SunOpta, Inc.

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 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 a more detailed discussion of the factors that could cause actual results to differ materially from those projections and any further 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 that follow Unless otherwise stated, the company will be referring to the 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. With today's prepared remarks, I want to accomplish the following goals. Wrap a bow on a growth-filled 2024. Share more details of our long-term strategy. and provide our financial outlook for 2025. I will cover several of the main themes, and Greg will finish by providing more detail on the numbers. Then we'll take your questions. Let me begin by saying that Q4 performance unfolded substantially as we anticipated. Revenue grew, we invested some operating dollars in supply chain improvements, and we finalized the last significant step in our Midlothian build-out. Our business fundamentals are solid. Our strategic initiatives are delivering results, and we continue to demonstrate our ability to drive significant growth, improve productivity and profitability, and build processes for sustainable shareholder value creation. As it relates to closing out 2024, fourth quarter results were in line with our expectations. Revenue increased 9%, driven by volume growth of 13%. Again, reflecting broad base gains across segments, products, and customers. Adjusted EBITDA increased 20%. Adjusted EBITDA margin improved 130 basis points to 13.4%, resulting from strong revenue growth and operational efficiencies, net of some temporary investments. Our co-manufacturing and private label solutions continue to resonate in the market. The end consumer categories in which we participate continue growing. Our customers, on average, continue to over-index to the fastest growing categories, and our solutions-based sales approach is enabling us to expand share with existing customers and acquire new customers. Within our portfolio, four of our top five customers grew double digits in the quarter, growing an average of 13%. In total, Supported by the factors we just discussed, it enabled us to deliver 21% volume growth in 2024, a truly extraordinary number considering the current food and beverage consumer landscape. In Q4, we also officially completed the startup phase in Midlothian. In December, we swapped temporary electrical distribution equipment in the facility for the new permanent solution, which was on backorder for the last two years. Although the equipment upgrade went well, it did cost us 10 plus days of downtime and resulted in inefficiencies and some waste as the facility came back online. By mid-December, the new equipment was in place and functioning well. When I joined the company over a year ago, I was incredibly excited about our asset base and the potential to leverage our deployed equipment and facilities. I am more excited today. Throughout 2024, and notably in Q4, our supply chain was fighting to keep pace with our growth. We invested in people, training, processes, and engineering support during the last three quarter of the year. We delivered improvements and are sustaining those improvements as we move through Q1 of 2025. The supply chain improved significantly in Q4 and allowed us to produce enough product to satisfy our 13% volume growth and to achieve our adjusted EBITDA target for the quarter. To wrap up 2024 succinctly, volume growth resulted in significant revenue growth. We finished off our capital expansion efforts that were started in 2022 and 2023, and we made enough progress in improving the efficiency of our existing assets that we could satisfy a 21% expansion in volume, grow adjusted EBITDA, improve operating income, and increase cash flow. Greg will cover our 2025 financial outlook in more detail in his section, but I also want to share some high-level thoughts. As we turn to 2025, I foresee more volume-fueled growth, expanding margins, increasing adjusted EBITDA, and a continued strengthening of the balance sheet. Most pointedly, I see and am confident in our path to exiting 2025 at a $125 million adjusted EBITDA annual run rate, a number we have affirmed multiple times over the past 15 months. Our expected revenue growth stems from two powerful forces. First, we continue to see a steady growth trajectory for the categories we support. The shelf stable plant-based milk market, including tracked and untracked channels, continues to grow in the mid single digit range. Broth is growing in the mid single digits. We serve the ready to drink protein shakes category, which continues to see strong double digit category growth. In Better For You Fruit Snacks, momentum remains incredibly strong with demand still outpacing capacity. The category has been growing over 20% and our business has achieved 18 consecutive quarters of double digit growth. Secondly, and equally important to revenue growth, we provide great solutions by listening to our customers so we can uncover their problems and challenges. Our model has numerous competitive advantages, including a national manufacturing footprint, broad packaging format capabilities, production redundancy across facilities, and a world-class R&D team. We deploy our advantages to solve customers' challenges. When our customers win, we win. The combination of these competitive advantages allows us to grow share with existing and new customers and participate in TAM expansion opportunities. Operationally and structurally, we are well positioned to win. Short-term supply chain investments throughout 2024 provided a roadmap to improve output, expand capacity, deliver high-quality products to our customer, and fuel increased volumes without significant growth capex until late 2026 and potentially further. With our operational improvement roadmap, and some investments in plant-level leadership, quality assurance, and oversight roles focused on maintenance, reliability, and continuous improvements, we are targeting a 20% increase in overall aseptic processing capacity by the end of 2026. The investment in people will take a couple of quarters in the 2025 to deliver the steps function change in efficiency and margins that we are anticipating. Therefore, we expect the second half of 2025 improvements will allow us to exit the year at a notably higher gross margin run rate. Together, revenue growth in the 7 to 11 percent range Q4 25 gross margin between 18 and 19%. And a realization of FCNA leverage gives me great confidence in achieving our targeted annual adjusted EBITDA run rate of $125 million as we exit 2025. With significant growth CapEx needs pushed out at least to the end of 2026, free cash flow will continue to be strong. enabling us to further de-lever and strengthen our balance sheet. Our management goals are simple. Grow the business, make money, and spend capital wisely. To reinforce that philosophy, we revised each of our executives' incentive metrics for short and long-term performance. All incentive compensation will be determined by achieving a combination of adjusted EBITDA, revenue growth, and return on invested capital. We believe there is significant opportunity for continued growth, higher margins, and lower leverage, all of which drive value for shareholders. In summary, volume growth remains the key driver for our top line, and we are gaining share with growth rates that are outpacing the respective categories in which we compete. Our confidence in the future continues to be based on what we see, not on what we hope. Our priorities are unchanged. One, drive operational improvements to fulfill customer growth while expanding margins. Two, grow volume through expanding our current customer relationships via both share gains and innovative solutions, acquiring new customers and expanding our TAM. And three, leverage our growth and operational efficiencies to drive increasing free cash flow and higher returns on invested capital. Now, I'll turn the call over to Greg to cover the fourth quarter and the fiscal 2025 outlook in more detail.

