SunOpta Inc. Q1 FY2025 earnings call

• Category and customer strength: All categories are growing, customers and channels outperform the market. Top five customers grew, foodservice and club channel saw growth.
• Solution-centric proposition: Diversified product and channel portfolio mitigates impact of consumer preference changes. Pipeline stands at almost 25% of annual sales volume, 2 times prior pipeline level.
• Asset optimization strategy: Making progress on capacity expansion. Aseptic network increased Q1 volume production, fruit snacks network produced more units with same equipment. Focus on fixed cost leverage, manufacturing yield improvement, labor productivity, and resolving Midlothian wastewater issue.

Revenue for SunOpta's first quarter 2025 was $202 million, up 9% driven by volume growth of 12%. Gross profit decreased to $30.3 million compared to $31.1 million in the prior year. Adjusted gross margin was 15.3%. The shelf-stable plant-based beverage category is expected to grow high-single-digits in 2025. Better-for-you fruit snacks and ready-to-drink protein shakes are growing over 15%, while broth and tea grow mid-single-digits. Each of the top five customers delivered year-over-year growth in Q1 2025, with foodservice customers growing mid-single digits and club channel customers growing double digits.

• Raised 2025 revenue guidance to $788 million to $805 million (9%-11% growth) and adjusted EBITDA to $99 million to $103 million (12%-16% growth).
• Long-term targets: Annual revenue growth 8%-10%, adjusted EBITDA growth 13%-17%, ROIC 16%-18% by end of 2026.
• Tariff response: Intend to pass through essentially all incremental tariff costs to customers, expecting no material impact on gross profit or adjusted EBITDA in guidance.

• Temporary wastewater management issue at Midlothian, Texas facility creating a bottleneck limiting output volume. Incur approximately $500,000 per quarter in excess wastewater haul-off fees until mid-2026. Once resolved, could positively impact gross margins by ~50 basis points.

Q: About accelerating category growth and pipeline amid choppy consumer environment.

A: Categories like plant-based beverages are lifestyle choices, products are often non-discretionary or small luxuries. Demand generation engine is strong, pipeline is accelerating due to underserved market in capacity, supply, innovation.

Q: On tariff side, how does passing through work?

A: View tariff increases like other raw material increases, transparent with customers, expect to substantially pass on all incremental costs.

Q: Wastewater treatment in Midlothian, can it be pulled forward?

A: Equipment is designed, capital outlay included in maintenance CapEx, leaning on engineers but solution implemented mid-2026.

Q: Pipeline composition and conversion timeline?

A: Pipeline is 25% of 2025 guided revenue, ~twice prior level. Bigger pipeline translates to more volume growth, but no specific conversion target provided.

Q: Upside in 1Q revenue, source?

A: Outperformance more on capacity creation side than demand, ahead on capacity creation.

Q: Raw materials and yield improvement?

A: Yield improvement involves recipe compliance, raw product substitution, processing time, tested in R&D, pilot, then network implementation.

Q: Raw material costs outlook?

A: Excluding tariff, no major increase/decrease expected, ~2% giveback on price in Q1, similar range expected for rest of year.

Q: Share repurchase authorization?

A: Board approved $25M share repurchase program, size/timing dependent on multiple factors including leverage target progress and market conditions.