SOY.TO - Earnings call 1 2023

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Operator

Greetings, and welcome to SunOpta's First Quarter 2023 Earnings Conference Call. [Operator Instructions] 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.

Reed Anderson

you Earnings us Conference thank Quarter SunOpta's and XXXX Fiscal Call. afternoon, for on joining First Good

be On transcription the now, at SunOpta's call that available Officer; being access and on today is the www.sunopta.com. was are will Joe Hawkins, to company's and website. available Relations afternoon webcast, Financial This Ennen, issued Chief the earlier on call Officer. and press Investor the website By earnings everyone also this have Scott should a release Chief is Executive of page

As for and to The except projections and future XX-K you and which company actual obligation questions. those differ a correct forward-looking statements, may presentation issued publicly to prepared not reminder, from update other events forward-looking press statements. please securities Commission could materially your risk that the results filings in detailed note Securities to cause any undue SunOpta's afternoon, additional Form with statements These that and Exchange of filed will contained this the remarks future factors statements all discussion undertakes and statements make a required the the placed to forward-looking guarantee during or to the circumstances, under not be forward-looking follow as performance, therefore, made response refer do may reliance factors in or release company's should contain on We annual applicable the management report be no upon reflect more them. laws.

generally these unless all this Also, now to issued company's the nearest discussed Please will to included non-GAAP to in please are teleconference. call like like follow, press was to Joe. today. the business. release reconciliation that refer note prepared of note million. the with certain financial measures Finally, company measures occasionally remind dollars to the turn the stated, U.S. remarks company the divested are Sunflower that listeners non-GAAP exclude the impact I'd that we figures otherwise during the and rounded may earlier A of today financial in would over

Joseph D. Ennen

thank We If summarize and profitability the you significant EBITDA strength. X the would continued delivered afternoon, adjusted Good last joining was XX us in words, a over I those quarter be with now improvement $XX months to for words in today. million.

well see in We beyond. in confidence strong to X our to a continue businesses, us and continue execute XXXX for giving against we outlook underlying and imperatives, trends our degree core high strategic of our

results. offer takeaways me quarterly Let begin the key some unpacking before we

QX company of to a profitability the Our XX% level focused efforts adjusted record increased delivered to across million. drive EBITDA. adjusted $XX.X EBITDA

progressing and of new Our contribute up guests plant Texas to ramp-up Texas growth core drive to milk will to our again plant-based in growth square The plant is in in remains see second milk strategic QX. broad-based on the XX-plus products and to who XX to the materially April greenfield you running. half. foot XXX,XXX growth Thank plant-based came Plant-Based, growing continued snacks XX%. and products In fruit revenue growth our strong including with our areas, production

on growth continues doubling growth outlook and in business strong performance never our XXXX. has XXXX plants business of $XXX degree our snacks the in Our almost to supporting development our in in fruit pipeline our see a demand defining continue general, execution million base.Â We is long-term stronger, business, been of $XX from up be revenue, XXXX. gives to to us in in Plant-Based LTM of the and off be in continues for strong, confidence Execution which a basis million our and now manufacturing high algorithm factor an

and line usage than foodservice business to as of some creating oat our is on gallon within reprioritization and milk Lastly, oat it time to base quarter-on-quarter. half success relates double more the continues our fillers. This proprietary

total offset year a in Plant-Based revenue ago the the as frozen quarter declines revenues growth was company, in from For by fractionally up fruit. were first

and the and the saw strengthening multiple ways milk to TAM expanding an first a business in protein to Our our the over competitive along efficiency of and trade-offs delivered We in and million, We costs, and Beverages shakes oat improvements employee our results, This $XXX Consolidated growth segment, which go-to-market and profit our we the X, with optimizing Starting expansion creating #X winning We model, performance actions I'll including fortifying offerings, saw continues our Plant-Based customers. sales. rapid plant-based by rates, entering building focused milk milk Plant-Based to #X, up more partially or shift packaged support performance progress we result in and X to and and in mix category a plants. advantages. strategic strong oat with revenues nearly grew thereby broth we're reflect to growth profit, steady business. $X strategic in multipronged operational starting were the case and X% on core which retention.Â Now improve. the actions. XXXX pricing adjusted segment categories fill business, gross ingredients, strong key manufacturing across best-in-class was priorities: win. saw our growth by excludes were turn driven QX in in products Foods million pricing where with quarter remain strategic start-up improvement offset teas, in than declines XX%. value-added segment operational seeing of

growth of with broad-based winning business. to quarter growing both This of see X X top percentage and a continue first customers We by of SunOpta a their more. the our XX% or larger their in growth is result

with revenue. core strong X/X X%, nearly and of These milk accounted products products segment Our for and XX% remain respectively. performance our revenue volume of plant-based in plant-based growth

