SunOpta, Inc.

Greetings, and welcome to Synopta's third quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen-only 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, Reed Anderson with ICR. Thank you. You may begin.

Good afternoon, and thank you for joining us on Synopta's third quarter fiscal 2025 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 also be available on the company's website. The investor presentation referenced during this call and webcast is also posted on the company's investor relations 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 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 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 my prepared remarks, I want to cover three topics. review our third quarter performance including some underlying trends supporting our tremendous growth provide transparency around some near-term operational opportunities we are navigating and reinforce our confidence in our long-term growth trajectory margin expansion initiatives and value creation potential greg will then cover 3q financial results and our updated 2025 expectations and initial 2026 outlook in more detail. Following our scripted comments, we'll take your questions. Let me begin by saying that Q3 marked another quarter of exceptional commercial success. We exceeded our expectations for revenue and met our Q3 expectations for adjusted EBITDA. We continue to demonstrate our revenue diversity and ability to grow market share. Our categories and customers continue to grow at an accelerated rate compared to broader food and beverage trends. We did a fantastic job of creating capacity within our existing manufacturing network to service 17% volume growth. We have now achieved nine successive quarters of, on average, 15% volume growth, and have done so while maintaining the highest food safety and quality standards. As you can see on slide six, revenue increased 17%, driven entirely by customer demand, and we continued to experience broad-based gains across our portfolio. Sales volume across our top six customers all increased over the previous year. We continue to win with category-leading customers in high-performing categories and channels. Plant-based milk volumes increased at a high teens rate in Q3. We have exceptional momentum in the club channel, as well as continued strength in food service, where we continue to drive both menu expansion and share gains. Broth had another solid quarter with volumes up high single digits, and tea was our fastest growing product category in both retail and food service during the quarter. In Better For You Fruit Snacks, we achieved our 21st consecutive quarter of double-digit revenue growth. Note that demand for fruit snacks continues to significantly outpace supply, and we look forward to bringing on the previously announced additional capacity in 2026. Turning to slide 7, I want to expand on the strength of the plant-based beverage category in food service. Circana data disclosed the plant-based beverage category grew 9% in food service. Menu innovation is creating new purchase occasions and driving frequency. Mintel reports that 46% of consumers are expected to visit coffee shops at increasing rates. With plant-based offerings increasingly at the core of this innovation, we are seeing increased levels of demand. In addition, Based on consumption trends and population growth, we anticipate that the number of US coffee shop units will grow by approximately 20% over the next five years. Remember, our products are featured in eight of the top 10 coffee chains across North America, including all four of the fastest growing chains. As a value-added solution provider with broad-based and diversified distribution, we already benefit from and are positioned to continue winning from these trends. During the quarter, a major Club Channel customer, a co-manufacturing customer, and two broth customers accelerated their supplier of choice decisions. We had opportunities to capture the volume immediately, along with some expected temporary inefficiencies that would accompany servicing the volume. or forego the business and profit for several years. We seized every single one of these opportunities. These are exactly the kind of openings that validate our solutions-based approach and demonstrate why customers view us as an indispensable partner. When the commercial marketplace presents these windows to expand our footprint and deepen customer relationships, we do not hesitate. Taking advantage of all that new demand did present short-term challenges to our supply chain, and I want to be completely transparent about the operational realities of accelerating business into 2025. To put this in perspective, at the beginning of the year, our production and cost plans were built in anticipation of approximately 9% revenue growth. We actually grew 17% in Q3. In stretching our operations to satisfy customers' incremental growth needs, we quickly reengineered our network to drive more volume output. While we were able to create enough capacity to service the increased demand, the production schedule was not as efficient as it could have been, and equipment maintenance requirements were more significant than planned. We paid more in parts, technicians, and outside services to keep the equipment running and incurred additional overtime costs to accomplish this we also had to push some of the new volume to our midlothian facility exacerbating the pre-existing limitations at that facility given we will never compromise our food safety and quality standards the new volume opportunities also increased our short-term cost of compliance finally As we were focused on servicing our customers with safe and high-quality product, we were forced to delay some of the previously planned margin expansion initiatives. As we digest the incremental volume, driving operational efficiencies will be back on center stage. While it would take us a couple of quarters to fully absorb all the volume growth, we have a clear understanding of the root causes of the short-term increased spend and are implementing corrective action plans. These plans include maintenance scheduling changes, labor balancing between shifts, and network optimization between plans. I am confident in and fully expect to get back to our planned adjusted EBITDA growth and margin expansion pace by mid-2026. We are incredibly excited about the long-term benefits of the customer volume recently gained and fully expect to see incremental benefits in 2027 and beyond. I do not want the short-term increase in cost to overshadow the most important part of our third quarter results. Our categories are roaring. Our customers are voting with their business, and they are voting for us. We are winning in the marketplace, and by virtue of these opportunities, we are growing volume faster than we anticipated. As we look into 2027, we see a growth trajectory well in excess of our expected supply chain capacity. Just as we realized last quarter with our fruit snacks business, our aseptic customers are quickly demanding more capacity than we can deliver. We must now invest for growth in 2027 and beyond. As such, we are announcing the investment of an additional line of aseptic processing capacity at our Midlothian facility. We are timing the launch of this new line with the completion of the previously announced wastewater management investment. I am looking forward to finally utilizing the full power of our Midlothian facility. Greg will have more details on the financials, but I'm proud that we can invest in growth at an accretive ROIC while maintaining discipline leverage rates. Our confidence in the future continues to be based on what we can see, not on what we hope. Our fundamentals remain intact, and we are growing faster than we even anticipated. I remain incredibly confident in our strategic position and execution capabilities. This extraordinary growth does put some near-term pressure on our production network, but we have a plan and know what we need to do to reach our margin target. Our ability to create value for customers while driving sustainable returns for shareholders remains our North Star. Now, I'll turn the call over to Greg to cover the financial details and our updated outlook.