Q1 2025 SunOpta Inc Earnings Call

Reed Anderson: Greetings and welcome to Sunopta's first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.

Greetings and welcome to Opera's first quarter 2025 earnings conference call. At this time, all participants are in a listen only mode.

Reed Anderson: A question and answer session will follow the prepared remarks. As a reminder, this conference is being recorded.

Speaker Change: Question and answer session will follow the prepared remarks as a reminder, this conference is being recorded I would like to trying to conference over to your host Reed Anderson with ICR. Thank you you may begin.

Reed Anderson: I would now like to turn the conference over to your host, Reed Anderson with ICR. Thank you. You may begin.

Reed Anderson: Good afternoon and thank you for joining us in Sunopta's first quarter fiscal 2025 earnings conference call. On the call today are Brian Kocher, Chief Executive Officer, and Greg Gaba, Chief Financial Officer. By now, everyone should have access to the earnings press release that was issued earlier this afternoon and is available on the investor relations page of Sunopta's website at www.sunopta.com. This call is being webcast and the transcription will also be available on the company's website. The investor presentation referenced during this call and webcast is also posted on the company's investor relations website.

Brian Cooker: Good afternoon, and thank you for joining us and Synaptics first quarter fiscal 2025 earnings conference call on the call today are Brian Cooker, Chief Executive Officer, and Greg Gaba Chief Financial Officer.

Speaker Change: Now everyone should have access to the earnings press release that was issued earlier. This afternoon is available on the Investor Relations page of <unk> website at Www dot sit after dotcom.

Speaker Change: Causing webcast the transcription will also be available on the company's website.

Speaker Change: Investor presentation referenced during this call and webcast is also posted on the company's Investor Relations website.

Reed Anderson: As a reminder, please note that the prepared remarks, which will follow, contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee a future performance and, therefore, undue reliance should not be placed upon them. We refer you to all risk factors contained in Sunopta's press release issued this afternoon, the company's annual report filed on Form 10-K, and other filings with the Securities and Exchange Commission for a more detailed discussion of the factors that could cause actual results to differ materially from those projections and any forward-looking statements.

Speaker Change: As a reminder, please note that the prepared remarks, which will follow contain forward looking statements and management may make additional forward looking statements in response to your questions. Please.

Speaker Change: These statements do not guarantee future performance and therefore undue reliance should not be placed upon them.

Speaker Change: For you to all risk factors contained in snap its press release issued this afternoon. The Companys annual report filed on Form 10-K, and other filings with the Securities and Exchange Commission for a more detailed discussion of the factors that could cause actual results to differ materially from those projections and any forward looking statements.

Reed Anderson: The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances, except as may be required under applicable securities laws.

Speaker Change: The company undertakes no obligation to publicly correct or update the forward looking statements made during the presentation to reflect future events or circumstances, except as may be required under applicable securities laws.

Reed Anderson: Finally, we would like to remind listeners that the company may refer to certain non-GAAP financial measures during this teleconference. A reconciliation of these non-GAAP financial measures was included with the company's press release issued earlier today.

Speaker Change: Finally, I'd like to remind listeners that the company may refer to certain non-GAAP financial measures. During this teleconference.

Speaker Change: A reconciliation of these non-GAAP financial measures was included with the company's press release issued earlier today.

Reed Anderson: Also, please note, in the prepared remarks that follow, unless otherwise stated, the company will be referring to the continuing operations portion of the business, and all figures are in US dollars, occasionally rounded to the nearest million.

Speaker Change: Also please note in the prepared remarks that follow unless otherwise stated the company will be referring to the continuing operations portion of the business and all figures are in U S dollars occasionally rounded to the nearest million now I'd like to turn the call over to Brian to begin Brian.

Brian Kocher: Now I'd like to turn the call over to Brian to begin. Good afternoon and thank you for joining us today. As noted on slide four, Greg and I will cover the following topics. quickly cover our first quarter 2025. visibility into our revenue growth, resiliency and staying power. provide a deeper look at our four-point plan to achieve an improved gross market. overview our plan for managing the fluid tariff situation and reiterate our capital allocation priorities and provide you the why's behind it. At the end of the call, you will have a clearer understanding of our confidence in achieving our long-term growth, cash flow, and return on invested capital goal.

Brian Cooker: Good afternoon, and thank you for joining us today.

Speaker Change: As noted on slide four Greg and I will cover the following topics today.

Speaker Change: Quickly cover our first quarter 2025 performance.

Speaker Change: Visibility into our revenue growth resiliency and staying power.

Speaker Change: Provide a deeper look at our four point plan to achieve an improved gross margin.

Speaker Change: I'll review, our plan for managing the fluid tariff situation.

Speaker Change: And reiterate our capital allocation priorities and provide us the whys behind them.

Speaker Change: At the end of the call you will have a clearer understanding of our confidence in achieving our long term growth cash flow and return on invested capital goals.

Brian Kocher: After our scripted comments, we'll take your questions. As you can see on slide six, Q1 performance exceeded our expectations with revenue increasing 9% driven by volume growth of 12% reflecting continued broad based gains across segments, products and customers. Reported gross margin improved sequentially, and we anticipate this sequential improvement continuing throughout the balance of the fiscal year. Adjusted EBITDA of $22.4 million exceeded our expectations. We are raising the bottom end of our fiscal year 25 guidance to reflect the outperformance in Q1, and Greg will cover more financial details in his section. The takeaway from Q1 is we are ahead of our plan and marching along the path that we outlined for 2025.

Speaker Change: After our scripted comments, we'll take your questions.

Speaker Change: As you can see on slide six Q1 performance exceeded our expectations with revenue increasing 9%.

Speaker Change: Driven by volume growth of 12%, reflecting continued broad based gains across segments products and customers.

Speaker Change: The reported gross margin improved sequentially and we anticipate this sequential improvement continuing throughout the balance of the fiscal year.

Speaker Change: Adjusted EBITDA of $22 4 million exceeded our expectations.

Speaker Change: We are raising the bottom end of our fiscal year 'twenty five guidance to reflect the outperformance in Q1, and Greg will cover more financial details in his section.

Speaker Change: Takeaway from Q1 as we are ahead of our plan and marching along the path that we outlined for 2025.

Brian Kocher: Looking ahead, I am excited to share additional details on some of the key factors that underpin our conviction in Sunopta's outlook and value creation potential. which are the continued strength of our categories and customers. the resilience of our solution-centric proposition. and the progress we are making on our asset optimization strategy. Starting with our category in customer strength, all of our categories are growing. Based on internal estimates, we anticipate the shelf stable plant based beverage category will grow high single digits in 2025, an increase from the mid single digit growth in recent quarters. Better-for-you fruit snacks and ready-to-drink protein shakes are growing at a rate exceeding 15 percent, while broth and tea continue to grow at mid-single-ditch.

Speaker Change: Looking ahead I am excited to share additional details on some of the key factors that underpin our conviction in <unk> outlook and value creation potential.

Speaker Change: Which are.

Speaker Change: The continued strength of our categories and customers.

Speaker Change: The resilience of our solution centric proposition.

Speaker Change: And the progress, we're making on our asset optimization strategy.

Speaker Change: Starting with our category and customer strength all of our categories are growing.

Speaker Change: Based on internal estimates, we anticipate the shelf stable plant based beverage category will grow high single digits in 2025.

Speaker Change: The increase from the mid single digit growth in recent quarters.

Speaker Change: Better for you fruit snacks and ready to drink protein shakes are growing at a rate exceeding 15%, while broth and <unk> continue to grow at mid single digits.

Brian Kocher: Furthermore, our customers and channels continue to outperform the market. Each of our top five customers delivered year over year growth in Q1 25. Our food service customers grew in the mid-single digits and our club channel customers grew double digits. Complementing our category and customer growth, we have a sustaining value proposition. In light of heightened market uncertainty, I think it's important to highlight how resilient our business is given our diversification across categories, segments and channels, a core strength of our model and a key point of differentiation. In terms of categories, in addition to being a leader in plant-based beverages, we are the manufacturing leader in better-for-you fruit-based snacks.

Speaker Change: Furthermore, our customers and channels continue to outperform the market.

Speaker Change: Each of our top five customers delivered year over year growth in Q1 25.

Speaker Change: Our foodservice customers grew in the mid single digits and our club channel customers grew double digits.

Speaker Change: Complementing our category and customer growth, we have a sustaining value proposition.

Speaker Change: In light of heightened market uncertainty I think it's important to highlight how resilient our business is given our diversification across categories segments and channels, a core strength of our model and a key point of differentiation.

Speaker Change: In terms of categories. In addition to being a leader in plant based beverages. We are the manufacturing leader in better for you fruit based snacks.

Brian Kocher: Additionally, we have a sizable and growing presence in broth, ready-to-drink protein beverages, and tea. Within plant-based beverages, our largest category, our portfolio is diversified across oat, almond, coconut, and soy bases, serving both brands and private label customers who go to market through retail, club, e-commerce, and food service channels. Our customer and channel diversity positions us to consistently win and grow with the overall category even as consumer preferences for plant-based milk types and purchase channels evolve over time. In Fruitsnacks, we continue to see very strong demand and we have delivered double-digit revenue growth for 19 consecutive quarters.

Speaker Change: Additionally, we have a sizable and growing presence in broth and ready to drink protein beverages and tea.

Speaker Change: Within plant based beverages, our largest category.

Speaker Change: Our portfolio is diversified across.

Speaker Change: Almond coconut and soy basis, serving both brands and private label customers, who go to market through retail club E Commerce, and food service channels, our customer and channel diversity positions us to consistently win and grow with the overall category even.

Speaker Change: As consumer preferences for plant based milk types and purchase channels evolve over time.

