digits for calendar year 2024. Recall that much of our volume is derived from untracked channels, and we continue to see growth in food service and club channels. Also, protein shakes continue to show very robust growth in tract chains, up roughly 20% in volume over the last 13 weeks versus the prior year. Finally, fruit snacks revenue grew 31% from the prior year's quarter, a 15th straight quarter of double-digit growth. Fruit snacks continue to deliver the highest growth rates among our product categories as we leverage our expanded capacity while underlying demand remains very strong. In short, we grew in almost every way you can analyze our revenue. Switching to operations, I've spent a significant amount of my own personal leadership time just starting our supply chain excellence initiatives. As I mentioned previously, improving the effectiveness and the efficiency of our supply chain is a journey of 1,000 steps. We made progress in the quarter, increasing our output by over 20 percent from the prior year, despite some modest margin leakage in inventory reserves as we continue harmonizing processes across an integrated supply chain. We have a continuous improvement structure in place, and we see a lot of opportunity for significant margin improvement in the back half of the year. As it relates to our capacity expansion projects, Production continues to ramp on our first two lines at our Midlothian facility. We feel really good about the demand environment for utilizing the Texas capacity. Our third line commercially launched at the end of the first quarter, and we expect to see meaningful contribution from this line in the back half of the year. The focus in Texas continues to be on improving output and efficiency of these lines to fully realize the volume potential in 2024 and 2025. Finally, our oat extraction expansion in Modesto is now up and running, and we will continue ramping up production volumes throughout the remainder of the year. As to spending capital wisely, we continue to evaluate capital projects in a disciplined way and are on track for our 2024 CAPEX guidance of $25 to $30 million. Additionally, we fully expect to achieve a leverage ratio under three times adjusted EBITDA by the end of the year. I'd like to take a minute to highlight a Sunata strength. We have a fantastic culture at Sunata. Our people care. They care about the planet, about each other, and about making a positive impact in the communities in which we work and live. The passion and values of our employees and company culture drive our ESG initiatives. Whether our employees are pushing energy reduction in our Midlothian facility, achieving zero waste status at our beverage plants, or planting trees in Niagara, Canada during a designated volunteer time off day, our employees live ESG and we are better for them. I am thrilled that in our model, we make sound business decisions and investments that are also great for ESG considerations, all while managing our capital allocation. I'm excited to share that we just published our latest annual comprehensive ESG report, highlighting progress across the business. This report is available on our website and does a terrific job of articulating our intertwined goals of fueling the future of food and living our ESG values each and every day. Now that we've talked about the highlights of the quarter, let's discuss specifically how all this information impacts our outlook for the balance of the year. As a reminder, we provided and updated guidance for 2024 financial results based upon what we see versus what we hope, and we are sticking to that communication philosophy. In determining our guidance for the year, we consider our performance to date and all publicly available trends in the food service, club store, and retail channels. In addition, we collaborate with our customers on a regular basis in supporting their innovation efforts to ensure we are co-developing products to address changing consumer needs and wants and incorporate changing business demands. Most importantly, and certainly most relevant to how we guide our future performance, On a weekly and sometimes daily basis, we work with our customers reviewing actual purchase order volumes on a rolling eight-week period, as well as order forecasts for the balance of the year. As a result, we feel it is appropriate and have confidence in raising the guidance for 2024 by the amount of our overperformance in Q1. Again, by what we see, not what we hope. Greg will cover the specific details in his section. Before turning it over to Greg, I want to review our priorities for next quarter. In short, our areas of focus will not change, and we remain steadfast in executing across the three following areas. Number one, top-line growth. We are a growth company in growing categories with a competitively advantaged model that provides multiple ways to win Remember, our revenue stream has the advantage of diversity. We operate in categories that are growing, and we have a great customer base that continues to win in the marketplace. We are thrilled to be able to support their growth. We expect the trajectory of our growth to continue to be driven by growth of our existing customers, share games with our existing customers, the acquisition of new customers, and TAM expansion. I'm excited about our new business development efforts and the opportunities on the horizon. Number two, increasing the efficiency and the effectiveness of our supply chain. As mentioned, we made progress in increasing the output of our manufacturing facilities. We are simultaneously working numerous initiatives to improve labor costs, waste, inventory management, conversion costs, and a host of other key operating metrics. Importantly, this is a journey integrating multiple people, processes, and technology platforms, and my highest leadership priority is ensuring we are taking a step forward in operational excellence every day. To continue delivering strong volume gains, it is essential that we optimize our production to support the demand-side momentum in our business and expand our gross margin. Number three, manage our capital wisely. We remain disciplined in executing our capital allocation priorities and continue to be focused on deleveraging over the near term. In summary, we're off to a great start in 2024, and our team is executing well across our strategic priorities. While we are encouraged with our results, we expect to continue getting better. We have a great opportunity to continue delivering strong revenue and EBITDA growth to drive significant shareholder value, and we are relentlessly focused on accomplishing this goal. We know that SunOpt's true potential is so much greater, and we are still very early in the operational excellence phase of our transformation. As we continue to sweat our assets to drive volume and revenue growth, the efficiencies we realize should propel even greater improvements in profitability and increasing rates of return. I'm confident in our outlook and the direction of our business, and we are on track for delivering our 2024 guidance and midterm financial goals. I am looking forward to updating you on our strategic initiatives throughout the year. Now, I'll turn the call over to Greg to cover the first quarter and full year outlook in more detail.