Customer Concentration - In 2024, the top ten customers accounted for approximately 80% of SunOpta's revenues[17] - In 2024, the top ten customers accounted for approximately 80% of the company's revenues[17] Employee Engagement and Retention - The voluntary employee turnover rate decreased to 16.3% in 2024, down from 20.2% in 2023[27] - The voluntary turnover rate in 2024 was 16.3%, down from 20.2% in 2023[27] - The company has implemented various employee retention programs aimed at increasing engagement and reducing turnover[27] - The company employs 1,248 full-time employees in North America as of December 31, 2024[27] Health and Safety - SunOpta's Total Recordable Incident Rate (TRIR) ended the year at 2.25, indicating a focus on employee health and safety[27] - The Total Recordable Incident Rate (TRIR) ended the year at 2.25[27] - The company is subject to various safety regulations, including those from OSHA, to protect employees from accidents[35] Innovation and Development - The company operates a 24,000 square foot innovation center and pilot plant, employing 21 food scientists dedicated to product development[23] - The innovation center and pilot plant spans 24,000 square feet and supports a team of 21 food scientists and technologists[23] Sustainability and Environmental Commitment - Over 95% of SunOpta's packaging by weight is recyclable, reflecting the company's commitment to sustainability[20] - Over 95% of the company's packaging by weight is recyclable, with ongoing efforts to innovate packaging technologies[20] - The company is committed to meeting all applicable environmental compliance requirements, including air quality and waste treatment regulations[38] - The company is committed to environmental, social, and governance (ESG) principles, with oversight from the Corporate Governance Committee[28] Regulatory Compliance - The company is subject to a wide range of governmental regulations in the U.S. and Canada, impacting various aspects of its operations, including food safety and environmental compliance[29] - The company maintains compliance with USDA organic regulations and has an organic testing and verification process in place[31] - The company believes it is in material compliance with state and local food safety, labeling, and packaging regulations, including California's Proposition 65[34] - The company maintains compliance with various U.S. and Canadian regulations related to food safety, labeling, and environmental standards[29] - In 2022, the Government of Canada amended the Food and Drug Regulations, requiring manufacturers to update labels on prepackaged foods by December 31, 2025[43] - The Canadian Food Inspection Agency (CFIA) has the authority to inspect and recall products deemed a risk to public health, including fresh produce and processed foods[43] Financial Reporting and Risks - SunOpta's financial reporting is expressed in thousands of U.S. dollars, ensuring clarity in financial disclosures[11] - The company anticipates potential impacts from inflationary pressures on raw material, packaging, labor, and transportation costs[12] - The company faces risks related to supply chain disruptions and fluctuations in the cost and availability of raw materials[13] Intellectual Property Protection - The company has a policy to protect its technology, brands, and trademarks through patents and confidentiality agreements[39] - The company relies on patents, trade secrets, and trademarks to protect its technology and products, filing patent applications in the U.S. and selected foreign jurisdictions[39] - The company believes it has sufficient rights to use all proprietary technology necessary for manufacturing and marketing its products, but acknowledges risks related to patent applications and potential challenges from third parties[40] - The company utilizes confidentiality agreements and internal policies to safeguard its proprietary technology and processes, although there is a risk of outside partners gaining access[41] Waste Management - The company has agreements with local sewer districts to treat waste at specified limits, requiring regular reporting and inspections[37]