Speaker Change: In fruit snacks, we continue to see very strong demand and we have delivered double digit revenue growth for 19 consecutive quarters.

Brian Kocher: The optionality and flexibility this diversification provides is particularly relevant in periods of transition or when consumers feel cost pressure. We can adapt quickly to changes in the market. and are well-positioned across the entire spectrum of consumer purchase options, whether it's food at home or away, from fast casual to premium in food service, or from private label to branded within retail and clubs. All of those data points give me confidence in our revenue outlook. In addition, the status of our pipeline is a reflection of the value and relevance of our solution-centric offering and showcases the future potential.

Speaker Change: The Optionality and flexibility. This diversification provides is particularly relevant in periods of transition or when consumers feel cost pressure.

Speaker Change: We can adapt quickly to changes in the marketplace and are well positioned across the entire spectrum of consumer purchase options, whether it's food at home or away from fast casual to premium in foodservice or from private label to branded within retail and club.

Speaker Change: All of those data points give me confidence in our revenue outlook.

Speaker Change: In addition, the status of our pipeline is a reflection of the value and relevance of our solution centric offering and showcases the future potential.

Brian Kocher: As of today, our new business pipeline stands at almost 25% of annual sales volume, which is two times the pipeline level we experienced over the prior 15 months and includes share and TAM expansion opportunities. For clarity, our pipeline progress is not a substitute for our revenue guidance. However, our business development efforts are accelerating and creating additional opportunities. As you can see on slide 8, our pipeline momentum, coupled with category growth tailwinds, give us a high degree of confidence in achieving our long-term revenue growth target of approximately 10 percent. While we are committed to a communication strategy that is based upon what we can see and not what we hope.

Speaker Change: As of today.

Speaker Change: Our new business pipeline stands at almost 25% of annual sales volume.

Speaker Change: Which is two times the pipeline level, we experienced over the prior 15 months and include share and Tam expansion opportunities.

Speaker Change: For clarity our pipeline progress is not a substitute for our revenue guidance. However.

Speaker Change: Our business development efforts are accelerating and creating additional opportunities.

Speaker Change: As you can see on slide eight.

Speaker Change: Our pipeline momentum coupled with category growth tailwind give us a high degree of confidence in achieving our long term revenue growth target of approximately 10%.

Speaker Change: While we are committed to a communication strategy that is based upon what we can see and not what we hope.

Brian Kocher: Based on the significant growth in our pipeline, it should be clear why I am so excited about our future. Finally, we're making good progress on our asset optimization strategy. We have demand, and we have an accelerating pipeline, but we still must make the product and make the product at an acceptable gross margin. In addition to having the right assets, we are implementing more consistent processes and practices to unlock the latent capacity in our manufacturing network and deliver product at an improved margin. The progress we have made in these areas is undeniable. On slide nine, you can see that in our aseptic network, we increased Q1 volume production by over 6% from the fourth quarter of 24, which was 6% more than in the third quarter of 24.

Speaker Change: Based on the significant growth in our pipeline.

Speaker Change: It should be clear why I am so excited about our future.

Speaker Change: Finally, we're making good progress on our asset optimization strategy.

Speaker Change: We have demand and we have an accelerating pipeline, but we still must make the product and make the product at an acceptable gross margin.

Speaker Change: In addition to having the right assets, we are implementing more consistent processes and practices to unlock the latent capacity in our manufacturing network and deliver a product and an improved margin.

Speaker Change: The progress we have made in these areas is undeniable.

Speaker Change: On slide nine you can see that in our aseptic network, we increased Q1 volume production by over 6% from the fourth quarter of <unk>, 24, which was 6% more than in the third quarter of 2004.

Brian Kocher: Our FruitSnacks network produced 7% more units in Q1-25 than in the same quarter of 24 with exactly the same equipment. We are significantly ahead of schedule on creating capacity within our network. I do want to see and expect more to show up in gross profit. As shown on slide 10, the full benefit of our capacity expansion on gross margin will materialize as we make progress on the following four major areas of operational impact. First, we see fixed cost leverage positively impacting our margin profile for the balance of the year. We are making so much progress in unlocking trap capacity that we've unlocked enough volume to achieve the midpoint of our 2025 Revenue Guide.

Speaker Change: Our fruit snacks network produced 7% more units in Q1 'twenty five than in the same quarter of 2004 with exactly the same equipment.

Speaker Change: We are significantly ahead of schedule on creating capacity within our network.

Speaker Change: I do want to see and expect more to show up in gross profit.

Speaker Change: As shown on slide 10, the full benefit of our capacity expansion on gross margin will materialize as we make progress on the following four major areas of operational emphasis.

Speaker Change: First we see fixed cost leverage positively impacting our margin profile for the balance of the year.

Speaker Change: We are making so much progress in unlocking trapped capacity that we've unlocked enough volume to achieve the midpoint of our 2025 revenue guidance.

Brian Kocher: As that additional volume sells through, we anticipate approximately 150 basis points of operating leverage will flow to the bottom line between now and our Q4 reporting Second. optimizing manufacturing yield relative to units produced. While we have significantly ramped up production volume, we are using more raw material than anticipated. As our product yield improvement initiatives progress from the R&D stage to pilot testing to network-wide implementation over the next several quarters, our yields will increase materially. Between now and Q4 2025, product yield improvements are expected to result in approximately 100 basis points of margin expansion. Third, labor productivity.

Speaker Change: As that additional volume sell through we anticipate approximately 150 basis points of operating leverage will flow to the bottom line between now and our Q4 reporting period.

Speaker Change: Second.

Speaker Change: Optimizing manufacturing yield relative to units produced.

Speaker Change: While we have significantly ramped up production volume, we are using more raw material than anticipated.

Speaker Change: As our product yield improvement initiatives progressed from the R&D stage to pilot testing to network wide implementation over the next several quarters, our yields will increase materially.

Speaker Change: Between now and Q4 2025 product yield improvements are expected to result in approximately 100 basis points of margin expansion.

Speaker Change: Third labor productivity.

Brian Kocher: We have several active training programs throughout our manufacturing network designed to improve the efficiency and the effectiveness of our team members. But rolling this out across four shifts in seven plants that operate 24-7 takes time to fully implement and validate. We've made significant progress and are on track with year-end targets. I anticipate labor productivity and improvements driving an additional 50 basis points of margin expansion between now and the end of the year. We are facing a headwind that prevents us from accelerating margin fast. We have a temporary technical limitation at mid-low. We are out of the startup phase at Midlothian and are making good progress across output, labor, and yield metrics.

Speaker Change: We have several active training programs throughout our manufacturing network designed to improve the efficiency and the effectiveness of our team members, but rolling this out across four shifts in seven plants that operate $24 seven takes time to fully implement and validate.

Speaker Change: We've made significant progress and are on track with year end targets I anticipate labor productivity and improvements driving an additional 50 basis points of margin expansion between now and the end of the year.

Speaker Change: We are facing a headwind that prevents us from accelerating margin faster.

Speaker Change: We have a temporary technical limitation at Midlothian.

Speaker Change: We are out of the startup phase at Midlothian and are making good progress across output labor and yield metrics. However, a combination of a more restrictive regulatory environment and a sub scale wastewater management system is creating a temporary bottleneck that limits our output volume.

Brian Kocher: However, a combination of a more restrictive regulatory environment and a subscale wastewater management system is creating a temporary bottleneck that limits our output volume. We will face some headwinds on maximum output volume and margins in Midlothian until our wastewater solution is installed in mid-2026 and expect to incur approximately $500,000 per quarter in excess wastewater haul-off fees until that time. Once completed, we believe the additional output unlocked at Midlothian could positively impact total company gross margins by approximately 50 basis. Again, starting in the second half of 2026. Combining the capacity we have already unlocked, our plans to seize more latent capacity, and the planned improvements in yield and labor efficiencies bolster my confidence in achieving our 2025 gross margin expansion target.

Speaker Change: We will face some headwinds on maximum output volume and margins in Midlothian until our wastewater solution is installed in mid 2026, and expect to incur approximately $500000 per quarter and excess wastewater haul off fees until that time.

Speaker Change: Once completed we believe the additional output unlocked at mid low teens could positively impact total company gross margins by approximately 50 basis points.

Speaker Change: Again, starting in the second half of 2026.

Speaker Change: Combining the capacity we have already unlocked.

Speaker Change: Our plans to seize more latent capacity and the planned improvements in yield and labor efficiencies bolster my confidence in achieving our 2025 gross margin expansion targets.

Brian Kocher: If you add our initiatives together, we built the bridge from our first quarter 2025 adjusted gross margin of 15.3% to our guided fourth quarter 2025 gross margin range of 18 to 19%. For clarity, our fourth quarter is typically our highest revenue and margin rate quarter of the year due to seasonality of our broth business. For Q1 2026, we would expect to see a 200 basis point improvement versus Q1 of 2025 and full year 26 gross margin range of 18 to 19%. With the progress already made, additional capacity unlocks that we see over the next year.

Speaker Change: If you add our initiatives together, we built the bridge from our first quarter 2025, adjusted gross margin of 15, 3%.

Speaker Change: Two our guided fourth quarter 2025, gross margin range of 18% to 19%.

Speaker Change: For clarity our fourth quarter is typically our highest revenue and margin rate quarter of the year due to seasonality of our broth business.

Speaker Change: For Q1, 2026, we would expect to see a 200 basis point improvement versus Q1 of 2025 and full year 2006 gross margin range of 18% to 19%.

With the progress already made additional capacity unlocks that we see over the next year.

Brian Kocher: and the benefit of resolving our wastewater challenges in Midlothian, we see reaching 20% gross margin in the back half of 2026 and reaching a full year gross margin of 20% plus in 2027.

