STKL - Earnings call transcript Q1 2022

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Operator

Good afternoon, and welcome to SunOpta's First Quarter 2022 Earnings Conference Call. By now, everyone should have access to the earnings press release that we issued this morning and is available on the Investor Relations page on SunOpta's website at www.sunopta.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. the risk the in from discussion Company's and projections filings forward-looking all issued press Form any of you Commission and differ other afternoon, Exchange materially could this annual with results the refer factors factors more cause SunOpta's contained release XX-K for that We a and actual detailed to Securities statements. report those filed from presentation laws. statements to obligation no publicly or made to circumstances, during forward-looking as under the future The be Company undertakes except reflect update correct or events required the may applicable securities

Finally, listeners during otherwise press earlier CEO, today. refer Ennen. this unless nearest may to like rounded in included non-GAAP turn the over we figures are measures discussed reconciliation conference release to I'd issued A to all was ahead. the would and Company's dollars these stated, of like Joe to that today call the U.S. the Please SunOpta's that please go are occasionally million. teleconference. financial Also, now, financial remind And certain non-GAAP measures Company note to in

Joe Ennen

Financial And joining thank you Chief With today. on call afternoon. in Huckins, our us the Scott Good me for Officer.

which with exceeded pleased quarter expectations. the are first We our results

We top working we made negatively strong through that are solid the rebound pleased a line especially QX. impacted progress with in growth as various constraints

us plus record XX%. significant facilities, in versus volume result, by XX% and growth the Production pricing very with allowed Led oatmilk improvement across improvement which QX or best levels, importantly plus quarter growth. one-third to the versus offer service versus plus Oatmilk QX be XXXX. saw plus customer business. the our portfolio plant and some brands. was XX% We rebuild and line We part output also but fueled and plus me the and manufacturing versus Top ever. supported are largest Revenue stock. XX% Dream along now plus in QX in The depleted This unpacking gross across robust record from let drove every with which previous begin QX. we Before with sales XX% the partner up sequential the X% was full margin based and we strong the are by to safety improve XXXX, brands production in P&L had EBITDA strong from by quarter. profit versus QX service U.S. oatmilk QX continued support, week. down roughly growth our share takeaways of gaining market sales food our

We are to firing development. cylinders on extraction from of and supply customer to all the hose

fruit every are our drop from can expected and and for of producing fruit original fruit make. costs above very the snacks and strong are we We QX, demand capital deliver alignment in volume better projections in prices And than Frozen underwriting better business project units. smelling we a our

our selling making We track Texas projects in are pre expansion are in with we and including Greenfield real capacity. on plant plant progress

we QX, increased managing the Despite covered million environment. We double in had inflation inflation only by wasn't that are tightly inflationary pricing. $X digit of customer

about execution uncertainties in outlook the macro financial we clients. today. our That are how not are manage in increasingly updating are and enhance Given the controllables calendar, early we and optimistic said ability we our our to

XX% increases in based from by pricing solid volume a million, XXX highlights WestSoy. acquisition reported on take to steps the remaining margin There of fourth takes to portfolio. to detail, Dream a mitigate consolidated slight Gross million, quarter. our continue XX% quarter. across was growth, the we’ve in which including $X.X declined fruit-based due gains basis we pricing the Scott Now to from profit. came the the broad X% year factors approximately mix first more volume Of let impact cover me versus gains up combination and were inflationary reduction basis, and margin will this and two-thirds and XX.X% but was in puts to from and points improvement. track and EBITDA one-third XXXX up $XXX and several million plant-based the driven and both Adjusted primarily firmly of prior in to Total on revenue for of $XX.X further share gross was some down the from

labor costs our and recognize to higher outstanding We bonus also one-time QX. the plan turnaround a related and incurred to

execution discussed Importantly, adjusted Inflation strong the leading EBITDA fourth the anticipated probably mind. we in is up call was XX% improvement business, everyone's Reflecting February. the QX topic from on quarter and XXXX. the on of the in

additional for well context and are we So in inflationary of balance I’d up our how business, on addressed some XXXX. margins the these to successfully impacting for how factors items quarter have beyond. sets key you provide like This over the and

encourage costs versus million These cogs $XX year. As customer inflation covered longer of We million actions. our by were review. pricing of last well as XX term