Revenue and Growth - Revenue from continuing operations increased 8.9% to $193.9 million, driven by 12.8% volume growth[6] - The company expects revenue growth of 7% to 11% and adjusted EBITDA growth of 9% to 16% for fiscal 2025[15] Financial Performance - Loss from continuing operations was $4.6 million compared to a loss of $3.0 million in the prior year period[10] - Adjusted EBITDA from continuing operations increased 20% to $26.1 million, representing 13.5% of revenues[11] - Gross profit decreased by 15.4% to $21.2 million, with a gross profit margin of 10.9%[8] - Adjusted earnings from continuing operations were $7.6 million or $0.06 per diluted share, compared to $4.5 million or $0.04 per diluted share in the prior year[11] - The company reported a net loss of $17.4 million for the year ended December 28, 2024, a significant improvement from a net loss of $178.8 million in the prior year[24] - Adjusted earnings from continuing operations for the year ended December 28, 2024, were $13,416 million, or $0.11 per share, compared to $5,847 million, or $0.05 per share, for the year ended December 30, 2023[34] Cash Flow and Assets - Cash provided by operating activities increased to $52.3 million from $3.6 million in the prior year[14] - Strong free cash flow enabled a $24.7 million sequential reduction of debt, achieving a leverage target of 3.0x[6] - Total assets as of December 28, 2024, were $668.5 million, with total debt of $265.2 million[14] - Cash and cash equivalents increased to $1.6 million as of December 28, 2024, from $306,000 as of December 30, 2023[23] - Total current liabilities increased to $169.4 million as of December 28, 2024, from $158.2 million as of December 30, 2023[23] Operational Highlights - The company has undergone significant capital expansion, including the construction of a new plant-based beverage facility in Midlothian, Texas[27] - Start-up costs for the year ended December 28, 2024, totaled $19,149 million, primarily related to production scale-up at the plant-based beverage facility in Texas[35] - Wastewater haul-off charges for the year ended December 28, 2024, amounted to $4,361 million due to volume constraints at the treatment system[39] - Product withdrawal costs for the year ended December 28, 2024, were $2,145 million, reflecting direct costs related to the withdrawal of specific batches of products[38] Expenses and Other Financial Metrics - Interest expense, net, for the year ended December 28, 2024, was $24,908 million, down from $26,909 million for the year ended December 30, 2023[34] - Depreciation and amortization for the year ended December 28, 2024, was $36,497 million, compared to $31,039 million for the year ended December 30, 2023[34] - Stock-based compensation for the year ended December 28, 2024, was $11,190 million, a decrease from $12,432 million for the year ended December 30, 2023[34] - The company recorded a gain on the sale of the smoothie bowls product line amounting to $1,800 million for the year ended December 28, 2024[34]

Core Viewpoint - The sustainability of a trend is crucial for successful short-term investing, and confirming fundamental factors is essential to maintain momentum in stocks [1][2]. Group 1: Stock Performance - SunOpta (STKL) has shown a solid price increase of 17.7% over the past 12 weeks, indicating strong investor interest [4]. - The stock has also increased by 16.7% over the last four weeks, suggesting that the upward trend is still intact [5]. - STKL is currently trading at 91.3% of its 52-week high-low range, indicating a potential breakout [5]. Group 2: Fundamental Strength - STKL holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises [6]. - The stock has an Average Broker Recommendation of 1 (Strong Buy), reflecting high optimism from the brokerage community regarding its near-term price performance [7]. Group 3: Investment Strategy - The "Recent Price Strength" screen is a useful tool for identifying stocks with strong fundamentals that can maintain their upward trends [3]. - In addition to STKL, there are several other stocks that meet the criteria of the "Recent Price Strength" screen, providing additional investment opportunities [8].