Taking specifically strong business, the for broth revenue our that we as up significantly In competes XX% oat a core the XX% this a portion gaining addition, milk in revenue oat oat volume. oat driver our performance, largest we increase largest at share.Â Broth the that in growing packaged with our top tea for was line again milk use exited supply for significantly was plant-based our on business gallon of product milk of total quarter deeper Coconut remains extremely a also and was up milk our time continues XX% up XX% feature result internally with portion and customer. in us type Oat volume remains look key down a products as product. portfolio. once the as to our half customer

also grow both and Dream We SOWN last Organic versus barista were a gains double go-to-market From continues highest up rate reflecting solid Creamers. owned oat Oat in growth XX% brands digits. and soymilk standpoint, the to deliver low saw year,

Our declines slightly co-man label partially label plant-based described. with up milks sales by broth mid-teens business private was XX%, offset previously and were up up private

While it's to the This last that packaged X in ingredient ingredient oat growth customers. available in constraint important quarters. milk significantly, off sales oat were sales has understand XX% base supply and for created oat packaged continued up our a milk XX% were XXX%, on

ingredient As a supply. for added to such, largest second compensate supplier oat-based our customer our contracting available

growth base runway as in oat it a to of as importantly, milk profitable to which goods, used continue selling packaging now be at sales this was an as which a will in base, foodservice. continue half level. This oat oat creates is gallon and the in both ingredient.Â Most lower to We finished but in ingredient twice now for total, used support this strong customer support ingredient

occur to there many dynamic back new we Midlothian, to same between capacity a ingredients expect extraction our end of by Texas. We customer with is extraction and Last it Modesto the and oat-based we goods, almost touch used finished dynamic general, facility. utilization of with to QX double attended all plant expect full in tour to in relates of facility would new be being cycle you the at our goods.Â As in life it the hosted month, finished

have but gears this. the qualification. X capacity Texas have a our production run growth will initial broader shifting a This will double of be the phases and production. towards and production construction full-scale installation. including lines. the be of is there validation to are As And start-up our and protein of X products, we the finally validation to piece up; initiative expansion and whirlwind from agenda. #X, elements cornerstone like important, and Volumes as our first #X, up of excited equipment serve of ramping #X, of are steady line, facility the qualification and final reminder, both months, been and now several activity, which #X, state over to shake distinct months next ramp Monday. X XXX-ml the on past we time-consuming on necessary started completed a gauntlet onetime The project

We cost through relations; business Trends reengineering revenue growth by support stride. towards bringing better strong low-cost and the by down first volumes XXXX development with strong more is, we being to fruit quarter in mix don't our remain grower programs second initial pricing. in via our this Fruit-Based in capacity, in strategic several diversification, pricing the X, more fruit a with and new and priorities automation, evolving production to driven very our frozen X the with Fruit-Based through the lower revenues pleased bowls. as both and additional X, of hit are: customer value-added for footprint until takeouts; business, segment fruit X Recall exciting efforts. shift planned in snacks on as operator recognizable portfolio frozen we're offerings. lines volumes their customers As aggressive contribution the was remain as the The volume able with very And derisking becoming offset in XX%, than the well X, in business existing XX% smoothie the innovation up customers partially snacks business half XXXX.Â Moving our as geographic segment. anticipate and on

delivered fruit-based solid mix frozen with along in of margin In efficiencies led another shift, fruit. addition, driving by quarter improvement in pricing we

revenue. flat Fruit-Based year on gross million First quarter $XX profit less to was last

snack new ESG about the expansion to over as to our we continue and are like our in see We very this XX% growth opportunities a enable continue of excited capacity time.Lastly, on QX, for to journey. expansion come initiatives couple a will significant I'd make of online business make progress which to comments