We pace also SG&A, unprecedented have areas, inflation executed increases. inflationary but with other as is the There cost impacting we QX. overall, obviously being pricing additional such in are keeping

caveat, constructive. business attacked pricing have environment that day, customers. known I the the inflationary all one seen that in which is in at describe be change we costs almost of However, next point that But last we would nine any our to our could months, will with customers at assessment on time as that the

our few inflationary be environment chosen using customers. and to pay the While view back have current take a margins, enhance partnerships building to may we of long-term a companies maintaining with

we plant-based. strategic that our segments priorities. listeners to I'd like Now we'll three have to remind with starting turn

competitive advantages. First, fortifying our and strengthening

year ingredient label a strong from in pricing is revenue third gains million quarter, XXth revenue grow multi-pronged acquisition Oak includes the led beverages. both business broad-based came of XX% Growth WestSoy. was market on co-manufacturing, XX% volume XX% segment and types increasing Strong try across and refrigerated once portfolio Dream to again, XX% sales the offerings the the as first quarter and increased product and a And focused the that channels, plant-based approaching innovation of growth. record based the building months XXX within and approximately consecutive Oat of and our XX milk the our in XX% and portfolio value another in building Plant-based the to one-third brands. last of Second, the demand period, business go-to versus focus. underscores and a customers. owned of private Of including growth from sales percentage prior for doubled

year from an the have derive As almost for process marketplace. winning we is our seen in now, a extraction proprietary oat oat-based often

market third has retail scan Nielsen mentioned Oat measured are overlap. light, segment of brands winner is As at XX%. support has softness share bit we earlier, as plant-based roughly I are a COVID the of but The our big category believe seen this data. of sales been we some up total milk a the of and

category is has we a at it As XX% on two-year steadily basis, the grown over for a up look and decade.

Additional large ahead growth top rose which broad-based. a and slightly principally drivers up XX%. new and customer XX% was based a our new customers for from overall contribution Revenue and demand which from business XX% From our were significant tea grew oat-based, of perspective, reflect plant customer. five SunOpta products plant-based ingredients demand was

remains core scale new Our advantage. rapidly products innovate competitive and ability a to develop

products during or new from the majority quarter of In customers. fact, our the first growth new came

execution on continue of our progress to the and branded development We portfolio. make

in business, label brands gains and plant total our had approximately to similar a percent private also solid by year business. As based a overall own sales, X% of approximately XX% represent under compared we our driven the X% of ago, increased gross comment

Finally, up ingredients show XX% growth continued to the quarter. strong in

and as contribute sustained significant to which company paramount a customer XXXX. growth business growth We are to importance such in growth new of is in on XXXX, will We a milk development based trajectory. boarded XXXX, plant and our

to also on a XXXX. are extend three We our that with our relationship contract extension one customers will working of top out

XXX the XXXX. of plant initiatives, Let XXXX. in versus we an is of are foundational our online six the the of capacity projects, comes on the startup our The Modesto business despite revenue doubling of project doubled By doubled end me the is effectively than one, update share and four XXXX have the expansion from profit chain million and revenue to double through the still manufacturing to This tracking capital will all on QX and plan gross in is macro more big XXXX, our are added achieved have impressively Texas Greenfield challenges. over year of A fifth which this QX track. in supply capacity. complete toward which

X are broke installed then, to do a wall XXX field we And This rug hired the left the have This installation a poured contractors stood week the of started work Texas, concrete original And processing we week, XXXX. of testimony on to dirt September days XX-acre million four this HVAC, our We of in have electrical since XX we site. execute. already it XXX working lot on equipment. schedule believe we've weeks a is ability management team. up the plumbing. and pounds over ground of alone, or the of within majority our have to we While not the

always sure I'm to and the and While culture year, entrepreneurship, by fueled people comes and our to passion now executing accountability. face we'll end ability our down is more of of execute the challenges success between

As on call, great making capacity. the we I are on progress last the off mentioned selling

algorithm. this I above new days facility fulsome a referenced capacity. second which more facility and a the old provide growth this the contributes including to on will We doubling last investor long-term over is update call, extraction our how and

our capacity We extraction our as the mentioned, winning I is are marketplace. currently at the system. in first of on And oat-based

to and to is And more This at QX XXXX, us commitment customer be online that new based of existing system our and and now grow continue project oat $XXX are be a rate. utilized. on giving XX% highly will in Our discussions capacity opaque own nearly confident customers underway this will taking million. rapid we

this add capacity whether its [indiscernible]. to opaque system Coast Importantly, the West new will