Financial Data and Key Metrics Changes - Revenue for Q3 2024 was $176 million, up 16% year-over-year, driven by a 21% increase in volume growth [28][8] - Adjusted gross margin improved to 17% from 16.4% in the prior year, reflecting higher sales and production volumes [28][9] - Adjusted EBITDA from continuing operations increased 13% to $21.5 million compared to $19.1 million last year [30] Business Line Data and Key Metrics Changes - The fruit snacks business grew by 42%, with a 40% increase in sales volume [10] - Beverages & Broths product lines saw a revenue growth of 14% [11] - Protein shakes increased by 17% over the last 52-week period [12] Market Data and Key Metrics Changes - Shelf stable plant-based milks grew at a mid-single digit rate, while the better-for-you fruit snacks category grew by 21% [12] - The broth category, typically stable, saw an 8% increase over the last 52 weeks [12] Company Strategy and Development Direction - The company is focused on driving operational improvements to fulfill customer growth and expand sustainable margins [24] - Plans to maintain a disciplined financial approach and continue deleveraging to under three times adjusted EBITDA by the end of the year [24] - The company aims to achieve a midterm target of $125 million adjusted EBITDA run rate by late fiscal 2025 or early fiscal 2026 [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to improve operational efficiencies and unlock capacity within the existing manufacturing network [91] - The company is optimistic about sustaining revenue growth through operational excellence initiatives without significant capital expenditures [66][60] - Management reaffirmed fiscal 2024 revenue guidance in the range of $710 million to $730 million, representing growth of 13% to 16% [32] Other Important Information - The company made temporary operating expense investments in the supply chain to enhance future efficiencies and capacity growth [7][16] - The company reported a decrease in debt to $290 million, with net leverage improving to 3.3 times [31] Q&A Session Summary Question: Impact of removing surcharge on plant-based add-ons - Management believes that any initiative fostering trial penetration or repeat buys is beneficial for the company [36] Question: Factors affecting Q4 guidance - Management maintained guidance for Q4, indicating confidence based on observed data and customer interactions [40][43] Question: Customer growth and underlying trends - Management noted that growth is driven by both gaining incremental business and underlying customer growth trends, with a balanced contribution from both [48] Question: Expansion of Dream brand oat milk - Management clarified that the expansion is not a strategic shift but a response to customer supply chain needs [52] Question: Reinvestment in R&D and sales support - Management expressed confidence in maintaining operating expense leverage while supporting customer growth through R&D and sales initiatives [57] Question: Balancing growth and operational efficiency - Management emphasized the importance of operational efficiencies to satisfy growth initiatives while maintaining margin expansion [68] Question: Manufacturing efficiencies and EBITDA impact - Management indicated that the costs associated with manufacturing inefficiencies are expected to wind down by the end of Q4 [87]

Financial Performance - SunOpta reported quarterly earnings of $0.02 per share, matching the Zacks Consensus Estimate, compared to break-even earnings per share a year ago [1] - The company posted revenues of $176.22 million for the quarter ended September 2024, exceeding the Zacks Consensus Estimate by 2.27% and up from $152.54 million year-over-year [2] - SunOpta has surpassed consensus EPS estimates two times and revenue estimates four times over the last four quarters [1][2] Stock Performance - SunOpta shares have increased approximately 23.4% since the beginning of the year, outperforming the S&P 500's gain of 19.8% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.05 on revenues of $193.9 million, and for the current fiscal year, it is $0.14 on revenues of $720 million [7] - The outlook for the Food - Miscellaneous industry, where SunOpta operates, is currently in the bottom 45% of over 250 Zacks industries, which may impact stock performance [8]