Speaker Change: And the benefit of resolving our wastewater challenges in Midlothian, we see reaching 20% gross margin in the back half of 2026, and reaching a full year gross margin of 20% plus in 2027.

Brian Kocher: In summary, the three key points I would like you to take away are first, our customized supply chain solutions generate diverse and growing revenue streams and deepen our partnership with customers that are growing faster than the categories in which we serve. Our pipeline is strong and accelerating in spite of challenging macro dynamics. Second, our diversified product and channel portfolio creates an index fund-like exposure to the high growth categories and customers we serve, mitigating the impact of changes in consumer preference and shopper behavior across channels, products, and brands.

In summary, the three key points I would like you to takeaway or <unk>.

Speaker Change: First our customized supply chain solutions generate diverse and growing revenue streams and deepen our partnership with customers that are growing faster than the categories in which we serve.

Speaker Change: Our pipeline is strong and accelerating in spite of challenging macro dynamics.

Speaker Change: Second.

Speaker Change: Our diversified product and channel portfolio creates an index fund like exposure to the high growth categories and customers. We serve mitigating the impact of changes in consumer preference and shopper behavior across channels products and brands.

Brian Kocher: Third. Our supply chain initiatives are making progress and ahead of our plan. I am confident in achieving sequential margin improvement for the remainder of the year as well as expanding margins into 2026.

Speaker Change: Third.

Speaker Change: Our supply chain initiatives are making progress and ahead of our plan.

Speaker Change: I am confident in achieving sequential margin improvement for the remainder of the year as well as expanding margins into 2026.

Greg Gaba: Now I'll turn the call over to Greg to highlight our key financial metrics and discuss our tariff response plan and capital allocation priorities. Thank you, Brian. And good afternoon, everyone. We had another strong quarter, as shown on slide 12, revenue of $202 million was up 9% compared to last year and continued to be driven by solid volume growth. Gross profit decreased by $0.8 million to $30.3 million compared to $31.1 million in the prior year. Adjusted gross margin was 15.3% compared to 17% in the prior year. The 170 basis point decrease in adjusted gross margin reflected investments in talent and infrastructure to improve long-term margins.

Speaker Change: Now I'll turn the call over to Greg to highlight our key financial metrics and discuss our tariff response plan and capital allocation priorities.

Speaker Change: Thank you, Brian and good afternoon, everyone. We had another strong quarter as shown on slide 12 revenue of $202 million was up 9% compared to last year and continued to be driven by solid volume growth.

Speaker Change: Most profit decreased by <unk> 8 million to $30 3 million compared to $31 1 million in the prior year.

Speaker Change: Adjusted gross margin was 15, 3% compared to 17% in the prior year.

Speaker Change: The 170 basis point decrease in adjusted gross margin reflected investments in talent and infrastructure to improve long term margins.

Greg Gaba: The inefficiencies related to the volume limitations resulting from the excess wastewater issue at our Midlothian, Texas facility and incremental depreciation related to assets recently placed in service but not fully utilized as production ramps up. These factors are partially offset by higher sales and production volumes for beverages, broths, and fruit snacks, driving improved plant utilization. Earnings from continuing operations was $4.8 million, compared to $3.8 million in the prior year period. Adjusted earnings from continuing operations was $5.3 million, or $0.04 per diluted share, compared to $1.9 million, or $0.02 per diluted share in the prior year period.

Speaker Change: The inefficiencies related to the volume limitations, resulting from the excess wastewater issue at our Midlothian, Texas facility and incremental depreciation related to assets recently placed in service, but not fully utilized as production ramps up.

Speaker Change: These factors are partially offset by higher sales and production volumes for beverages broth and fruit snacks driving improved plant utilization.

Speaker Change: Earnings from continuing operations was $4 8 million compared to $3 8 million in the prior year period adjusted earnings from continuing operations was $5 3 million or <unk> <unk> per diluted share compared to $1 9 million or <unk> <unk> per diluted share in the prior year period.

Greg Gaba: Adjusted EBITDA from continuing operations increased from $21.9 million to $22.4 million. Turning to our balance sheet, at the end of the first quarter, debt was $261 million, down $4 million from the end of the fourth quarter, and leverage was 2.9 times versus 3 times at the end of the fourth quarter. Cash generation was strong, with $22 million of cash provided by operating activities of continuing operations in the first quarter compared to $7 million in the prior year period. Cash used in investing activities of continuing operations was $15 million in the first quarter compared to $4 million in the prior year period.

Speaker Change: Adjusted EBITDA from continuing operations increased from $21 9 million to $22 4 million.

Speaker Change: Turning to our balance sheet at the end of the first quarter that was $261 million down $4 million from the end of the fourth quarter and leverage was two nine times versus three times at the end of the fourth quarter.

Speaker Change: Cash generation was strong with $22 million of cash provided by operating activities of continuing operations in the first quarter compared to $7 million in the prior year period.

Speaker Change: Cash used in investing activities of continuing operations was $15 million in the first quarter compared to $4 million in the prior year period.

Greg Gaba: Now turning to our outlook on slide 13. We would like to be very clear on our outlook for 2025 and 2026. As such, we are providing guidance without using run rates or exit rates going forward. We are raising our outlook for the year to reflect the strong performance in Q1. We now expect revenue in the range of $788 million to $805 million, growth of 9% to 11% versus 2024 compared to our prior guidance of 7% to 11%. From a profit perspective, we now expect adjusted EBITDA of $99 million to $103 million, which represents growth of 12% to 16% compared to our prior guidance of $9 million.

Speaker Change: Now turning to our outlook on slide 13.

Speaker Change: We would like to be very clear on our outlook for 2025 and 2026 as such we are providing guidance without using run rates or exit rates going forward.

Speaker Change: We are raising our outlook for the year to reflect the strong performance in Q1, we.

Speaker Change: We now expect revenue in the range of 788 million to 805 million growth of 9% to 11% versus 2024 compared to our prior guidance of 7% to 11%.

Speaker Change: From a profit perspective, we now expect adjusted EBITDA of $99 million to $103 million, which represents growth of 12% to 16% compared to our prior guidance of 9% to 16%.

Greg Gaba: From a pacing standpoint, we expect the pacing to remain the same as we discussed in our February call, with the Q1 outperformance being the only change. For 2025, we continue to expect the Justitia Vita to improve sequentially throughout the year. We also continue to expect interest expense of $24 to $26 million. Capital expenditures on the cash flow statement of approximately $30 to $35 million. and free cash flow of $25 to $30 million. Please note, essentially all of the free cash flow in 2025 is allocated for mandatory debt and notes payable repayments, which is reflected in our two and a half times leverage target that we continue to expect to achieve by the end of 2025.

Speaker Change: From a pacing standpoint, we expect the pacing to remain the same as we discussed in our February call with the Q1 outperformance being the only change.

Speaker Change: For 2025, we continue to expect adjusted EBITDA to improve sequentially throughout the year.

Speaker Change: We also continue to expect interest expense of $24 million to $26 million.

Speaker Change: Capital expenditures on the cash flow statement of approximately 30% to $35 million and free cash flow of $25 million to $30 million.

Speaker Change: Please note essentially all of the free cash flow in 2025 is allocated for mandatory debt and notes payable repayments, which is reflected in our two five times leverage target that we continue to expect to achieve by the end of 2025.

Greg Gaba: Slide 14 shows our long-term growth algorithm we published in our February investor presentation, which remains unchanged. We continue to target annual revenue growth of 8-10%, adjusted EBITDA growth of 13-17%, and expect to deliver approximately the midpoint of these ranges in 2026. as well as ROIC of 16 to 18% by the end of 2026.

Speaker Change: Slide 14 shows our long term growth algorithm, we published in our February Investor presentation, which remains unchanged. We continue to target annual revenue growth of 8% to 10% adjusted EBITDA growth of 13% to 17% and expect to deliver approximately the midpoint of these ranges in 2026.

Speaker Change: As well as ROIC of 16% to 18% by the end of 2026.

Greg Gaba: Turning to slide 16, as it relates to tariffs, this is obviously a fluid situation that we continue to monitor. While our employees, production facilities, and customers are predominantly located in the U.S., we source a portion of our raw material ingredients in packaging globally, and less than 8% of our total revenue is generated from the sale of fruit snack products imported into the U.S. from our Niagara, Ontario facility. In response to these tariffs, we started communications with our customers at the beginning of the year and we intend to pass through essentially all the incremental costs to our customers.

Speaker Change: Turning to slide 16, as it relates to tariffs. This is obviously a fluid situation that we continue to monitor.

Speaker Change: While our employees production facilities and customers are predominantly located in the U S. We source a portion of our raw material ingredients and packaging globally and less than 8% of our total revenue is generated from the sale of fruit snack products imported into the U S from RNA Agra, Ontario facility.

Speaker Change: In response to these tariffs we started communications with our customers at the beginning of the year and we intend to pass through essentially all the incremental costs to our customers similar to our pass through of pricing of raw material cost increases.

Greg Gaba: similar to our pass-through of pricing of raw material passes. While our pass-through mechanisms may trail some tariff costs by a month or two, we expect to recover substantially all incremental. As a result of our pass-through approach, we do not expect a material impact to our gross profit dollars or adjusted EBITDA in our guidance. However, there could be an increase in revenue and decrease in gross margin and adjusted EBITDA margin simply due to the passing through of the incremental tariff cost.

Speaker Change: While our pass through mechanisms May trail, some tariff costs by a month or two we expect to recover substantially all incremental costs.

Speaker Change: As a result of our pass through approach, we do not expect a material impact to our gross profit dollars or adjusted EBITDA in our guidance. However, there could be an increase in revenue and decrease in gross margin and adjusted EBITDA margin simply due to the passing through of the incremental tariff costs.