Moving segment. first onto our

Two, the evolving pricing. operator footprint took and strategic was and the frozen roughly unit largely grew accounted three, largest portfolio as via fruit to more XX% in program, two-thirds low by of automation, very three our relations. one, Our fruit million Volume one-third aggressive which also We through really and value XX% derisking and mix pricing pleased Fruit-based volume revenues business takeout for whole. are our and from strategies geographic diversification, in increase, which some benefited offerings. better prices. towards fruits grower of driven first Frozen of were customer. by was cost priorities the quarter, performance the innovation the cost and our business through with one-time XXX revenue QX, number the in reengineering becoming added customer increased driven

that base a a the private up smoothie significant continues business, along largest to first for and was strong at primarily SunOpta experience with our up demand one via rose five XX%. a Fruit via quarter, also which in by launched XX% for the the gains global in versus week world, fruit implies food and Nielsen X%, accounted for snacks sales to We of via fruit total the which that snacks very In recently year's top massive quarter category continued to quarter. customers top we our growth the Sales snack co-manufacturing label coincide revenue brand customers. and own frozen on total snacks offering year our up brand. the gains show a last demonstrate driven which the with XX% data remain the XX% with strong of retailers were non-trend bowls, over volume customers to its in company, our for dynamics. our with large in share first XX% year XX five

took passion efforts we of closing, engagement formalize and forward into around sustainability. our social responsibility. Last want governance of Before new year, our to I our move era steps harnessing a touch the and employees environmental, to framework, on us awareness, to

continue commitment Our products, ESG two actions released It communicate to was we four sustainability summarizes relative which highlights approach key report, ago, transparently. advance as to plant, and recent people our most weeks and roughly governance. areas, SunOpta's and

ahead in the embrace food. we confident the fuel and a future of sustainably as We that strong And so start. is off to to of lie very summary, our are outlet. opportunities XXXX progress and we direction our proud In we work far, are

have capital. line committed our around on of innovation double We and continue SunOpta plant-based annual plant-based changed. interested term strategic growth today. profit increases and and rare focus algorithm beverages. invested profitability combination to on in The long business investors return Our based revenue growth both the plant of and and increased strong priorities offers foods digit portfolio remain top transformation, growth to doubling not

every and QX, in growth moving EBITDA adjusted quarter forward. year-over-year expect We

Now I'll turn to financials. the the the rest call over take us through to Scott? Scott of

Scott Huckins

much, Joe. afternoon good very And everyone. you Thank

both million our million solid to bowls, with were gross and impact one Gross Most in revenue of oat-based the and our segment. gains our smoothie revenues revenue XXXX. X actions year XX.X%. quarter driven the of a with first compared and of demand Dream to WestSoy factors increased outside basis acquisition. largest of teas. attributable along in which and increased implemented decrease demand points snacks second was over first by of the And year, profit offerings Plant-based pricing quarter in and consolidated from XX.X% of normal of for decline strong Fruit up million quarter for based XX.X% XX.X% for XXX to the the strong the XXXX plant-based $XXX.X orders represented First fruit actions margin some we down temporary Along with benefited half was pricing frozen distribution, as the time of revenues from half $XX customer growth. XXXX, segments. nearly

from Importantly, the expanded basis communicated down gross points was plant-based XXX versus XX.X% we The XXX rate XX.X% call. year. points X.X margin basis and prior margin with level gross QX points decreased from profit margin basis segment million QX. consistent was gross our improved and XXX what to In QX

accounted rate were inflation improvement of QX our represented These improved by plant-based depreciation decline factors dollars. gross growth higher beverage with partially volumes million at profit. margin sequential in along $X offset the million, Unrecovered in in which further gross increased expect operations. and $X ingredient year-over-year We production significant in utilization profit for expense

created cogs in basis. QX on XXXX plant we production that the On as estimate X% QX dilution, pricing fact, costs was to through margin and each pass last exiting added quarter very In of a points based margin up from year, basis similar rate notes and strong. of XX% over the would gets a sequentially XXX rate basis, revenue