Revenue and Profitability - Revenue from continuing operations increased 15.5% to $176.2 million compared to $152.5 million in the prior year period, driven by 20.6% volume growth [2] - Adjusted EBITDA from continuing operations increased 12.6% to $21.5 million compared to $19.1 million in the prior year period [10] - Gross profit increased 16.4% to $23.6 million, with a gross profit margin of 13.4% compared to 13.3% in the prior year [7] - Adjusted earnings from continuing operations were $2.5 million or $0.02 per diluted share, compared to $0.5 million or $0.00 per diluted share in the prior year [10] - Adjusted gross margin for the third quarter of 2024 was 17.0%, compared to 16.4% in the third quarter of 2023, indicating an improvement of 0.6 percentage points [24] - Adjusted earnings from continuing operations for the first three quarters of 2024 were $7,272 million, representing an increase from $3,390 million in 2023 [35] Loss and Improvement - Loss from continuing operations was $5.5 million, an improvement from a loss of $5.7 million in the prior year period [3] - The company reported a net loss of $7,756 thousand for the three quarters ended September 28, 2024, a significant improvement from a net loss of $163,284 thousand for the same period in 2023 [21] - For the quarter ended September 28, 2024, the loss from continuing operations was $5,498 million, an improvement from a loss of $5,680 million in the same quarter of 2023 [31] - For the first three quarters of 2024, the loss from continuing operations attributable to common shareholders was $5,843 million, compared to $21,710 million for the same period in 2023 [35] Cash Flow and Operating Activities - Cash provided from operating activities of continuing operations was $19.2 million, up from cash used of $8.4 million in the same period last year [11] - Cash provided by operating activities for the three quarters ended September 28, 2024, was $16,911 thousand, compared to $10,413 thousand for the same period in 2023, marking a year-over-year increase of approximately 62.5% [21] - Cash, cash equivalents, and restricted cash at the end of the period increased to $10,636 thousand, up from $3,544 thousand at the end of September 30, 2023, indicating a year-over-year increase of approximately 200% [21] Assets and Liabilities - Total assets as of September 28, 2024, were $699.3 million, with total debt of $289.9 million [11] - Total assets increased to $699,326 thousand as of September 28, 2024, up from $669,424 thousand on December 30, 2023, representing a growth of approximately 4.3% [20] - Current assets rose to $192,922 thousand, compared to $184,245 thousand at the end of 2023, reflecting an increase of about 4.6% [20] - Total liabilities increased to $523,164 thousand as of September 28, 2024, from $493,890 thousand at the end of 2023, representing an increase of about 5.9% [20] Business Operations and Initiatives - The exit from the smoothie bowls category resulted in a 2.3% reduction in revenue [6] - The company continues to have a substantial pipeline of new business opportunities and is focused on driving increasing returns on invested capital [5] - The company incurred start-up costs of $4.1 million in the third quarter of 2024, down from $4.7 million in the same quarter of 2023, indicating a reduction in costs associated with production ramp-up [25] - The company has initiated operational productivity initiatives, incurring $0.8 million in professional fees related to these efforts in the third quarter of 2024 [32] Other Financial Metrics - Interest expense, net for the first three quarters of 2024 was $19,222 million, slightly down from $19,391 million in the same period of 2023 [36] - The company incurred start-up costs of $7,655 million in the first three quarters of 2024, a decrease from $17,855 million in the same period of 2023 [36] - The unrealized foreign exchange loss on restricted cash for the first three quarters of 2024 was $1,363 million, with no such loss reported in the same period of 2023 [36] - The company reported a gain on the sale of the smoothie bowls product line of $1,800 million in the first three quarters of 2024 [36] - Depreciation and amortization expenses for the first three quarters of 2024 totaled $27,005 million, compared to $22,873 million in 2023 [36]

Core Viewpoint - SunOpta (STKL) shares have increased by 16.6% recently, closing at $6.10, with analysts suggesting a potential upside to a mean price target of $9.20, indicating a 50.8% increase from the current price [1] Price Targets - The average price target consists of five estimates ranging from $9 to $10, with a standard deviation of $0.45, suggesting a relatively tight clustering of estimates [2] - The lowest estimate indicates a 47.5% increase, while the highest suggests a 63.9% upside [2] - A low standard deviation indicates strong agreement among analysts regarding the stock's price movement [7] Analyst Sentiment - Analysts show strong agreement in revising earnings estimates higher, which correlates with potential stock price increases [9] - The Zacks Consensus Estimate for the current year has risen by 3.9% over the past month, with no negative revisions [10] - STKL holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [11] Caution on Price Targets - Solely relying on price targets for investment decisions may not be prudent, as they can often mislead investors [5][8] - Analysts may set overly optimistic price targets due to business incentives, which can inflate expectations [6]