Thank you, Brian, and good afternoon, everyone. We had another strong quarter. Revenue of $194 million was up 9% compared to last year and continued to be driven by solid volume growth. Gross profit decreased by $3.9 million compared to the prior year, mainly due to an increase in cost to complete the startup at Midlothian as we installed a new electrical switchgear, as Brian discussed. This is the final piece to complete the startup at Midlothian, and we do not expect to have any startup costs in 2025. Adjusted gross profit increased 2% to $31.5 million and adjusted gross margin was 16.1% compared to 17.2% in the prior year. The decline in adjusted gross margin was primarily due to incremental depreciation for newly launched production assets, along with our short-term investments to drive future sustainable supply chain efficiencies. Loss from continuing operations was 4.6 million compared to a loss of 3 million in the prior year period. Adjusted earnings from continuing operations was $7.6 million compared to $4.5 million in the prior year period, and adjusted EBITDA from continuing operations increased 20% to $26.1 million. Turning to our balance sheet, at the end of the fourth quarter, debt was $265 million, down $25 million from the end of the third quarter. We achieved our year end net leverage target of three times, which was down from 3.4 times last quarter. We are also very pleased with our strong cash generation as full year cash provided by operating activities of continuing operations increased significantly to 52 million compared to 4 million in 2023. And cash used in investing activities of continuing operations was 25 million compared to 47 million in 2023. Now turning to our full year 2025 outlook, we expect revenue in the range of $775 to $805 million, growth of 7% to 11% versus 2024, and adjusted EBITDA of $97 million to $103 million, which represents growth of 9% to 16%. From a pacing standpoint, we expect revenue to grow 8% year over year in the first half of the year, and 10% year-over-year in the second half. From an adjusted EBITDA perspective, we see the back half of the year to be stronger than the first half with a split of approximately 44% first half and 56% second half. One of the outcomes of the temporary investments we made to deliver higher sustainable margins was identifying opportunities in our supply chain that required additional positions focused on maintenance, reliability, and continuous improvement. We are anticipating that it will take a couple of quarters for the new positions to deliver the step function change in efficiency and margins. We expect adjusted EBITDA to improve sequentially throughout the year. As Brian mentioned, we expect to achieve our target of 125 million run rate adjusted EBITDA in the fourth quarter. We also expect to continue generating strong operating cash flow and anticipate CAPEX needs will be primarily for maintenance and productivity as we remain focused on unlocking trapped capacity and enabling growth through further efficiency gains. For fiscal 2025, we expect interest expense of $24 to $26 million, capital expenditures on the cash flow statement of approximately $30 to $35 million, and free cash flow of 25 to 30 million. We have achieved our stated leverage target of three times as planned, and we continue to prioritize reducing our leverage. We are establishing a new target of two and a half times, which we expect to achieve by the end of 2025. Beyond 2025, we believe our long-term growth algorithm will remain robust with annual revenue growth of eight to 10% and adjusted EBITDA growing at a slightly faster rate, driven by further progress on initiatives to drive efficiency and productivity across the enterprise to deliver higher sustainable margins. We plan on spending capital wisely, maximizing returns, and expect to deliver ROIC of 16 to 18% by the end of 2026. In summary, in the fourth quarter, we again delivered strong volume-driven top-line growth, along with a solid increase in adjusted EBITDA, as well as significant free cash flow generation. We remain well positioned for further growth and profitability improvement in 2025, along with higher rates of return to deliver significant long-term value for our shareholders. Before opening the call for questions, just a reminder that for competitive reasons, we do not provide detailed commentary regarding customer or SKU-level activity. And with that, operator, please open the call for questions.