bonus, diluted Given the their X.X% measures. continuing exchange table Gross challenging improvement year. our on results and of did first some $X.X profit to with fruit $X.X in foreign were the from adjusted gross and per earnings first and the up dynamic. million consolidated efficiencies share points. In of million including Partially the period. $X.XX $X.X to earnings X lot first we the profit year-over-year incremental benefited and to segment period. $X.X recognizing or higher some quarter, year in of the the would A products. year-over-year adjusted through that quarter, prior back On transportation decline quarter of a quarter we unable the found Dream million that be I'd share his can from prior previously compared in in we adjusted of would and leading from related these like had companies diluted in one-time was million reconciliation flat the EBITDA quarter, portfolio from on with press The consolidation the gross availability was earnings $X.X these stemming attributable first primary costs reduction WestSoy. of EBITDA left basis, improvement year. in to a afternoon. X adjusted year, XXXX issued to basis In represented the offsetting global year-over-year with we'd $X.X that decline was the income remind rationalization year million special XXXX. arrange challenges of estimate environment, the year our the revenue improvement million the pick GAAP million adjusted last gross compared of earlier and in operations $X.X $X.X period. which earlier was estimate along toward $X million of to million, the income. in mentioned of in to some April gross transportation release in $X.X million the million Earnings pass $X.X measures to driver SG$A, million listeners EBITDA the $X.X per CPG the And carriers million $XX.X amortization Mexican a versus or are million even this significant production the factors operating Segment increase million margin hacking fourth gross $XX.X the was a XXX rose million focus, see fruit quarter down profit In dollars adjusted based operations. lower in with of of margin we of in was prior was and of for level a manufacturing $X.XX and on additional prior due profit a $XX.X profit an to basis, of million non-GAAP efforts rate for operating basis, The in

Turning cash to flow. the and balance sheet

the As first and of planned X.X of balance years. quarter our leverage million credit communicated our million was of at to previously significant $XXX reflective smaller asset and credit facility. with facilities. capital that a our April times on out is our the and point position to investments representing last Leverage XXXX end capacity range. total leases million reflects of debt important of above $XXX the is $XX base drawn scale the at two largely over expansion It and timing just current stood

to many As we these have and double quarters, capacity, said the business. of plant-based investments profits are revenue for needed many, our

this projects, of perspective. in of the year, flow by and cash And compared XX.X expect rewarding. will environment XXXX. the capacity stride hit XXXX from compared of used activities we last EBITDA. executing online during result first reduction and cash activities a would we of expansion Texas cash a From essentially to in with QX and operating XXXX believe million quarter, a to provided million, year's with this with XXX% operations the the reflecting strong in of the first comes during investing quarter XXXX. primarily This operations capacity As leverage we continuing projects. a in through continuing first Cash some use ‘XX of quarter drop expansion end be $XX.X $X of in million magnitude was $X.X investments million is of

labor with supply for Recognizing me is comments environment outlook to as some raw of and on materials. the XXXX. our relates chain Let the very fluid close it balance inflation,

guidance prior revenue our maintaining into XX% are with which rate XXX to call We introduced of over XXX approximately compared million, translates to growth the of range QX in first our XXXX. of XX%

As we generally expect second quarters, of half we half have said first for than several year. to of the be the more XXXX challenging

affecting would be the listeners year, second to also margins we first capacity. in facility would such, how about XXXX, gross based As expect on existing stronger of I profit to Midlothian, we plant the Texas, a gross margin. to half the based half like and see in remind compared our

of ready the production, QX. startup incur As production and costs we we year In we second of primarily at evenly expect in QX roughly for XX commercial to in approximately order year. previously the expect half between to stated, as the to million start the be very year, end distributed of

to This margin very will XXXX. a to While previously confident represents XX% the these reported. From of XXXX. for adjusted EBITDA, $XX million startup communicated to remain and profit $XX gross back costs adjusted XX% affect rate growth are gross we over range million EBITDA standpoint, profitability in added as they

profit in for year-over-year expect improvement Joe EBITDA and As the adjusted year. of we the balance gross mentioned,

capital by $XXX million in to expectations standpoint, expenditures EBITDA the also a From $XXX cash statement, XXXX. the new in range, adjusted We as $XXX reiterate in driven facility Texas. capital on to the expect million million we primarily flow for continue reported our from

leased do fund credit is financed facility being need to the we capital equity company's this reminder, a investments. these through As not facilities, and and

of share to for financial depict we I'd advantage metrics, an through Finally, planned additional in investor and our competitive business outlook performance including that like unpack further listeners are on day to remind holding our X, June detail, the XXXX. sources we

detailed with opening commentary reasons, Before that, the call reminder that SKU just operator, for please a level do up regarding questions, not customer for questions. activity. or open for And provide the we call competitive

Operator

Your first Holland Brian Instructions] of from comes [Operator Company. the Cowen question line with and

open. Your line is

Brian Holland

Yes, Good evening, gentlemen. thanks.

the to gross a margin the for a sounds expectation year ongoing about of sequentially, XQ XX talked like in the Just margin, But year-over-year measures market that looking corrective at in to that debit place, the jump we're assume gross croc sources you QX. considering I your it grow you XQ a should still in know, fiscal be margin. gross isn't -- would some going bounces suspect pretty big be

half that then QX is year kind frame just out here gross here. the over up on of and maybe but over higher So is margin, still back year, sequentially down

Scott Huckins

is this Brian, Hey, Scott.