Greg Gaba: Turning to our capital allocation priorities on slide As a supply chain solutions provider serving growing customers in growing categories, we have great conviction in our long-term growth of our categories and our capital allocation priorities must incorporate and reflect that conviction. As such, the confidence in our growth trajectory ripples through a capital allocation decision. In February 2024, on Brian's initial earnings call, we clarified our capital allocation priority. At that time, we said that our first priority was to be under three times levered, and once we achieved that target, we would continuously evaluate the best use of free cash flow that may include share buybacks, funding high ROI capital projects, and or accretive M&A.

Speaker Change: Turning to our capital allocation priorities on slide 17.

Speaker Change: As a supply chain solutions provider, serving growing customers and growing categories. We have great conviction in our long term growth of our categories and our capital allocation priorities must incorporate and reflect that conviction.

Speaker Change: As such the confidence in our growth trajectory ripples through our capital allocation decisions.

Speaker Change: In February 2024 on Brian's initial earnings call, we clarified our capital allocation priorities.

Speaker Change: At that time, we said that our first priority was to be under three times Levered and once we achieve that target we would continuously evaluate the best use of free cash flow that may include share buybacks funding high ROI capital projects <unk> accretive M&A.

Greg Gaba: We achieved our leverage target at the end of 2024. And that did exactly what we promised by continuously evaluating the best use of cash going forward. The world has changed since February of 2024, and on our last call, we discussed our top priority was to reduce leverage to two and a half times by the end of 2025.

Speaker Change: We achieved our leverage target at the end of 2024 and that did exactly what we promised by continuously evaluating the best use of cash going forward.

Speaker Change: The World has changed since February of 2024 and on our last call. We discussed our top priority was to reduce leverage to two five times by the end of 2025.

Greg Gaba: Let me expand on why we made that decision and discuss our current priorities after we achieve our leverage target. In our eyes, delivering further is critical because of our conviction and our long-term growth potential of our categories and our Well, we currently don't need significant growth capex to drive our revenue and EBITDA trajectory. Our more disciplined approach will allow us to continue to have a reasonable leverage level even when we eventually start to ramp growth investment. Also, delivering our balance sheet allows us to adapt to volatility in the commercial marketplace and to take advantage of unique opportunities if they yield a disproportionately positive ROIC profile.

Speaker Change: Let me expand on why we made that decision and discuss our current priorities after we achieve our leverage target.

Speaker Change: And our eyes Delevering further is critical because of our conviction in our long term growth potential of our categories and our customers.

Speaker Change: While we currently don't need significant growth Capex to drive our revenue and EBITDA trajectory.

Speaker Change: Our more disciplined approach will allow us to continue to have a reasonable leverage level, even when we eventually start to ramp growth investments again.

Speaker Change: Also delevering, our balance sheet allows us to adapt to volatility in the commercial marketplace and to take advantage of unique opportunities if the yields a disproportionately positive ROIC profile.

Greg Gaba: Once we achieve our leverage target at the end of the year, our second priority is investing back in the Sunopta business through capacity expansion to meet the growth of our categories in In almost every scenario we evaluate, the highest return is to invest in growth capex and is the best option for long-term value creation for shareholders. We are excited about our future outlook and consistently look at our capital needs two to three years out. We are constantly gauging commercial market, consumer trends, and the outlooks of our customers for growth. Investing wisely, combined with our focus on operational excellence, are the key elements of achieving our long-term growth algorithm.

Speaker Change: Once we achieve our leverage target at the end of the year. Our second priority is investing back into should not the business through capacity expansion to meet the growth of our categories and customers.

Speaker Change: And almost every scenario we evaluate the highest return is to invest in growth Capex and is the best option for long term value creation for shareholders.

Speaker Change: We are excited about our future outlook and consistently look at our capital needs two to three years out.

We are constantly gauging commercial market consumer trends and the outlook of our customers for growth.

Speaker Change: Investing wisely combined with our focus on operational excellence are the key elements of our achieving our long term growth algorithm.

Greg Gaba: When it comes time for growth investment, we will always analyze relative returns between new production lines and or acquired. Delevering to two and a half times in the near term will allow greater financial flexibility to invest in the business in the longer term.

Speaker Change: When it comes time for growth investment, we will always analyze relative returns between new production lines and or acquired businesses.

Speaker Change: Delevering to two five times in the near term will allow greater financial flexibility to invest in the business in the longer term.

Greg Gaba: Our third capital allocation priority is returning capital to shareholders. While our immediate plans are to achieve a two-and-a-half times leverage target, since we currently do not envision meeting growth capex in 2025, we would like to be positioned for opportunistic share repurchases if we are trending ahead of plan and have excess cash available while still being able to meet our leverage target. Accordingly, our board has approved a share repurchase program authorizing the purchase of up to $25 million in common debt. The size and timing of repurchases, if any, will depend on a multitude of factors, including the company's progress towards its leverage target, financial position, capital allocation priorities, market conditions, regulatory requirements, and other considerations.

Speaker Change: Our third capital allocation priority is returning capital to shareholders.

Speaker Change: While our immediate plans are to achieve a two five times leverage target since we currently do not envision needing growth Capex in 2025, we would like to be positioned for opportunistic share repurchases. If we are trending ahead of plan and have excess cash available, while still being able to meet our leverage target.

Speaker Change: Accordingly, our board has approved a share repurchase program authorizing the purchase of up to $25 million in common shares.

Speaker Change: The size and timing of repurchases if any will depend on a multitude of factors, including the company's progress towards this leverage target financial position capital allocation priorities market conditions regulatory requirements and other considerations.

Greg Gaba: We are committed to driving shareholder We are committed to maximizing our cash generation and our RIC opportunities as the best way to drive long-term shareholder value. We believe the best way to maximize cash generation at ROIC is to maintain a reasonable debt level while fueling and funding our growth strategy with high-growth projects. We believe the capital allocation priorities outlined above will generate long-term value.

Speaker Change: We are committed to driving shareholder value, we are committed to maximizing our cash generation and our IC opportunities is the best way to drive long term shareholder value. We believe the best way to maximize cash generation and ROIC is to maintain a reasonable debt level, while fueling and funding our growth.

Speaker Change: <unk> with high growth projects, we believe the capital allocation priorities outlined above will generate long term value.

Greg Gaba: Before opening the call for questions, just a reminder that for a competitive We do not provide detailed commentary regarding customer or SKU level activities.

Speaker Change: Before opening the call for questions. Just a reminder that for competitive reasons, we do not provide detailed commentary regarding customer or SKU level activity.

Operator: And with that, Operator, please open the call. At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A restroom.

Speaker Change: And with that operator, please open the call for questions.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.

Andrew Strelzik: Your first question comes from the line of Andrew Strelzik with BMO Capital Markets. Your line is open. Hey, good afternoon. Thanks for taking the questions. My first one is about the commentary you made about the accelerating category growth and your accelerating pipeline. And, you know, I just find it interesting that that's happening amid what is, you know, a pretty choppy consumer environment. A lot of consumer companies talking about incremental slowdown. So, you know, why do you think those two things are happening now? Do you think they're related or, you know, with respect to the pipeline, is it more internal or external kind of push?

Speaker Change: Your first question comes from the line of Andrew <unk> with BMO capital markets. Your line is open.

Andrew: Hey, good afternoon, thanks for taking the questions.

Andrew: My first one is about the commentary you made about the accelerating category growth and Youre accelerating pipeline.

Andrew: I just find it interesting that that's happening a bit what is a pretty choppy consumer environment, a lot of consumer companies talking about incremental slowdown so.

Andrew: Why do you think those two things are happening now do you think they are related or.

Andrew: With respect to the pipeline is it more internal or external kind of push I'm just I'm just trying to wrap my head around why those things are happening now because it's great to see.

Andrew Strelzik: I'm just trying to wrap my head around why those things are happening now, because it's great to see.

Brian Kocher: Andrew, thanks, I'm really glad you asked that question. A couple of things that I would think about as I think about long term growth. First of all, if you look at our categories, in particular, plant based beverages, those usage occasions and purchase intentions are often not times not considered discretionary. They're lifestyle choices, they're medicinal purposes, they're taste preferences, and so we believe that they're sustaining headwinds in those categories which are fueling growth. That's one thing to keep in mind. If you look at some of our other categories, better for you and our nutritional protein, again, those are growth, better for you fruit snacks, those are growing as a category.

Speaker Change: Andrew Thanks, I'm really glad you asked that question.

Speaker Change: Couple of things that I would think about as I think about long term growth.

Speaker Change: First of all if you look at our categories in particular plant based beverages. Those those usage occasions and purchase intentions are often times not considered discretionary their lifestyle choices there medicinal purposes there.

Speaker Change: Taste preferences, and so we believe that theyre sustaining headwinds in those categories, which are fueling growth that that's one thing to keep in mind.

Speaker Change: If you look at some of our other categories better for you in and our nutritional protein again those are growing better for you fruit snacks those are growing as a category.

Brian Kocher: So, again, I think there's some reasons that our categories are growing. That's one. Two, I also think that most of our products either fall outside of what someone would consider a luxury product or are considered a small luxury, that they can afford themselves even in tough times or challenging environments. So, I think that's another reason. It's helpful when we think about that in terms of the categories growing. Also remember, we support great customers. Our customers are performing better than the categories in which they participate. So we get a bump for that. Finally, I think our demand generation engine, which by the way, has been a strength for the last several years.

Speaker Change: So again I think theres. Some some reasons that our categories are growing that's one two I also think that most of our products either fall outside of what someone could would consider a luxury product or are considered a small luxury that they can afford themselves even in.

Speaker Change: In tough times or challenging environment. So I think thats another reason and it's.

Speaker Change: It's helpful. When we think about that in terms of the category is growing also remember we support great customers are our customers are performing better than the categories in which they participate so we get a bump for that.