Financial Data and Key Metrics Changes - Revenue for Q2 2024 was $171 million, representing a 21% increase year-over-year, driven by strong volume growth [19] - Adjusted EBITDA from continuing operations increased by 12% to $20.6 million compared to $18.4 million in the prior year [20] - Gross profit rose by $3.2 million or 17% to $21.8 million, with reported gross margin at 12.8% and adjusted gross margin at 16.2% [19] Business Line Data and Key Metrics Changes - The fruit snacks business grew over 24%, marking 16 consecutive quarters of at least double-digit growth [6] - The foodservice segment also saw double-digit revenue growth, with all major product categories contributing positively [6][19] - The top five customers experienced an average revenue growth of 23% year-over-year [6] Market Data and Key Metrics Changes - The U.S. shelf-stable plant-based milks market is expected to grow in the mid-single digits across all channels [8] - The protein shakes category is one of the fastest-growing in CPG, with track channel volume up approximately 18% over the past 13 weeks [9] - The better-for-you segment within fruit snacks is growing over 30% year-over-year, with customers commanding over 75% market share [9] Company Strategy and Development Direction - The company aims to grow volume through expanding customer relationships and acquiring new customers while focusing on operational improvements to increase output and sustainable margins [14][15] - Investments are being made in supply chain initiatives to enhance efficiency and support future growth, with expectations for sustainable margin expansion starting in Q4 2024 [15][16] - The company is committed to maintaining a disciplined financial approach, targeting a net leverage of under 3 times EBITDA by the end of the year [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand generation engine and the potential for further growth, raising the 2024 revenue outlook for the second time this year [14][21] - The company is optimistic about its long-term revenue and profit growth outlook, supported by strong volume growth and operational resilience [17] - Management highlighted that all categories served are experiencing growth, indicating a positive outlook despite broader consumer softness in some areas [48] Other Important Information - The company has increased unit output in aseptic facilities by over 24% and in fruit snacks facilities by more than 33% compared to the prior year [10] - The oat extraction expansion in Modesto has come online, contributing to increased volume and future capacity sales [11] - The company is focused on identifying operational efficiencies and making short-term investments to support long-term growth [12][13] Q&A Session Summary Question: What drove the strong sales performance this quarter? - Management indicated that growth was driven by a combination of new product launches, TAM expansion initiatives, and overall category growth, with supported brands outperforming their categories [23][24] Question: How is the company managing challenges in the foodservice channel? - The company benefits from a diverse customer base across various channels, with top customers showing double-digit growth, indicating resilience in the foodservice segment [25][26] Question: What are the reasons for gross margin degradation despite strong volume growth? - Management explained that while volume growth tested the supply chain, they are investing in operational efficiencies to improve margins moving forward [27][28] Question: How does the company view the sustainability of customer share gains? - Management noted that tracked channels represent less than a fifth of the market, and they are seeing positive trends in untracked channels, which are more significant for their business [34][35] Question: What is the outlook for supply chain investments and margin targets? - Management clarified that investments are aimed at enhancing efficiency and driving towards a long-term gross margin target of over 20% [39][40] Question: How is the company addressing potential new business opportunities? - Management emphasized that they are focused on visible growth opportunities while continuing to explore various initiatives for expansion [50][51] Question: What is the tone of customer conversations in the current environment? - Management reported that all categories served are growing, and they are actively helping customers innovate and grow, indicating a positive outlook despite consumer pressures [48][49]

Company Performance - SunOpta reported quarterly earnings of $0.02 per share, exceeding the Zacks Consensus Estimate of $0.01 per share, compared to a loss of $0.03 per share a year ago, representing an earnings surprise of 100% [1] - The company posted revenues of $171 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 11.76%, although this is a decrease from year-ago revenues of $207.81 million [2] - Over the last four quarters, SunOpta has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times as well [2] Stock Outlook - SunOpta shares have underperformed the market, losing about 7% since the beginning of the year, while the S&P 500 has gained 9.9% [3] - The current consensus EPS estimate for the coming quarter is $0.02 on revenues of $163.3 million, and for the current fiscal year, it is $0.13 on revenues of $685 million [7] - The estimate revisions trend for SunOpta is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market in the near future [6] Industry Context - The Zacks Industry Rank for Food - Miscellaneous is currently in the bottom 42% of over 250 Zacks industries, suggesting that the industry outlook can materially impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

SunOpta Inc. (NASDAQ:STKL) Q1 2024 Earnings Conference Call May 8, 2024 5:30 PM ET Company Participants Reed Anderson - IR Brian Kocher - CEO Greg Gaba - CFO Conference Call Participants Jon Andersen - William Blair Jim Salera - Stephens John Baumgartner - Mizuho Securities Brian Holland - D.A. Davidson Ryan Myers - Lake Street Capital Markets Andrew Strelzik - BMO Daniel Biolsi - Hedgeye Operator Greetings and welcome to the SunOpta's First Quarter 2024 Earnings Conference Call. At this time, all participa ...