So from our would to through we QX way I right, one to sequential sequential margin, again, improvement think you've QX work XXXX, in as generally and and got etcetera. four if expect we

question answer that's So your that the core Yes. of

Brian Holland

I selling pricing to the on fruit it. obviously district speakers]. they're drastic got took on about that there, Okay, wanted pricing both elasticity eco benefit know in performance XQ, [multiple inflation also obviously more but great but distribution their benefit clearly broadly or

we also across exposure tiers. the pricing have So,

kind on be So the there interplay based, the It'd of you're seeing thoughts as on plant well? side but just fruit helpful. any curious

Joe Ennen

growth we existing grow core watching category reference new have our as driver it’s two growing aggregating at elasticity, ways Joe. that certainly obviously, certainly as share underlying as volume as Yes, we look within heard lever, volume as And growth. well or We're volume us customers. a growth to or Brian, you keenly for a

the basis, we you based snacks, which drop pricing own So, pretty fantastic. holding we in some face of as did two-year any growth mentioned then a on lightly timeframe frozen, in strong the plant based we but down plus pretty is in longer I dollar in category. was did momentum and its see plant on sales reference see growth continue certainly to in it's on upward And nine unit significant

Joe Ennen

I'll get one Appreciate back me, into the Joe. color, Last for queue.

second more slide. You updates customer here mentioned on the several

etcetera, you about customers, this talk Just specific capacity adding to in you winds what's driving right etcetera. about with don't now stepping But conceptually, can you're what's environment? driving, talk mean, a want understand talk the provider we But, I And about are they right people What's network, new can looking it, right bringing is back, you just this coming plus to just now? business for demand fruition what's broad us? et just manufacturing this help happening outstripping that is in supply. cetera. can anywhere now, all break

Joe Ennen

Brian, considerable Yes, to which specifically, it up in output. significant Unfortunately, we I us a has period one doesn't a customer our because fit time, it development the either will of quickly. production for referenced being end been very for wasn't that have rush to SunOpta, an happen business emergency

is really is to in as this So this months long-term this I shared development, in times. development many customer cycle. mean, XX industry, we customer category many, XX

And XXXX. probably so, because end worth to we since and we feel starting been was on felt candidly dividends referencing are worth something in the of terms today, we of efforts it the have like but revenue simply growth working this really, pay was is highlighting,

Brian Holland

Understood, I'll there. Congrats. it leave

Operator

Strelzik Your with Capital next your Andrew open. line question comes Markets, from line BMO the of is

Andrew Strelzik

the category spending plant a you about would get talk softer Hey, think plant guess environment? I about interplay category, and the in income. we what's for questions. speaking to don't demand. about, the skews how onto holds generally Thanks good taking the guess, a probably question the curious tack I elasticity category higher how into event for that the wanted I'm customer up more type to your I sense with just of guess I service based generally afternoon. that I think if there's food in an I'm just that know environment? consumer based just for about

Scott Huckins

higher things skew a the does Andrew, one, consider; Yes, couple there's I to category income. think

the health alternative category consume available a products category and meaning they are alternative, believe is a have allergy are this where reasons, they to many isn't that the healthier dairy them. either is, in to the Second for people these versus or

So they'll just in off cut is, loath a save in health. their consumers unhealthier to else make seen that typically, choice $X.XX, trade to their in food overall an reason own and budget health product what spending they're are purchasing I've that’ll personal before a for something XX sacrifice years

Andrew Strelzik

on strides kind you kind talk the that? staffing Okay, there And curious productivity. the those think of drove of what of some then, some made hump of how operational drove side, just the quarter that tighten dynamics? that execution, and those this really makes getting the I perspective? sense. you about was Can the that things, from perspective about a a training was what mean, really Or you over and just down

Scott Huckins

mean, ball QX we was think, I I on the QX. in and to call, team rose people park, we not out, output. the production without challenge referenced the getting we the XX% hired, the production that headwinds. mean, of and that say we majority had I started of understatement. QX pointing knocking that our the frustrated almost just out worth the growth QX versus Yes, And And it’s QX with to as because simply slightly were needed, we that weren't the

I run is to post operations knows company I in mean, company, so those get marketing that history numbers. plants. I numbers, our you and we're mojo not we're And the just company, see what X%, company, great speaks our of brand, think best a we're an the it to flat the these driven to to think back. operations a how versus was us And, record an we we're not operators quarter do, manufacturing ever, who as in quarter, really

Andrew Strelzik

a big segment forward, was Thanks, how anticipating, think for then, was just maybe to about what food sequential us context you're And you the we segment sustainability about better the year? knowing how But should last about of that margin if that to the the throughout I improvement, was. contribution, that could, the the how generally, just that, can were volume of going there guess I'm trying one-time and frame and talking the than understand I Absolutely. my of one, performance rest of we think in note

Scott Huckins

Andrew, this is Scott.