Speaker Change: Finally, I think our demand generation engine, which by the way has been a strength for the last several years I think I've mentioned on several calls in a row that demand generation is pacing our business. Our demand generation is able to take advantage of some of the capacity, we're creating and then turnaround and meet the needs of what.

Brian Kocher: I think I've mentioned on several calls in a row that demand generation is pacing our business. Our demand generation is able to take advantage of some of the capacity we're creating and then turn around and meet the needs of what I still believe is an underserved market. Underserved in terms of capacity, underserved in terms of consistent supply, and underserved in terms of innovation and high product quality. sorry, high quality product. Thank you.

Speaker Change: I still believe is an underserved market underserved in terms of capacity underserved in terms of consistent supply and understood underserved in terms of innovation and high product quality.

Speaker Change: Or sorry high quality product. Thank you. So that's that's how I look at marrying those two.

Andrew Strelzik: So that's how I look at marrying those two, Andrew. That's super helpful. I appreciate that.

Speaker Change: Andrew.

Speaker Change: That's super helpful. I appreciate that.

Andrew Strelzik: Uh, maybe I'll ask on the tariff, um, side, you know, it's, it's great to hear that you're, uh, you've been so proactive on, on passing that through. I guess I've just would like to get a better sense for kind of what that looks like from a cost bucket. If, if you're able to frame that based on what we know today and how much pricing that implies that you'll be, you know, you'll need to pass through, um, and even maybe some color on how those conversations with your customers have gone.

Speaker Change: Uh huh.

Maybe I'll ask on the tariff.

Speaker Change: Syed it's great to hear that you're you've been so proactive on passing that through I guess I'd, just like to get a better sense for kind of what that looks like from a cost bucket, if youre able to frame that based on what we know today and how much pricing that implies that youll be youll need to pass through.

Speaker Change: And even maybe some color on how those conversations with your customers have gone.

Greg Gaba: Sure. So Andrew, you know, six of our seven plants are located in the US. 98% of our revenue in 2024 was to US-based customers. We do have a small portion of raw material and packaging that is sourced globally. In addition, we do have a portion of our fruit snacks product that is imported into the US from our Niagara Canada. But we view the tariff increases, Andrew, no different than our other raw material increases. You know, we have the business model to pass through those changes and raw materials to our customers as a normal process. We do that all the time, right?

Speaker Change: Sure So Andrew six of our seven plants are located.

Speaker Change: At 98% of our revenue in 2024 was the U S based customers and we do have a small portion of raw material and packaging that is the source Goldberg globally.

Speaker Change: In addition, we do have a portion of our fruit snacks product that is imported into the U S from our Niagara Canada facility, but we view the tariff increases Andrew no different than our other raw material increases we have the business model at the pass through those changes in raw materials to our customers is a normal process, we do that all the time.

Andrew Strelzik: We're very transparent. If the cost goes up, we increase the price. If the cost goes down, we decrease. And we view this exactly the same way. Our goal is to make a fair margin on producing our products. And whether raw materials increase or decrease, we pass. And we started our conversations with our customers back in January. And we do expect to substantially pass on all the incremental costs to our customers. Great, I'll pass it on.

Speaker Change: We're very transparent if the cost goes up we increase the price and the cost goes down we decrease the price and we view. This is exactly the same way our goal is to make a fair margin on producing our products and with the raw materials increase or decrease we pass those ads and we started our conversations with our customers back in January and we do expect to.

Speaker Change: <unk> pass on all the incremental cost to our customers.

Speaker Change: Great.

Andrew Strelzik: Thank you very much. Thank you Andrew.

Speaker Change: I'll pass it on thank you very much.

Speaker Change: Thank you Andrew your next.

James Salera: Your next question comes from the line of James Salera with Stephens Inc. Your line is open. Brian, thanks for taking our question. Brian, I wanted to start off on your comments on the wastewater treatment in Midlothan. Maybe two parts on that. One, is there any way to pull forward? Because it sounds like, you know, we're still, you know, over a year out on having that up and running. Is that just like an equipment availability issue? Or is there anything that you guys could do to kind of accelerate that and pull that forward and get it installed?

Speaker Change: Your next question comes from the line of Jim <unk> with Stephens, Inc. Your line is open.

Jim: Alright, great. Thanks for taking my question.

Speaker Change: I wanted to start off on your comments on the wastewater treatment in Midlothian.

Speaker Change: Maybe two parts on that one is there any way to.

Speaker Change: Pull forward because it sounds like we're still over a year out on having a pump and running is is that just like delta and equipment availability issue or is there anything that you guys could do to kind of accelerate that and pull that forward and get it installed and then secondly.

James Salera: And then secondly, are there other plants in the network that you can lean on in the interim to shoulder some of the volume that you could run through Midlothan that you can't right now? Or should we view that as there's just a cap on certain products until you get that wastewater up and running? Thanks, Jim. Appreciate that.

Speaker Change: Are there other plants in the network that you can lean on in the interim.

Speaker Change: Shoulder some of the volume that you could run through mid low than that you can right now or should we view that as.

Speaker Change: Theres just a cap on certain products until you get that wastewater up and running.

Jim: Thanks, Jim appreciate that here is.

Brian Kocher: Here is the way that I would think about that. There isn't a day go by that Greg and I don't try to figure out how to accelerate that solution. The fact of the matter is it's a capital solution. So the plan is designed, the equipment is designed, the capital outlay is already included in our guidance for our maintenance CapEx. So this isn't incremental. It's already included in our guidance for maintenance CapEx. And we are leaning on our engineers, fabricators, and everyone involved in that process as fast as we can. I do still see some incremental output in advances in Midlothian between now and when the solution is implemented in mid-26.

Jim: The way that I would think about that there isn't a day go by that Greg and I don't try to figure out how to accelerate that solution. The.

Jim: The fact of the matter is it's a capital solutions. So the plan is designed the equipment is designed the capital outlay is already included in our guidance for our maintenance Capex. So this is an incremental it's already included in our guidance for maintenance Capex and we are leaning on our engineers fabricators and everyone.

Jim: Involved in that process as fast as we can.

Jim: I do still see some incremental output in in advances in Midlothian between now and when the solution is implemented in mid 'twenty six but I think it's also fair to say this is this is a limitation.

Brian Kocher: But I think it's also fair to say this is a limitation. that we didn't foresee six months ago or nine months ago. We were ramping up Midlothian, we've had some problems, but boy, as we continue to make increases in output, it finally came to the head that we were going to have some limitations on our maximum output at Midlothian until such time as we could get a more permanent solution for that. We are already leaning on other plants. I think the good news underlying in a lot of our communication is we've made a lot of progress on capacity creation.

Jim: That we didn't foresee six months ago or nine months ago, we were ramping up Midlothian, we've had some problems, but boy as we continued to make good increases in output. It finally came to the ahead that we were going to have some limitations on our maximum output at Midlothian until such such time as we.

Jim: Could get a more a more permanent solution for that we are already leaning on other plants I think the good news underlying and a lot of our communication is we've made a lot of progress on capacity creation.

Brian Kocher: If you remember going back in time, one of the risks that potentially we had in 2025 on our revenue guidance was timing with respect to output creation and capacity creation. We freed up enough capacity in the first quarter that we feel confident we could deliver the midpoint of our revenue guide for 2025. So that continues to, we continue to have more work to do, we continue to drive our other facilities and plants, but in fact, we are relying on other plants to help us continue servicing the demand that we face. So hopefully that answered that one.

Jim: If you remember going back in time, one of the risks that potentially we had in 2025 on our revenue guidance was timing with respect to output creation and capacity creation, we've freed up enough capacity in the first quarter that we feel confident we could deliver the midpoint of our revenue guide for 2025, so that continues.

Jim: We continue to have more work to do we continue to drive our other facilities implants, but in fact, we are relying on other plants to help to help us continue servicing the demand that we face.

Jim: So hopefully that answers that on opening.

James Salera: Yes, that's very helpful.

Speaker Change: Yes, yes, that's very helpful. And then second question just on the demand side.

James Salera: And then a second question just on the demand side. You know, with retailers, I think, trying to diversify their supply sourcing and to the extent that they can source more products domestically, have you guys been having more conversations with retail partners that aren't currently utilizing your network that may be sourced from Canada or Mexico that in order to sidestep some of the tariffs would consider switching? And do you guys have a latent capacity that you can allocate to new business? Or is it really just all being absorbed with what you have in the existing customer pipeline?

Speaker Change: With retailers I think trying to diversify their supply sourcing and to the extent that they can source more products domestically have you guys been having more conversations with retail partners that.

Speaker Change: Currently utilizing your network may be sourced from Canada, or Mexico that in order to sidestep. Some of the tariffs would consider switching and you guys have latent capacity that you can allocate to new business or is it really just all being absorbed with with what you have an existing customer pipeline.

Brian Kocher: Yeah, Tim, I just think realistically in our market U.S. Sales are being sourced by U.S. providers. So I don't really see that as an opportunity. I would remind you that our pipeline continues to accelerate. In fact, it's twice as much as it was the day that I walked into the place. So I'm excited about that. We are trying to create latent capacity every single day and the faster that we create it, I think the faster that we'll be able to sell it. But it's really the more traditional demand generation tools that you see. Innovation, share expansion with existing customers, expansion with new customers.

Tim: Yes, Tim I, just think realistically in our market.

Speaker Change: U S <unk>.

Speaker Change: Sales are being sourced by U S provider, so I don't really see that as an opportunity.

Speaker Change: I would remind you that our pipeline continues to accelerate in fact, it's twice as much as it was the day that I walked into the place. So I am excited about that we are trying to create latent capacity every single day and the faster that we created I think the faster that we'll be able to sell it but it is really the more traditional.

