SunOpta (STKL) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Second Quarter 2025 Financial Highlights SunOpta reported strong second-quarter fiscal 2025 results, with significant increases in revenue, earnings, and Adjusted EBITDA, driven by robust volume growth across its diverse portfolio Key Financial Metrics (Continuing Operations) | Metric (Continuing Operations) | Q2 2025 | Q2 2024 | Change (%) | | :----------------------------- | :------ | :------ | :--------- | | Revenue | $191.5M | $169.5M | 13% | | Earnings | $4.4M | ($4.4M) | 198% | | Adjusted EBITDA | $22.7M | $20.0M | 14% | | Adjusted EPS | $0.04 | $0.02 | 100% | - Revenue growth was primarily driven by a 14.4% increase in volume, partially offset by a 1.4% price reduction due to pass-through pricing for raw material cost savings[7] CEO Commentary CEO Brian Kocher highlighted outstanding Q2 results, attributing them to strong competitive positioning, execution, and robust double-digit growth in revenue and Adjusted EBITDA, also noting significant progress in operational initiatives and a strong new business pipeline - Both revenue and Adjusted EBITDA continued double-digit growth, driven by robust volume gains across the portfolio[6] - Significant progress was made in operational initiatives to improve margins, including unlocking capacity and improving yields, with further traction expected in late 2025[6] - A new fruit snack manufacturing line is announced for the Omak, Washington facility, anticipated to come online in late 2026 to meet demand for 2027 and beyond, driven by powerful tailwinds in the better-for-you fruit snack category[6] Financial Performance - Second Quarter 2025 Revenue Analysis Second quarter 2025 revenues increased by 12.9% to $191.5 million, primarily due to a 14.4% volume growth in plant-based beverages, broth, and fruit snacks, alongside new product launches, partially offset by a 1.4% price reduction from raw material cost savings passed through to customers Revenue Performance Overview | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change | | :----- | :----------------- | :----------------- | :--------- | | Revenues | $191.5 | $169.5 | 12.9% |\n| Volume Growth | 14.4% | N/A | N/A |\n| Price Reduction | 1.4% | N/A | N/A | - Volume growth was observed across plant-based beverages, broth, and fruit snacks, supported by new product launches[8] Profitability Analysis Gross profit increased significantly by 34.0% to $28.4 million, with gross margin expanding by 230 basis points to 14.8%, and operating income also saw a substantial increase, though adjusted gross margin decreased by 80 basis points due to tariff timing lags, labor/infrastructure investments, and increased depreciation, partially offset by higher sales and production volumes Profitability Metrics (Q2) | Metric (Q2) | 2025 (Millions) | 2024 (Millions) | YoY Change (%) | | :------------ | :-------------- | :-------------- | :------------- | | Gross Profit | $28.4 | $21.2 | 34.0% | | Gross Margin | 14.8% | 12.5% | +230 bps | | Operating Income | $10.5 | $2.0 | +$8.5M | | Earnings from Continuing Operations | $4.4 | ($4.4) | 198% | | Adjusted EBITDA from Continuing Operations | $22.7 | $20.0 | 13.9% | - Adjusted gross margin decreased by 80 basis points to 15.2% (from 16.0% in Q2 2024) due to timing lag on tariff pass-through, investments in labor and infrastructure, and incremental depreciation, partially offset by improved plant utilization from higher volumes[9] Financial Position & Cash Flow Balance Sheet Overview As of June 28, 2025, SunOpta's total assets increased to $704.9 million from $668.5 million at year-end fiscal 2024, while total debt slightly increased to $273.4 million from $265.2 million, improving its net leverage to 2.9x from 3.0x with a target of 2.5x by year-end Balance Sheet Summary | Metric | June 28, 2025 (Millions) | Dec 28, 2024 (Millions) | | :----- | :----------------------- | :---------------------- | | Total Assets | $704.9 | $668.5 | | Total Debt | $273.4 | $265.2 | | Net Leverage | 2.9x | 3.0x | - The company continues to expect to achieve its 2.5x net leverage target by the end of fiscal 2025[13] Cash Flow Activities Cash provided by operating activities from continuing operations significantly increased to $17.8 million for the first two quarters of fiscal 2025, up from $2.0 million in the prior year, driven by improved working capital efficiency and increased operating income, while investing activities consumed $18.6 million, reflecting higher capital expenditures Cash Flow Summary (First Two Quarters) | Metric (First Two Quarters) | FY2025 (Millions) | FY2024 (Millions) | | :-------------------------- | :---------------- | :---------------- | | Cash from Operating Activities (Continuing Operations) | $17.8 | $2.0 | | Cash Used in Investing Activities (Continuing Operations) | $18.6 | $13.9 | - The increase in operating cash flow mainly reflected improved working capital efficiency and increased operating income due to revenue growth[13] Capital Allocation During the second quarter, SunOpta repurchased 163,227 common shares for $1.0 million at an average price of $6.04 per share, with $24.0 million remaining authorized under the Share Repurchase Program - Repurchased 163,227 common shares for $1.0 million at an average price of $6.04 per share in Q2[14] - $24.0 million remained available under the Share Repurchase Program as of June 28, 2025[14] Operational Factors & Outlook Tariff Impact Tariffs negatively impacted gross profit by $1.6 million and reduced gross margin by 90 basis points in Q2 due to a timing lag in passing through costs, though the company successfully implemented new pricing arrangements with customers by mid-July to mitigate known tariff exposure and expects to recover substantially all additional tariff costs, despite anticipating a similar timing lag impact in Q3 for recently announced changes - Tariffs negatively impacted Q2 gross profit by $1.6 million, reducing gross margin by 90 basis points due to timing lag[15] - New pricing arrangements with all customers were successfully implemented by mid-July to mitigate known tariff exposure[15] - A similar timing lag impact is expected in Q3 for recently announced tariff changes, but the company anticipates recovering substantially all additional costs[15] 2025 Financial Outlook SunOpta is raising its fiscal 2025 revenue outlook to $805 - $815 million (11% - 13% growth) from the prior $788 - $805 million (9% - 11% growth), reflecting strong Q2 performance and the expected impact of pass-through tariff pricing, while the Adjusted EBITDA outlook remains reaffirmed at $99 - $103 million (12% - 16% growth) Fiscal 2025 Outlook Comparison | Metric | Prior Outlook | Revised Outlook | | :----- | :------------ | :-------------- | | Revenue | $788 - $805M | $805 - $815M | | Adj. EBITDA | $99 - $103M | $99 - $103M | | Revenue Growth | 9% - 11% | 11% - 13% | | Adj. EBITDA Growth | 12% - 16% | 12% - 16% | - The revised revenue outlook includes an approximate $8 million increase in revenue and $10 million in cost of goods sold in the second half of 2025 due to expected tariff expenses and related pass-through pricing[16] Company Information & Disclosures Conference Call Information SunOpta hosted a conference call on August 6, 2025, at 5:30 P.M. Eastern time to discuss Q2 financial results, with details for accessing the live webcast and replay, along with dial-in information and conference ID, provided - Conference call held on August 6, 2025, at 5:30 P.M. ET to discuss Q2 results[17] - Webcast and replay available on SunOpta's website under 'Investor Relations'[17][18] About SunOpta SunOpta Inc. (Nasdaq: STKL) (TSX: SOY) is a company with over 50 years of expertise, providing customized supply chain solutions and innovation for top brands, retailers, and foodservice providers, specializing in beverages, broths, and better-for-you snacks, distributing high-quality, sustainability-forward solutions across North America through various channels - SunOpta delivers customized supply chain