So that's didn't called standpoint, repeat. forward definition, a just the reason go we one-time distribution so was the assume going by called yes, we out from to

in revenue. quarter, approaching growth that of distribution outside XX% driven by roughly was XX% that of So, the normal that half the or of half

we're balance So, again, years. fruit in for with I'm the the QX. think the seeing continued about pleased I it really solid results progress bullish and generally

So yes, of I think it's the consistent the narrative company.

Andrew Strelzik

Good.

Okay. it pass Thanks. on. I'll

Operator

is Your the Blair. William John question Anderson of from next line with

is line Your open.

John Anderson

QX? Good kind a food questions. piece beverage that question. was one-time Or understand related customer, on something? that trying of Maybe was the in The think if afternoon, of to as to kind the QX to last have from that? to filler to it Thanks of large of modeling for or order just come does that's growth based come the order out that everybody. quarter, Just revs we that pipeline out going fruit about tagging and the a of

Joe Ennen

doesn't if have question, No, while in, and of had good they shortfall they And another inventory a come John. it they that fill from the customer to asked supplier. were we step out to us scrambling, QX, we them Yes, and was out. it happen could in available help

divisions outside that that of but particular core we we so And it was for of customer kind cover. did, the

John Anderson

are similar of or of or let's not the maybe balance super for kind it That's other And given a it fruit level business Or XX% based factors? say through you order? about the grew, of it. year, helpful. that year? some the X% growth comparison simple as I mean, Got of you x seeing issues think is that the the balance

Joe Ennen

we're a see would see it's representation what have it's it's to we what I because we is I mind, that balanced expect year. over aside, year I to view. wrap of from think keep nuanced, But of even think SKU Qs that I understand, put two As bunch copying would four in good of representative a

John Anderson

to over bit harvest What sourcing, super food for of that how talk that Shifting fruit. actually let the have fruit -- may stay with Okay, may? little about implications segment? me Could a the well, that margins availability, on particular and costs, you helpful. kind

Joe Ennen

John. Yes,

almost footage food taken the Mexico of a So, number, core square based now and significant closed in as X% we've of out is our of operations the California.

berry that business. and season had so fruit up. very all a is were really our become has We and pricing the of kind season of very quality wrapping cornerstone And good availability successful Mexico

it that just threw almost starting. season in So Mexico is California

or days major days, bad, reports, kind just good So it's but early either no very there. early of

So nothing you as business. But, dynamic negative a know, from it's that for standpoint at us a hitting point.

John Anderson

good normal, hear it let's been Right, kind less seasons three right? that we've have of than but it's because call to had

Joe Ennen

Yes.

and terms volumes our were expectations fruit. add of we’re in in it, with, again, pricing expecting where bit exceeded we or, So a was even maybe availabilities no line surprises. so availability of And

John Anderson

Okay.

to based It thing want dig was about plan do and because next in the business double into XXXX your that a capacity million the business So $XXX is to I is XXXX. business XXXX. plant talk to

expansion a So, little capacity added and implies a take can your rocket you that. XXXX. in to even you science doesn't you about bit But programs, talked a some XX get that there I do capacity had

and that capacity more you're have XXXX. in You then in adding XXXX some more

Or to Where here the sequence that the of that lot that facility takes end quarter So trying get at and aggregate does million? guess, capacity? of Midlothian us you understand can out you? step your $XXX your does and of to But walk I hit that a north terms you you capacity capacity then, the the just the with mean, I'm in addition how in there's on the as the business extraction more And of the another kind total where know serve west? to today, builds target? of to that come? how there. then with ingredients, to do through, third I capability year, need is the and up I there capacity are really you

Joe Ennen

projects, the business. six doubling potential of of the Yes, so revenue equal

circa cases $XXX already our I grew a sick, producing run reminder, six already mean, as rate. already are six add we $XXX are in the They're projects, revenue million done. XXXX. four of XXXX million, So from

So, hold we're your coming. breath already realizing capacity the a, all of additions, it. the just It's wait and this for value isn't

to projects are four aggregate, Those of So equal completed. the call projects what in is $XXX four million I've six let's are referenced. it

million. got $XXX another coming us four those Modesto. Then projects project give on we've So in

balance, quantified as XXX. go. of is a project the significant remaining plus would XXX between call that. it to Texas that haven't remaining the And the project majority in We that Texas, the you expect, But Modesto is John,

John Anderson

Sure.