Speaker Change: <unk> demand generation tools that you see innovation share expansion with existing customers.

Speaker Change: Spansion with new customers and Thats, how you should probably think about our revenue growth.

James Salera: And that's how you should probably think about our revenue growth. Okay, very helpful. I'll hop back in the queue. Thanks, Jim.

Okay. That's very helpful I'll hop back in queue.

Tim: Thanks, Tim.

Jon Andersen: Your next question comes from the line of Jon Andersen with William Blair. Your line is open. Hey, good afternoon. Thanks. I wanted to stick with the pipeline for a minute. Brian, you mentioned it's twice as large as it was. maybe a year ago or so. What does that mean? You know, the sales potential, the sales volume associated with that pipeline is 2x what it's averaged over time, I guess is what, trying to understand the definition of that a little bit. And then, you know, is, could you give us some sense of the composition of the pipeline, maybe by product type, whether it's more on the plant-based beverage side or protein shake or fruit snacks, and whether there are any maybe incremental investments required if it tilts toward fruit snacks.

Tim: Your next question comes from the line of Jon Andersen with William Blair. Your line is open.

Jon Andersen: Hey, good afternoon. Thanks.

Jon Andersen: I wanted to stick with the pipeline.

Speaker Change: For a minute Bryan you mentioned.

Jon Andersen: <unk>.

Jon Andersen: Twice as large as it was.

Jon Andersen: Maybe a year ago or so what is does that mean.

Jon Andersen: The sales potential the sales volume associated with that pipeline is two X. What it's averaged over time I guess is what training understand the definition of that a little bit and then.

Jon Andersen: Could you give us some sense of the.

Jon Andersen: <unk> of the pipeline, maybe by product type, whether it's more on the plant based beverage side or protein shake or fruit snacks and whether there are any.

Jon Andersen: May be incremental investments required if it tilts towards fruit snacks I'm not sure where you stand with your capacity in <unk> et cetera. Thanks.

Jon Andersen: I'm not sure where you stand with your capacity in OMAC, etc. Thanks.

Brian Kocher: Okay, thanks for the question, Jon. Let's talk a little just just to get the definition right. And we included this in our prepared remarks. we're looking at a pipeline that right now is approximately a quarter of our annual revenue, 25% of our 2025 guided revenue. So in terms of overall dollars, that's about twice as big as it was a year ago, or 15 months ago at this time. So again, I never want anyone to confuse pipeline with our guidance. They're not the same. But it is gift, we are trying to dimensionalize you for you the strength and the size of our pipeline.

Speaker Change: Okay. Thanks for the question John Let's talk just just to get the definition right and we included this in our.

Jon Andersen: Our prepared remarks.

Jon Andersen: We're looking at a pipeline that right now is approximately a quarter of our annual revenue.

Jon Andersen: 25% of our of our 2025 guided revenue. So in terms of overall dollars thats about twice as big as it was a year ago or 15 months ago. At this time, so again I never want anyone that confused pipeline with our guidance. They are not the same but it is gift we are trying to <unk>.

Jon Andersen: <unk> for you.

Jon Andersen: The strength and the size of our pipeline and so hopefully that helped do that if I look at the composition of the pipeline. It is a wide range of channel opportunities. When you think about club foodservice.

Brian Kocher: And so hopefully that that helped do that. If I look at the composition of the pipeline, it is a wide range of channel opportunities. When you think about club, food service, it's a wide range of what I'll call product lines. So yes, we see heavy plant based beverage. And it is we also see fruit snack opportunities. We see some some opportunities in in the ready to drink protein shake. Probably just realistically less there because we do have a theoretical limit at Midlothian right now. But one area that we don't talk about as much about, John is our broth business.

Jon Andersen: It is a wide range of.

Jon Andersen: What I will call product line, so yes, we see heavy.

Jon Andersen: Plant based beverage opportunities, we also see fruit snack opportunities, we see some some opportunities in the ready to drink protein shake.

Jon Andersen: Probably just realistically less there because we do have a theoretical limit at Midlothian right now, but one area that we don't talk about as much about.

Jon Andersen: John is our broth business remember, we've kind of said bras I don't know that it's strategic but it's for strategic customers and we've really seen more recently, let's say over the last year and opportunity to really create and create value by solving problems in some.

Brian Kocher: Remember, we've kind of said broth, I don't know that it's strategic, but it's for strategic customers. And we've really seen more recently, let's say over the last year, an opportunity to really create and create value by solving problems in some of our broth customers networks. And, and so we see that pipeline is being very strong. I'm not trying to give you overall numbers here. But I'd say it's probably more weighted to plant based beverages, followed by broth, followed by fruit snacks is a good way to think of it. I would also say it's probably more heavier weighted towards growth with existing customers than with new customers.

Jon Andersen: Of our broth customers networks, and and so we see that pipeline as being very strong.

Jon Andersen: I am not trying to give you overall numbers here, but I'd say, it's probably more heavily weighted to.

Jon Andersen: Plant based beverages, followed by bras, followed by fruit snacks.

Jon Andersen: A good way to think of it I would also say, it's probably more heavier weighted towards.

Jon Andersen: <unk>.

Jon Andersen: The growth with the existing customers them with new customers, but the new customer component in the new product line component of the pipeline is is also substantial as well so I hope that's a little bit of color for you.

Brian Kocher: But the new customer component and the new product line component of the pipeline is also substantial as well. So I hope that's a little bit of color for you. Yeah, that that's, that's really great. And obviously, if you're, you're growing with existing customers, they like what you're doing. So it's a good sign of your success on the solution front. Hey, Jon, I'm so glad you brought that out. Just one point. Sorry to interrupt you. But yeah, I'm a firm believer that the best absolute best indicator that your value proposition resonates in the commercial marketplace is when your volume grows.

Jon Andersen: Yes.

Jon Andersen: That's really great.

Jon Andersen: Obviously, if you're growing with existing customers they like what youre doing so it's a good sign of your success.

Jon Andersen: Success on the solution front.

Jon Andersen: Hey, John just I'm. So glad you brought that up just one point sorry to interrupt you, but yes, I am a firm believer that the best.

Speaker Change: Absolute best indicator that your value proposition resonates in the commercial marketplace is when your volume grows.

Brian Kocher: And if you think about our growth over the last couple of years, our growth over the first quarter, it is volume based growth. And I think that's, that's the best indication that our value proposition in the commercial market resonates because that means customers are voting.

Speaker Change: And if you think about our growth over the last couple of years our growth over the first quarter. It is volume based growth and I think that's that's the best indication that our value proposition in the commercial market resonates because that means customers are voting.

Jon Andersen: Yeah, two part question that's more, I guess, just around some of the financial or volume and margin implications of what you've talked about with respect to the wastewater program. You know, how would you articulate your visibility into getting that done by the middle of next year? And are the volume limitations that you talked about that are associated with that upgrade, until you make that upgrade, are those in this year's guidance? Are they incorporated into the first half of 2026 when you talked about, you know, 26 growth being kind of at the midpoint of the long-term algo?

Speaker Change: Yes.

Speaker Change: Two two part two part question that's more I guess, just around some of the financial or <unk>.

Speaker Change: Volume and.

Speaker Change: Margin implications of what you've talked about with respect to the wastewater program.

Speaker Change: Yeah.

Speaker Change: How would you articulate your visibility into getting that done by the middle of next year and are the volume limitations that you talked about.

Speaker Change: That are associated with that upgrade until you make that upgrade are those in this year's guidance or the incorporated into the first half of 2026, when you talked about two.

Speaker Change: 26 growth being kind of at the midpoint of the long term algo I guess I'll start with that I have one quick follow up.

Brian Kocher: I guess I'll start with that. I have one quick follow-up. Yeah, so let's answer the second question first. Yes, incorporated into our 2025 guidance. Yes, incorporated into our comfort level with the midpoint of our long-term algorithm for 2026. Yes to both of those. Think of the wastewater challenge that we have, the limitation on output. At this point, we're very clear. I mean, we've got the equipment designed. We've got purchase orders that are going out for the equipment. Remember, just to be perfectly clear, this is an expenditure that we can manage within the confines of our maintenance and CapEx, so not additional CapEx, but it would be included in that maintenance CapEx that you can think about in our long-term algorithm.

Speaker Change: So let's answer the second question first yes incorporated into our 2025 guidance, yes incorporated into our comfort level with the mid the mid point of our long term algorithm for 2026, yes to both of those think of.

Speaker Change: Though the wastewater challenge that we have the limitation on output at this point, we're very clear I mean, we've got the equipment designed.

Speaker Change: <unk> got purchase orders that are going out for the equipment remember just to be perfectly clear. This is an expenditure that we can manage within the confines of our maintenance in <unk>.

Speaker Change: Capex, so not additional capex, but it would be included in that maintenance Capex that you can think about in our long term algorithm. We are literally trying to get fabricators to work is as fast as they can I mean, John.

Brian Kocher: We are literally trying to get fabricators to work as fast as they can. John, we had one analyst ask, I mean, Greg and I are doing math and trying to figure out if air freighting things faster works or if it's worth it. We're really trying to drive that solution faster, but it is to the point where the solution's designed. We've got the equipment that's ordered. We need to get it fabricated, and then, obviously, you have an installation that goes along with that. I think mid-2026 gives us plenty of room. A, we're farther along the path in terms of design, but I think that also gives us some room for any, what you would consider, normal contingency.

Speaker Change: We had one analyst asked I mean, Greg and I are doing math.

Speaker Change: Trying to figure out of air Freighting things faster works or if it's worth it.

Speaker Change: We're really trying to drive that solution faster, but it is it is to the point, where the solutions designed we've got the equipment. That's ordered we need to get it fabricated and then obviously you have an installation that goes along with that so I think mid 2026 gives us plenty of room, we're farther along the path in terms of design, but I think that.