solutions and innovation for beverages, broths, and better-for-you snacks[20] - Products are distributed through retail, club, foodservice, and e-commerce channels across North America[20] Forward-Looking Statements & Non-GAAP Disclaimer The press release contains forward-looking statements regarding future financial performance, including expectations for gross margin improvement, debt reduction, share repurchases, tariff recovery, and fiscal 2025 outlook, which are subject to various risks and uncertainties, and the company uses non-GAAP financial measures like Adjusted EBITDA, which exclude certain items, and cannot reliably reconcile forward-looking non-GAAP measures to GAAP due to the unpredictability of excluded components - Forward-looking statements include intentions for disciplined financial approach, sustainable gross margin improvement, free cash flow generation, balance sheet de-leveraging, and achieving net leverage targets[21] - The company cannot present a quantitative reconciliation of forward-looking non-GAAP financial measures to GAAP due to the inability to reliably predict all necessary components of such GAAP measures[19] - Historically excluded items from non-GAAP measures include acquisition/divestiture expenses, restructuring charges, asset impairment, legal settlements, and their tax effects[22] Contacts Contact information for Investor Relations (Reed Anderson, ICR) and Media Relations (Claudine Galloway, SunOpta) was provided for inquiries - Investor Relations contact: Reed Anderson, ICR, 646-277-1260, reed.anderson@icrinc.com[23] - Media Relations contact: Claudine Galloway, SunOpta, 952-295-9579, press.inquiries@sunopta.com[23] Consolidated Financial Statements Consolidated Statements of Operations The Consolidated Statements of Operations show a significant improvement in profitability for Q2 2025 and the first two quarters of 2025 compared to the prior year, with a shift from net loss to net earnings, as revenue increased while cost of goods sold also rose, but at a slower pace, leading to higher gross profit and operating income Consolidated Statements of Operations (Thousands USD) | Metric (Thousands USD) | Q2 2025 | Q2 2024 | 2 Quarters 2025 | 2 Quarters 2024 | | :--------------------- | :------ | :------ | :-------------- | :-------------- | | Revenues | 191,489 | 169,541 | 393,117 | 353,963 | | Cost of goods sold | 163,082 | 148,349 | 334,391 | 301,719 | | Gross profit | 28,407 | 21,192 | 58,726 | 52,244 | | Operating income | 10,533 | 1,956 | 21,020 | 12,079 | | Net earnings (loss) | 4,351 | (5,334) | 9,162 | (2,455) | | Diluted EPS | 0.03 | (0.04) | 0.07 | (0.02) | Consolidated Balance Sheets The Consolidated Balance Sheets indicate an increase in total assets to $704.9 million as of June 28, 2025, from $668.5 million at December 28, 2024, with current assets, property, plant and equipment, and intangible assets all seeing increases, while total liabilities also rose, but shareholders' equity increased, reflecting improved financial health Consolidated Balance Sheets (Thousands USD) | Metric (Thousands USD) | June 28, 2025 | December 28, 2024 | | :--------------------- | :------------ | :---------------- | | Total current assets | 184,083 | 159,458 | | Property, plant and equipment, net | 345,968 | 343,618 | | Total assets | 704,940 | 668,527 | | Total current liabilities | 190,812 | 169,434 | | Long-term debt | 233,080 | 235,798 | | Total liabilities | 529,901 | 504,885 | | Total shareholders' equity | 159,816 | 148,594 | Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows show a significant increase in net cash provided by operating activities from continuing operations for the first two quarters of 2025 to $17.8 million, compared to $2.0 million in the prior year, while net cash used in investing activities increased to $18.6 million, and net cash provided by financing activities decreased to $1.9 million Consolidated Statements of Cash Flows (Thousands USD) | Metric (Thousands USD) | 2 Quarters 2025 | 2 Quarters 2024 | | :--------------------- | :-------------- | :-------------- | | Net cash provided by operating activities of continuing operations | 17,778 | 2,013 | | Net cash used in investing activities of continuing operations | (18,573) | (13,923) | | Net cash provided by financing activities of continuing operations | 1,947 | 10,583 | | Increase in cash, cash equivalents and restricted cash | 1,152 | 2,663 | Non-GAAP Financial Measures Reconciliation Adjusted Gross Margin Reconciliation The company reconciles reported gross margin to adjusted gross margin by excluding unusual items like wastewater haul-off charges, start-up costs, and product withdrawal costs, with Q2 2025 adjusted gross margin at 15.2%, compared to 16.0% in Q2 2024, reflecting a decrease due to factors like tariff timing lags and investments Adjusted Gross Margin Reconciliation | Metric | Q2 2025 | Q2 2024 | 2 Quarters 2025 | 2 Quarters 2024 | | :----- | :------ | :------ | :-------------- | :-------------- | | Reported Gross Margin | 14.8% | 12.5% | 14.9% | 14.8% | | Adjusted Gross Margin | 15.2% | 16.0% | 15.3% | 16.5% | - Adjustments primarily include wastewater haul-off charges, start-up costs, and product withdrawal costs[28][29] Adjusted Earnings Reconciliation Adjusted earnings from continuing operations for Q2 2025 were $4.4 million ($0.04 per diluted share), up from $2.2 million ($0.02 per diluted share) in Q2 2024, with adjustments including wastewater haul-off charges, start-up costs, product withdrawal costs, unrealized foreign exchange, and other items, providing a clearer view of core operational performance Adjusted Earnings Reconciliation (Thousands USD) | Metric (Thousands USD) | Q2 2025 | Q2 2024 | 2 Quarters 2025 | 2 Quarters 2024 | | :--------------------- | :------ | :------ | :-------------- | :-------------- | | Earnings (loss) from continuing operations | 4,351 | (4,437) | 9,162 | (641) | | Adjusted earnings from continuing operations | 4,375 | 2,185 | 9,683 | 4,075 | | Adjusted EPS (diluted) | 0.04 | 0.02 | 0.08 | 0.03 | - Key adjustments include wastewater haul-off charges, start-up costs, product withdrawal costs, unrealized foreign exchange loss/gain, and other non-recurring items[31] Adjusted EBITDA Reconciliation Adjusted EBITDA from continuing operations increased to $22.7 million in Q2 2025 from $20.0 million in Q2 2024, driven by strong volume growth, with the reconciliation adding back non-operating and non-cash expenses (interest, taxes, depreciation, amortization, stock-based compensation) and adjusting for unusual items to provide a measure of operating profitability Adjusted EBITDA Reconciliation (Thousands USD) | Metric (Thousands USD) | Q2 2025 | Q2 2024 | 2 Quarters 2025 | 2 Quarters 2024 | | :--------------------- | :------ | :------ | :-------------- | :-------------- | | Earnings (loss) from continuing operations | 4,351 | (4,437) | 9,162 | (641) | | Adjusted EBITDA from continuing operations | 22,744 | 19,962 | 45,137 | 41,833 | - Adjustments include interest expense, income tax expense, depreciation and amortization, stock-based compensation, wastewater haul-off charges, start-up costs, product withdrawal costs, and unrealized foreign exchange[33][34] Net Leverage Reconciliation Net leverage, calculated as net debt divided by trailing four quarters adjusted EBITDA, improved to 2.9x as of June 28, 2025, from 3.0x at December 28, 2024, with net debt at $271.2 million and trailing four quarters adjusted EBITDA at $92.0 million Net Leverage Reconciliation (Thousands USD) | Metric (Thousands USD) | June 28, 2025 | December 28, 2024 | | :--------------------- | :------------ | :---------------- | | Total debt | 273,371 | 265,191 | | Cash and cash equivalents | (2,161) | (1,552) | | Net debt | 271,210 | 263,639 | | Trailing Four Quarters Adjusted EBITDA | 92,010 | 88,706 | | Net leverage | 2.9x | 3.0x | - Adjustments to trailing four quarters Adjusted EBITDA include wastewater haul-off charges, start-up costs, product withdrawal costs, unrealized foreign exchange, and other items[37][38]