Joe Ennen

above over doubling. to second relates the that the is it facility as extraction then And and

John Anderson

that wholly Okay. And is to you that a new is on Or mentioned, Modesto? attack location?

Joe Ennen

question. Good

We inside much doing that to execute. are of easier Modesto, so

there challenges of found are of we right Modesto. a lot know, as you a would it supply do now. chain you construction As doing inside to suspect And way

that So is us. about selling we excited expediting to that And every now. of milk can make we're we're project for as I right me, drop referenced

to moving. project get excited that we're So

John Anderson

you think I where if And can that of the you been growth? said have mid extraction that existing down? the and ingredient How gross I that's heard in I the plant broad think on Okay. the slow digit plant facility I limiter you're sold right, XXXX? capacity. delivering teen growth or portion. that does of double that out much mean, you based And your basically Is within base you goal plant higher I base think here get growth into up that second you until based a work of Does it's

Joe Ennen

you Yes, might I question. that thought ask

in XX -- in we XXXX, products. about of that anchor on so off could said just we million we call we in OBS XX% QX and number. the grow we did to So $XX did revenue And million

grow So in can XX% XXXX. we

estimate in that QX, QX, basis, we grow if year. year But QX can pretty year number over put what numbers, same grow And overlap full we Because these So is John, growth. QX. out can can a that what kind pace, in do communicating XXXX. represents but that at in meaning can at pace we we I on million are up we're for $XX are of we million XX% that obviously the $XXX sales we significant

John Anderson

Okay.

Joe Ennen

of got going relates QX of help our now it oat-based Are facility additional every are comes how which existing out XXXX? year and other might stuck day. then QX identify we've more you be, And that productivity we're figure and to what working next working do a as find to online? But aggressively to be squeeze until to your bridge that to and sources to sources from of on obviously to suppliers question We us single out. almost Modesto to base about of we try other

John Anderson

Yes.

still are of some forms or oat? business mean, kind business? And shifting favor a fully your seeing I forms are And in do you customer? with crop be with mix expect factor your of oat-based permanent their to you customer your largest declining Okay. then largest in

Joe Ennen

Absolutely. some To category you the there's but of seeing well, formats, second other we're from part also will, both of your based category, question. and milk within growing Yes, mix if milks kind impact Again, plant promotional growing, the growing we're foodservice volume but know, definitely sourcing seeing some doing total oat some shift. you there.

the XXX% very in question. it needs that And, And, to be old really, be customers service. long, of food XXX% our not high all service long incremental we've milk a kind continue longer isn't to But So for level. answer to it be that time. we a time old seen based expect business in are we to incremental, the very,

John Anderson

I so got someone here, stop, many more. to I've got to let Okay, think a couple I going else ask? do I'm

that everything $X is right, side, you So quarter. It covered? in sounds million, you you're covered that on inflation the the seeing like

are that, magnitude? in? of need when kind have just or price other I pricing? Such speaking, And kind do you it which you commodities moved? businesses? So what $X do in of thinking, you generically million go plan another What guess, only Or does Higher?

Joe Ennen

answer It's customer by a question, your customer to John.

to yes, other seen and certainly the you I as cover might market we million, will factors we've want expect, subsequently. then that -- go $X kind any down don't to have that inflationary that I of we So But pricing that granular in level. mean,

John Anderson

date you future? say be you've you in don't, the the when But we we'll market, communicated If mean, effective at some in it?

Joe Ennen

mean, some I mean, just XXX. was one are I product by some there's, team, mean, by wasn't a price customer mean, blast I These to saying. went the of customer yesterday increase I I XX, some this product, what XXX, just plant. Yes, with we everyone. that's it by through plant are handled effective.

John Anderson

rate Okay, cool. EBITDA sequentially confirm this rate, want I just heard this to And year. then throughout to that Margin click margin right. the on Gross improve and so I will

QX? is Ours

Joe Ennen

Correct.

heard right. You John. that

John Anderson

last acquisition And in in the I one, contribution promised the dollars. Okay. quarter

Joe Ennen

John. It’s around X million

John Anderson

for that X. Is all and it? I Great. for million. questions, the the but you see apologize X you June in thank time

Joe Ennen

Correct. Yes.

Operator

Mark from is question Lake next the of Smith line Capital Your Street with Markets.

your is line Your open. is open. line Mark Smith,

Mark Smith

can Hey, hear Yes. me? you guys

Joe Ennen

Yes.