Speaker Change: It also gives us some room for any what you would consider normal contingencies.

Jon Andersen: Okay hope that helps and then yeah it does and thank you for the uh You know, the detail around the four-point plan and how that unlocks capacity and helps drive productivity.

Speaker Change: Okay Hope that helps and then yes, it does and thank you for the.

Speaker Change: The detail around the.

Speaker Change: The four point plan and how that unlocks capacity and helps drive productivity the gross margin.

Jon Andersen: The gross margin path pacing that you've outlined, I guess, does that incorporate your best effort view of tariffs at present, or is the tariff thing just too early to walk into that? Because as you point out in your press release, it could have an impact on your margin rate, you know, even if you're fully recovering dollar costs, right? So just trying to get clarity on whether that's, you know, baked into the gross margin cadence at this point or not. Thanks. Yeah, Jon, it is not baked in. As you mentioned, it is a fluid situation, we continue to evaluate and we continue to expect to substantially pass on all of our costs.

Speaker Change: Pat.

Speaker Change: Pacing that you've outlined.

Speaker Change: I guess does that incorporate your best effort.

Speaker Change: View of tariffs at present or is the tariff thing just too early to to walk into that because as you point out in your press release.

Speaker Change: Got.

Speaker Change: It could have an impact on your margin rate, even if youre fully recovering dollar costs right. So just trying to get clarity on whether that's baked into the gross margin cadence at this point or not thanks.

Speaker Change: Yes, John it is not baked in.

Speaker Change: As you mentioned it is a fluid situation, we continue to evaluate and we continue to expect a substantially pass on all of our costs I wouldn't view it as a material impact significant impact either to our revenue or our increasing cost and our goal is to protect our gross profit dollars not have an impact on adjusted EBITDA, but as we called out.

Jon Andersen: I wouldn't view it as a material impact, significant impact either to our revenue or increasing costs. And you know, our goal is to protect our gross profit dollars not have an impact on adjusted EBITDA. But as we called out in our press release, there could be an impact on increasing revenue and increasing Okay, thank you so much.

Speaker Change: Our press release, there could be an impact on increase in revenue and increase in cost.

Speaker Change: Okay. Thank you so much.

Ryan Meyers: Your next question comes from the line of Ryan Meyers with Lake Street Capital Markets. Your line is open. Yeah, hi guys, thanks for taking my question. Just one for me here. I'm just kind of following up on the new business pipeline. So just to get a good understanding of it, you know, what's the typical timeline for, you know, converting this, let's call it new business into actual sales and revenue? You know, I know you said it was 25% of what the numbers in 2025 could be, but just, you know, curious the nuances of that and when we would potentially see that actually come through on the revenue side.

Speaker Change: Your next question comes from the line of Ryan Byrnes with Lake Street Capital markets. Your line is open.

Yes, hi, guys. Thanks for taking my question just one for me here just kind of following up on the new business pipeline. So just to get a good understanding of whats the typical timeline for converting this let's call it new business into actual sales and revenue and I know you said it was 25% of what the numbers in 2025.

Speaker Change: Could be cured.

Speaker Change: Curious the nuances of that when we would potentially see that actually come through on the revenue side.

Ryan Meyers: Ryan, thank you. I would consider this driving confidence in our ability to hit our long-term growth algorithm. I don't want to get too far ahead of ourselves in figuring out what percentage gets baked into 25, 26, 27, but it is a common, very common approach. The bigger your pipeline, the more that ultimately you convert and close into revenue. So I'm excited that we have a bigger pipeline. The way that I would try to think about it is Our pipeline has somewhere between six months and 18 months in a closed cycle. There are certain things that are faster, other things that are slower.

Ryan: Ryan Thank you.

Speaker Change: Consider this driving confidence in our ability to hit our long term growth algorithm.

Speaker Change: I don't want to get too far ahead of ourselves and figuring out what percentage gets baked in 'twenty five 'twenty six 'twenty seven.

Speaker Change: But it is a calm it is a common very common approach the bigger your pipeline the more that ultimately you convert and close into into revenue. So I'm excited that we have a bigger pipeline the way that I would try to think about it is.

Speaker Change: Okay.

Speaker Change: Our pipeline year SaaS somewhere between six months and 18 months in a closed cycle. There are certain things that are that are faster. Other things that are that are slower. This is a pipeline that we just tried to give you an order of magnitude. So you can understand what the potential is.

Brian Kocher: This is a pipeline that we just tried to give you an order of magnitude so you can understand what the potential is. We have projects along all those stages of the pipeline. And again, we guide to what we see, not what we hope.

Speaker Change: We have projects along all of those stages of the pipeline and again, we guide to what we see not what we hoped as those things become more clear as those things convert from from pipeline to actual we will update our guidance and you guys will be the first to know but right now I.

Brian Kocher: As those things become more clear, as those things convert from pipeline to actual, we will update our guidance and you guys will be the first to know. But right now, I wanted to give you a perspective that our categories are growing, our customers are growing even faster than the categories in which we participate. And oh, by the way, our demand generation is clicking and that provides me and Greg great confidence in our 2025 outlook, as well as our long-term algorithm for the future. Got it. No, that's helpful. Thank you.

Speaker Change: Wanted to give you a perspective that our categories are growing our customers are growing even faster than the categories in which we participate and oh by the way our demand generation is clicking and that provides me and Greg great confidence and our 2025 outlook as well.

Speaker Change: As our long term algorithm for for the future.

Speaker Change: Got it no that's helpful. Thank you.

Brian Holland: Your next question comes from the line of Brian Holland with DA Davidson. Your line is open. Yeah, I wanted to ask about the upside delivery on revenue in 1Q, which Brian, as you mentioned in your prepared remarks, came in ahead of expectations. I guess, you know, as we had conversations in the second half of the fall of 2024, you know, thinking about distribution gains at your largest customer, thinking about, you know, the removal of the plant-based surcharge that we started to see at several coffee chains, many of whom are of yours. What I inferred from your comments was that, you know, that's kind of baked into expectations at the time.

Speaker Change: Your next question comes from the line of Brian Holland with D. A Davidson your line is open.

Brian Holland: Yes, I wanted to ask about the upside delivery on revenue and <unk>.

Speaker Change: Brian as you mentioned in your prepared remarks came in ahead of expectations I guess.

Speaker Change: As we had conversations in the second half of the fall of 2024.

Speaker Change: Thinking about distribution gains at your largest customer is thinking about the removal of the plant based surcharge that we started to see several coffee chains.

Speaker Change: Many of whom are customers of yours.

Speaker Change: Well I think what I inferred from your comments was that kind of baked into expectations.

Brian Holland: So I'm just curious, the source of the upside, are we seeing incremental benefits from above and beyond what was planned for things like plant-based surcharge? Or is there any other dynamics that you would speak to that was specifically coming in ahead of expectations?

Speaker Change: At the time, so I'm just curious the source of the upside are we seeing incremental benefits from above and beyond what was planned for things like plant based surcharge or is there any other dynamic that you would speak to them specifically coming in.

Speaker Change: Ahead of expectations.

Brian Kocher: Yeah, hey, Brian, appreciate the question. Clearly, we We guided to what we see, not what we hope in 2025. But if you think about it, and we mentioned this in our prepared comments, our top five customers delivered year over year growth. Our food service customers grew in the mid single digits. Our club channel customers grew double digits. And frankly, the outperformance was probably more on the capacity creation side than it really was on the demand side. I think we had the demand already and just weren't sure that we could produce enough units to fulfill it.

Brian: Hey, Brian I appreciate the question.

Speaker Change: Clearly we.

Speaker Change: We guided to what we see not what we hope in 2025, but if you think about it and we mentioned this in our prepared comments, our top five customers delivered year over year growth.

Speaker Change: Our foodservice customers grew in the mid single digits, Our club channel.

Speaker Change: Customers grew double digits and frankly.

Speaker Change: The outperformance was probably more on the capacity creation side than it really was on the demand side.

Speaker Change: Think we had the demand already and just Werent sure that we can produce enough units to fulfill it and like I said on on on our supply chain I would say overall, we're ahead on capacity creation and I'm excited about that we still have some work to do in those in those four areas that I mentioned in the prepared remarks.

Brian Kocher: And like I said, on our supply chain, I'd say overall, we're ahead on capacity creation. And I'm excited about that. We still have some work to do in those four areas that I mentioned in the prepared remarks. That's helpful.

Speaker Change: That's helpful.

Brian Holland: And then quickly on the pipeline, obviously the 2027 revenue target includes the assumption of a less than 20% success rate of converting that pipeline. Seems low, but I don't have a lot of context there. Can you, forgive me if you mentioned this already, but is there a... Is there a bogey that you can provide for like, historically, it's we convert 50% of this or 10% of this? I don't even know if that's a fair question, but figured it was worth a stab. It's absolutely worth a stab. I will not give you a target on what we convert our pipeline.

Speaker Change: Okay.

Speaker Change: Then quickly on the pipeline.

Speaker Change: Obviously, the 2027 revenue target.

Speaker Change: It includes the assumption of less than 20% success rate.

Speaker Change: Of converting that pipeline.

Speaker Change: Seems low, but I don't have a lot of context, there can you.

Speaker Change: Give me if you mentioned this already but.

Speaker Change: Is there.

Speaker Change: Is there a bogey that you can provide for like historically.

Speaker Change: We convert 50% of this or 10% of this I don't even know if that's a fair question, but figured it was worth a stab.

Speaker Change: It's absolutely worth a stab I will not give you a target on what we convert our pipeline.

Brian Kocher: But I will say this, Brian, I mean, in all again, transparently, a bigger pipeline translates to more volume growth. In general, a bigger pipeline translates to more volume growth. And as I mentioned to one of the other questions, I would think of a bigger pipeline, also providing us more confidence. in our long term revenue target, our revenue growth target of approximately 10%. Think of it in that line.