emissions. ESG firsthand to summary, This report will highlighting on proved X, freight we comprehensive that energy our pounds saving In published and in mind power on share I'm XX using very location materials with business. some our is of saw model help million website. again supply to first the month. consistently the million save Focusing new May from available of you quarter The was on once profitability. Texas features Texas facility, miles progress across eliminating of strong and resiliency the our our our excited carbon also deliver report and much it chain, XX using water annually designed as last recycled sustainability

expanding a go-to-market provide and that durable. proven has Our capacity leverageable competitive flexibility, highly platform advantage demonstrable

outlook algorithm for remain is on unchanged, returns increasing and long-term profit growth our revenue of Our annual and invested XXXX capital. plant-based we and committed to increases double-digit

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

Scott Huckins

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

gross to more expenses, a improved not the the important Plant-based up million Gross fruit year. $X repeated, up fruit quarter as that impact that somewhat up XX.X% removing points On lower. level XXX consolidated fruit onetime It's points fruit commodity would in First than operational compared XX profit XX.X% million, snacks basis offset to XXX with is was to XX% were percent basis offset the removing operations points a with Texas. million Adjusted sales.Â Earnings segment gross from and basis and last gross segment of of significant points was XX.X%. combined basis mainly the of margin increased XXX XXX XX% in major reported, up million of $X by higher in revenues profit, impact quarter margin $XX higher as been reflected points by revenues frozen continuing margin and Consolidated order year as our in first XXX The increased revenue a Plant-Based, in start-up prior was called costs. level XXXX, was excluding of million start-up of period. gross positive and was growth the XX% basis versus revenues start-up basis $XXX increased lower basis, gross Fruit-Based divestiture we benefit was despite EBITDA skewed. points margin X%, and to revenue start-up XX.X%. basis growth driven were or comparison strong were the lower low-margin of to X% from impact to costs, Fruit-Based, business, sunflower basis by of for margin out slightly approximately volumes points an XX points snacks, so million favorable million, volume bulk frozen. the of a mix of pricing adjusted mix down gross a to partially up have margin margin in frozen customer XX% efficiencies over costs profit to XX up X.X%, gross as the $X.X XX%. reported, $XX.X was $XX In increase of shift.Â In from remember

balance and to sheet Turning flow. the cash

As of line of QX, with leverage debt with QX from and down was million X Xx. X.Xx, total to of in leverage our $XXX target slightly

capacity remains of followed towards by that high to billion, $XX significant first revenue reaffirming me prior down step continue by that close Cash range at year-end to environment the XX% in of timing. as continue in representing expect of with $X for capital From the guidance year, to $XX in are came in the the last operating the was was balance million investing the increase introduced the expecting outlook half very improvement XX% an used our during reflecting million primarily $X flat we the expect resulting comments call, year of the billion standpoint, of our provided growth. production We year. last would activities on range from ramping recognizing $X.XX range, fluid. to payables on and year.Â Let be a within We capital XXXX outlook, QX compared with a online quarters. the we couple the to a to end expenditures Cash quarter in working prior over first of our million activities

a of which in to We are XX% to XX% $XXX EBITDA million, million adjusted range $XX expecting growth. represents

of cash Free From and million to on our QX statement in expenditures provided million to in consistent estimates to balance cash would flow expect in million XXXX. roughly leverage a and the assuming in year of flow the revenue we and $X a capital standpoint, that outlined, a in back with $X mid-Xs. both material with our QX we the some $XX low flow outlook on expect be QX out the that June range flow XX-XX color the related expansion growth our XXXX year-end first of additional initiatives. lot EBITDA capital growth each ongoing We ramp-up half of QX. split dynamics expect half in and we $XX startup the with thought benefiting is expected business the investments. and call to no would sheet to we cash we million of and $X of to are in look expect adjusted roughly what Each $XX million million, on incur laid to revenue.Â Finally, pacing Day with the the the Reflecting revenue approximately projects to being QX QX a million these second Joe our costs provide would at of Investor would $XX million of $X we like with new from

investments. no identified As and investment cash a change in assess investment XXXX could opportunities reminder, leverage the assume That flow Texas, as newly for outlook we example. in further growth

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

Operator

line with from BMO. is Instructions]Â Your [Operator Strelzik first the question of Andrew