Mark Smith

Perfect. Hey, guys.

to trends can kind from ask kind Delta of wanted goes where kind kind be would maybe you months milk, where of in oat and any share on that that the it's the Just as well milk XX on share, think give growth great? first last of gone of over as industry us the you

Joe Ennen

males clear, where I'm from taken the would so say where other just within all the has So you share has category formats?

Mark Smith

so share ago? maybe where from kind of today? your it's oatmilk XX that's I guess come at that's more No, months where of And

Joe Ennen

the in of with of we five brands, they the I growing been and two them big oat in Yes, players mean, milk rip have the partnered two both market. the continue of category than the marketplace, top to faster

the we're the marketplace. And appreciative and the is obviously winning have response by we've certainly humbled that the to momentum consumers’ they roll in which oat-based, in marketplace. so, our really And,

Mark Smith

Okay.

Joe Ennen

that So for now. we've that several us has customers worked somebody not winning existing business with from are years These else. away

Mark Smith

up on in of just growth versus then and pre maybe service, that food Okay, pandemic. is catch kind us and how the maybe today

Joe Ennen

of in we that. driver is total. key we oatmilk was obviously that in gain, driving product continue foodservice applications. growth a is and foodservice And, saw And oatmilk channel. to in it And service QX great coffee solid discovering a growth consumers see food good the are

Mark Smith

we me, are any Okay. abatement And that as there? the effect? one, headwinds for you margins, of gross seen into your have the Or improvement last pricing out expectation has profit that on kind we look just of gone QX, based about purely at is as think the

Joe Ennen

not general the improvement I think the just I call, choppy. a I that environment on it's pretty spirit, inflation, guess think remains per se business. It's in the that's

the Mark, what just, QX. of rate roughly ingredient profit just the But of inflation, to we've would change increases, raw pass of you on that rate enough down. would and have to you seen remind goes I inflation No margin is in QX material if continuing you $XX gross the strengthen dollars. So destroying, -- gross gross I profit I business, by mark margin because that, continuation reduces it's $XX our XXX million points. basis cost think in the margin million, case to

Mark Smith

you guys. Thank Perfect.

Operator

Your Hallum, with next Furman Alex Craig is open. of line from question line is your

Alex Furman

retailers could potentially time? new about getting life. rebrand? from to category major Do you very has ask What I in for this and Great, supply? West response the become the much thanks brand a my you that and rebranded of given strong consistent this that the over consumers have question. from been wanted And taking brand a a such think kind

Joe Ennen

that and to go start half branding, that product the QX. innovation so that Yes, second expo showcase will in in of that we West

West that yet. Expo forum launch but kind has the of So to the not shipping started it marketplace, to we use as

milk. As really relates been good, a to the lot customer shelf been It's response. they're plant innovation stable based it hasn't of excited, there and

insight see And excited brands, product with distribution like grounded both step And, would consumer both Dream truly to the expect so SunOpta and we gains Westlife. driven some they're innovation. of somebody up on

Alex Furman

you. Thank helpful. that's Okay, really

Operator

Cowen. with question the Brian next line from comes Your of Holland,

is line Your open.

Brian Holland

obviously last as project the well to But, assumption curious, fast. would of to Or roll million? Because just XX the up nuanced But out beating Can't me from just a from volume XXXX. off working that about double pricing business this given pricing millions, get aside the that in bit you of XX% does significant that plus be standpoint, that kind as more the up normalized capacity value capacity you've I you on if just in taken your down go rid are another a of you say I'm a that capacity. follow nature response. would of environment? the XXX talked you think One out? of back question, I'd a could just

Joe Ennen

in our back gone capacity for numbers the new some we've Brian, all time, But aggregating stays adjusted it for it revenue really capabilities, making project that'd current we're looked those at we’ve sure be what And is, pricing more perpetual the you're assets, correct would we produce -- then takes those pricing. have and today if When readjusted we're that capital capacity adding but of underwriting. environment. we've certainly. that internal might not a have some where that, we those not added, pricing normal

Brian Holland

Understood. I Thanks again for leave can it that. there.

Operator

over time. this the at questions further Ennen call now Joe will turn for back to remarks. closing I Mr. no are There

Joe Ennen

operator and forward everyone you speaking in you participating some person Have Look seeing you, in our to evening. conference first of call. for interest SunOpta. and great your thank for soon in and a thank Great, quarter appreciate

Operator

Ladies call. and gentlemen, thank you for participating. today's This concludes

disconnect. You may now

SunOpta (STKL) 12 May 222022 Q1 Earnings call transcript