SunOpta Inc. Q4 FY2024 earnings call

• 2024 Q4 performance unfolded as anticipated, with revenue growth, adjusted EBITDA increase, and Midlothian buildout finalized. - Supply chain was improved through investments in people, training, processes, etc. - In 2025, foresee volume-fueled growth, expanding margins, and adjusted EBITDA increase. - Strategic initiatives include being a solutions provider, leveraging competitive advantages like national manufacturing footprint, and operational improvement roadmap to increase aseptic processing capacity by end of 2026. - Revised executives' incentive metrics based on adjusted EBITDA, revenue growth, and return on invested capital.

In the fourth quarter, revenue increased 9% driven by 13% volume growth. Adjusted EBITDA increased 20% with an adjusted EBITDA margin improving to 13.4%. In 2024, total volume growth was 21%. In Q4, the Midlothian startup phase was officially completed, but equipment upgrade caused over 10 days of downtime and inefficiencies. For 2025, expected revenue is in the range of $775 million to $805 million (7%-11% growth vs 2024), adjusted EBITDA is $97 million to $103 million (9%-16% growth). Balance sheet-wise, debt was $265 million at the end of Q4, down $25 million from Q3, and net leverage target of 3 times was achieved, with a new target of 2.5 times expected by end of 2025.

• 2025 revenue expected $775M - $805M (7%-11% growth). - Adjusted EBITDA $97M - $103M (9%-16% growth). - Revenue expected to grow 8% in first half and 10% in second half of 2025. - Adjusted EBITDA expected to improve sequentially, targeting $125M annual run rate adjusted EBITDA by end of 2025. - CapEx needs primarily for maintenance and productivity, free cash flow $25M - $30M in 2025, target leverage 2.5 times by end of 2025.

• Equipment upgrade at Midlothian caused over 10 days of downtime and inefficiencies. - Supply chain challenges in keeping pace with growth. - Potential competitive risks related to customer and SKU level activity.

Q: Jim Salera asked about the composition of revenue growth and new business wins in 2025.

A: Greg Gaba responded that volume growth is associated with category growth and customers outperforming categories, with a portion also from known distribution wins and innovation with existing customers.

Q: Jon Andersen inquired about gross margin and capacity.

A: Greg Gaba said gross margin 44% first half and 56% second half in dollars, driven by new roles hiring and productivity efforts, with long-term target of 20% gross profit.

Q: Andrew Strelzik asked about capital allocation priorities.

A: Greg Gaba stated paying down debt is a top priority, and Brian Kocher mentioned pivoting to an operational excellence fueled growth strategy with revised executive metrics on return on invested capital.

Q: Ryan Meyers asked about potential new business.

A: Brian Kocher said new business comes from expanding share, new product development, and TAM expansion with existing customers.

Q: Alex Fuhrman asked about trial in the category and product mix.

A: Brian Kocher responded that different commodities have different usages, with oat performing well in coffee products.

Q: John Baumgartner asked about reinvestments and CapEx.

A: Brian Kocher said complexity mix is not overly increasing, and Greg Gaba mentioned CapEx for maintenance/productivity to unlock trapped capacity.

Q: Daniel Biolsi asked about supply constraints and inflation.

A: Brian Kocher said fruit side is tighter, Greg Gaba said commodity costs have pass through pricing with no material impact on bottom line, and growth is volume driven.