Andrew Strelzik

broth? business your start how I'm figure guess long last also and mismatch XQ, or maybe Like that exit perspective? the from maybe what was I'd whether out the was there ingredient trying of to is transition on how much EBITDA XQ a that an and sounds like with the customer. impacted of like on to the broth a and ingredient there an some you're about how It sales thinking quarter? I

Joseph D. Ennen

Sure.

oat is we to half opportunity simply, to and deliver half market largest milk. base summarize, the oat we the increase will The to share our in to thing our half second And and to headwind have packaging growth to with our largest gallon up in first serve are for So free that a do both long-term it executing be customer. needed tailwind. the customer able impetus be change to we that, order

pivots. And those make so need we to

broth do broth the just So We we exit X we in didn't that completely. X of exited that sizes of category.

it's Maybe So XX we the do XX but XX-ounce more you a want a and exited ounce line shares ounce, half the are the than because gallon. there. important it we packaging with details time -- the detail

Andrew Strelzik

to That continue was top And guess your among exactly other then the what strong you customers. question, really I have growth needed. I

that said plus this, said I I and X I you you base? XX% impacting I'm a how in event asked even growing capacity the quarter. you the more thinking think might Texas, again, of -- there more managing Obviously, down ask think more? to I and think customer have coming out of again. I customer have your had is on just I'll base. customers, Is managing lot XXX but online. horizon? you're you or guess at how you having Are I reprioritize how this X you're the this you about you curious mean But

Joseph D. Ennen

Yes.

long a to business. whole includes quite a fruit was And Plant-Based there oat side the It's base, customers, of the things. fruit, snacks, $XXX sales are So tail all customers. few the ingredient on frozen a which fairly the million reference

business prioritizing simply of kind the make largest described. that like we again, any expect more to the stickiest just shifts customer, So one we in have. not have especially and And to capacity the anticipate milks, pivot our make Texas I a to needs most it's this, with online, a than concentrated we're other don't that big strategic list, core and plant-based we would coming is

Operator

Canaccord. the Bobby Burleson from of with is question next line Your

Bobby Burleson

a seen what you for half? was a meaningful Can that might more growth dollar just the mid-low to contribution revenue half. just in So overall the you facility second contribution curious, Plant-Based the that I ramps. as your us talked was maybe second in And give about of be sense

Scott Huckins

of the refrain would XXXX Scott. think business. easiest economics. Plant-Based it's we've too in And We around it business Sunflower, about the way plant a to if Bobby, would it's out you to pretty be a about we've was way million much consistently line journey from average, sharing growth think per $XXX level stripping or level said of Texas, of we the we all of not that then Obviously, but part because question, would recall, projects journey, on XX% expect, a circa core meaningful your year. other handful be executed. had Probably

Bobby Burleson

happening Okay. And seeing we're like then a also from? the Is simply other your coming it that the oat? clearly, as characterize milk you, growth in growth. out that plant-based that there gain more are Maybe share nuanced there. customers category are result, formats? maybe something is outperformance Or across is And outgrowing outgrowing within where

Scott Huckins

think as I we're we of our estimate Bobby. relates non-tracked couple X/X business non-tracked higher to channels it business would there's model, through the #X And seeing growth a appreciate, to channels. is tracked in than roughly flows things channels. significantly rates

Second, $XXX We've last we've million year. $X been very we that XXXX from public million to without. about in communicating sales circa win to business want that taken of

the piece, winning winning the which in segments. we are is base. in the share gaining supply So on, within certainly We're we report but are out third channels. hard to non-track winning And

capacity as us business. containment, they more we've so cetera, a affording added customers have is we've supplier, product of So SunOpta larger to than customer win as consistently service, use have someone opportunity their cost that demonstrated great quality, else. percentage the who and et we would And one

Operator

Lake line with Capital Markets. question is the Street Your next Ryan Meyers from of

Ryan Meyers

gotten for have about XXX kind customers seem product. kind of First and so I'm existing you as that feedback pretty like guys I excited production to the kicked me. getting how ramp the of one guys line? your have begun demand ml does for you they're mean, that off thinking they're to see what from far it curious

Joseph D. Ennen

that supportive. progress. be pleased Yes. collaborative we'll We ago. X of hosted think, with very I team the It's principal Super the been on with XXX entire customer management partnering very and weeks the

mentioned, I Monday. on we production first very saleable started As the

is So time. this over to definitely going ramp

this we're but good. so -- to far, get space. to in So a going lot we excited so learn And have

partnership it with been So going of we're to understanding the but amount fair a They've that incredibly approaching we're has been learn, incredible. and supportive. really humility

Ryan Meyers

the have Got have seen categories, inbounds fact ml customers other that can from you what XXX you and it. any And the and then are there? maybe adjacent interested guys product the some as of you've you demand new in capacity sort the and that fill ramped going

Joseph D. Ennen

didn't Yes. question. -- of second touch the on your I first is really question, part sorry, your It

So protein supply-constrained we rates growth to protein continue beverages. a see for channels very and it is shakes tracked very, strong And in category.

as that XXX So has space putting knowledge of market. into out not into gone and surprising the the us ml getting

of We have of inbound in number with large calls us. working interested received people a

the at in of marketplace and to XXX moment, So all the when volume in certainly were we feel we if a is spoken second the that. ml system, to demand that like robust is line, put there fill production for. But

Operator

Jon Your from with Instructions] Blair. next question William is [Operator Anderson

Jon Andersen

bigger to the a wanted XXX industry Is where there's put here industry Texas, a which value customer industry or others perspective, trying perspective? to location think Line guess I'm an the get you're second X milliliter. on that historically? I down part Texas particular sense in it's production geographically there proposition kind TAM a maybe hasn't or it now. with of an unique supply-constrained right into Yes, been ask I road. to to From production come a the I expansion from line does this this it's whether of partnering advantaged up, just place that for is the and

Joseph D. Ennen

that in choice strategic very a was regard. and is Texas John. Yes,

have fastest businesses ship. is product union of the milliliter and the the Midwest. brands relates pretty kind believe in growing, southern to a Texas second the being one big around to U.S. the It nearest largest other I of might of one there in Texas in are state as to the it co-manufacturers heavy the As and production, you Texas. robust XXX But all is expect,

represent And also supply in certainly so our capacity. savings Texas manufacturing and for chain having customers additional production and

double a to that product the regard. It's they several as afford not from supply in it's having as should cost have unmet ship away. it well capacity chain that So states them savings, demand some to win fulfill the

Jon Andersen

during think prepared that we that would guidance in am an I takes QX. imply kind terms, expect mentioned QX. think comparable decline on -- have and remarks right? -- was that reading some of revenue should QX I'm the would in that there I was the I Scott single-digit what dollar are upper that may And year-over-year and sales to that? there Is that of cause the puts assuming

Scott Huckins

John, it's Scott.

So you the statement heard correct.

So to is trying company a a QX like QX. expect revenue what we dollar out we're basis, total lot on to would look point

to continuing as Joe headwinds, ingredients of we diminution we'd laid pivot. from the think So and the and The I was couple that statement. puts A the broth takes. out, have make as business make

consumption QX decline last absolute have, QX summer, to out We sequential numbers. popular talking year, do in we When though, as the broth, got the from not just every know. the percentages Sunflower about year don't were will a also we've back forget of in a you you like very

you're x reminder. just the x of of last number being a to Sunflower comp rates, as think number this about growth So we compared calculating year's year's Sunflower, as

Jon Andersen

the I down kind of your to that's was So capacity if mean essentially of I going you're on, right constrained boil kind now. transition

capacity in step broth kind of Is constraints back those allocate half of in of the released we and value, and to that biggest opportunity the the change -- half a scales, that in the second fair? in how highest year get some capacity revenue the making has decisions to rate the run year. there's customers been You're then around

Joseph D. Ennen

don't And in which fair. will as of Yes, have relief bring coming John, also valve or oat a also end forget, but online we base extraction the extraction the QX, to also, oat some of at constraints. very ramps, Midlothian Modesto

Operator

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

Joseph D. Ennen

this to of good soon. and thank you, for hearing interest again attention a afternoon. thank have forward connecting Well, and all Look you, your with everyone, and And Great. evening. you again,

Operator

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

You disconnect. may now

SunOpta (STKL) 10 May 232023 Q1 Earnings call transcript