Speaker Change: We'll say this Brian.

Speaker Change: And all again transparently.

Speaker Change: A bigger pipeline translates to more volume growth and in general a bigger pipeline translates as more volume growth and as I mentioned to one of the other questions I would think of a bigger pipeline also providing us more confidence.

Speaker Change: In our long term revenue target our revenue growth target of approximately 10%.

Speaker Change: Got it.

Last question.

Speaker Change: I think of it in that line.

Speaker Change: Okay.

Speaker Change: Alright.

Brian Holland: My last question is, one of your customers in the protein shake category talked about some inventory destocking. I'm just curious whether or to what extent that might have flowed through to you, and maybe just any broader commentary about your positioning within that protein shake space, which I know just amounts to, I believe, one line today, but any updated thoughts on that? We won't discuss any particular customer or the impact of any particular customer. I will tell you this, we're excited about the category. We still see consumption in the ready-to-drink protein shake category growing dramatically. We have an opportunity, I think, even though Midlothian has some limitations in terms of its ultimate output, I still think we can eke out some more units that eventually we could sell.

Speaker Change: Hello.

Speaker Change: Okay.

Speaker Change: One of your customers in the protein shake category talked about some inventory destocking.

Speaker Change: Just curious whether or to what extent that might have flowed through to you and maybe just any broader commentary about your positioning within that protein shakes space was I know just amounts to I believe one line today, but any updated thoughts there.

Speaker Change: We will discuss any particular customer or the impact of any particular customer I will tell you. This.

Speaker Change: We're excited about the category, we still see consumption in the ready to drink protein shake category growing dramatically.

Speaker Change: We have an opportunity I think even though Midlothian is is has some limitations in terms of its ultimate output I still think we can eke out some more units that that.

Speaker Change: Eventually we could sell so overall.

Brian Holland: So overall, we continue to be excited about the ready-to-drink protein shake category. Appreciate it.

Speaker Change: We continue to be excited about the ready to drink protein shake category.

Jon Baumgartner: Thank you. Your next question comes from the line of Jon Baumgartner with Bezirhu Securities. Your line is open. Hey, good afternoon. Thanks for the question.

Speaker Change: I appreciate it thanks.

Speaker Change: Your next question comes from the line of John Baumgartner with Mizuho Securities. Your line is open.

John Baumgartner: Hey, good afternoon. Thanks for the question.

Jon Baumgartner: Maybe first off, Brian, if I see the detail on the gross margin bridge, very helpful, but I want to focus on the middle of the P&L. I mean, there was some nice leverage on OPEX in Q1, and I'm curious to what extent was that timing related, and if there are more, you know, sort of ongoing factors in there, are there any notable call-outs you have on SG&A, the benefits there, similar to the layout for gross margin? Yeah, Jon, the decrease in SG&A, 3.1 million, that was basically all related to timing with stock compensation. So, so there's a couple of things.

John Baumgartner: Maybe first off Brian. Thank you for the detail on the gross margin bridge very helpful. But I wanted to focus on the middle of the P&L I mean, there was some nice leverage on Opex Q1, and I'm curious to what extent was that timing related and if there are more sort of ongoing factors in there are there any notable call.

John Baumgartner: Do you have on SG&A the benefits there similar to the layout for gross margin.

Brian: Yes, John.

Brian: The decrease in SG&A were $3 1 million that was basically all related to timing with stock compensation.

Brian: So there's a couple of things one is we had some forfeitures in Q1 as some employees left in Q1 2025. In addition in Q1 2024 with the retirement of our prior CEO there were certain vesting of certain awards that accelerated which made the Q4 Q1 'twenty four number larger.

Greg Gaba: One is we had some forfeitures in Q1 as some employees left in Q1, 2025. In addition, in Q1, 2024, with the retirement of our prior CEO, there were certain vesting of certain awards that accelerated, which made the Q1, 2024 number larger. So really, your delta is all stock comp.

Brian: So really Youre Delta is all stock comp.

Greg Gaba: I wouldn't expect the number to be this low going forward. It'd go slightly higher as we wouldn't anticipate to have forfeitures. But that's really our driver.

Brian: I wouldn't expect the number to be this low going forward to go slightly higher as we would anticipate to have forfeitures, but thats really our driver year over year.

Brian Kocher: Okay, thanks, Greg. And then my second question is, can you speak a little bit more to that, the raw materials, the yield improvement that you're expecting in that forthcoming gross margin benefit? I guess, what does that entail? Are there any specific raw materials where you anticipate the greatest benefit and any, I guess, related costs to achieve that? Jon, it's a great question and thanks for asking it. Look, I think... You might be overthinking it. We're right now just using a little more product than we had planned based upon our standards. Now, that comes from a couple of different reasons.

Speaker Change: Okay. Thanks, Greg and then.

Speaker Change: And my second question is can you speak a little bit more to that the raw materials the yield improvement that youre expecting in that forthcoming gross margin benefit I guess, what does that entail are there any specific raw materials, where you anticipate the greatest benefit in any I guess related costs to achieve that.

Speaker Change: John It's a great question and thanks for asking it look I E.

<unk>.

Speaker Change: You might be over thinking it.

Speaker Change: We're right now just using a little more product than we had planned based upon our standards now that comes from a couple of different reasons could be recipe of compliance. So we've got training programs in place to to try to ensure recipe compliance is in the same area. It might be ingredients substitutes that can help us get more.

Brian Kocher: It could be recipe compliance, so we've got training programs in place to try to ensure recipe compliance is in the same area. It might be ingredient substitutes that can help us get more productive, which is why I said sometimes raw product and raw material yield, we first have to test it out in the R&D center, make sure we've identified it, then we go to a pilot plant, then we roll it across the network. So, it could be compliance related or recipe compliance related. It could be raw product substitution. It could be the right mixture. It could be the right processing time for product.

Speaker Change: <unk>, which is why I said, sometimes raw product and raw material yield we first have to test it out in the R&D Center make sure. We've identified then we go to a pilot plant then we roll it across the network. So it could be compliance related our recipe compliance related it could be raw product substitution it could be the <unk>.

Speaker Change: Mixture it could be the right processing time for for products. So it's a little bit of all those things I wouldn't say there is one silver bullet in there that that's.

Brian Kocher: So, it's a little bit of all those things. I wouldn't say there's one silver bullet in there that would solve all of this.

Speaker Change: Would solve all of this.

Brian Kocher: We've made some progress, but that's an area where I'd say, look, if some initiatives we have are pacing faster than we expected, like capacity creation, the improvements we expected in raw product yields is probably pacing a little bit behind. So, we need to catch up on that and do better.

Speaker Change: We've made some progress, but that's an area where I'd say look if some initiatives. We have are are pacing faster than than we expected like capacity creation. The improvements we expected and in raw product yields will probably are pacing a little bit behind so we need to catch up on that and do better.

Jon Baumgartner: Okay, thanks Brian. Thank you, Jon. Appreciate it.

Brian: Alright, Thanks, Brian.

Speaker Change: Thank you John appreciate it.

Daniel Biolsi: Your next question comes from the line of Daniel Biolsi with Hajai. Your line is open. Brian and Greg, I know it's not a driver of your margins, but I'm just curious what your outlook is for the raw material costs and what level of pricing we should expect for the year. Today we're just talking raw material in general.

Speaker Change: Your next question comes from the line of Danielle <unk> with <unk>. Your line is open.

Danielle: Hey, Brian and Greg I know, it's not a driver of your margins, but I'm just curious what your outlook is for the raw material costs and what level pricing, we should expect for the year.

Speaker Change: Todays talking raw material and general tariff can you clarify your question.

Greg Gaba: Tara, could you clarify your question? In general, just for the top line, between volume and price. Excluding tariff, I don't see a major increase or decrease this year. You know, if you see in Q1 here, we had a give back on price, which we're very transparent on. We had passed through give back, mainly OAT related in Q1, but it was less than 2%. I mean, it's probably fair to think of that similar type range, plus or minus in each quarter.

In general just for the top line between volume and price.

Speaker Change: Excluding tariffs I don't see.

Speaker Change: A major increase or decrease the Sherry if you see in Q1 here, we had a give back on price, which we're very transparent on we had pass through give back mainly related in Q1.

Speaker Change: But it was less than 2% I mean, it's probably fair to think of that similar type of range plus or minus in each quarter for the rest of the year.

Daniel Biolsi: Okay. And so I was encouraged by the share repurchase authorization announcement. And, you know, when I think about when you adjust, you know, your plans for risk or probability for free cash flow, it seems difficult to me to have a better ROI on free cash flow than buying back stock, you know, at below $5. For example, I'm wondering, are you thinking about share repurchases opportunistically, or is it just after all those other factors that you're thinking about share repurchase? Yeah, we try to be clear on this one. So our top priority is to delever, right to delever to get under two and a half times by the end of 2020-25.

Speaker Change: Okay.

Speaker Change: So I was encouraged by the share repurchase authorization announcement.

Speaker Change: When I think about when you adjust your plans for risk or probability on free cash flow.

Speaker Change: It's difficult to me to have a better ROI on free cash flow than buying back stock.

Speaker Change: Below $5. For example, Im wondering are you thinking about share repurchases opportunistically or does it just after all those other factors that you are thinking about share repurchase.

Speaker Change: Yes, Dan we tried to be clear on this one so our top priority is to delever prior to Delever to get under two five times by the end of 2000 2025.

Greg Gaba: We don't envision needing growth capex in 2025. So we wanted to get this authorization in place. If we're achieving that plan, if we're on track, and we're ahead of that plan to delever, we think there's an opportunistic area here to allow us to go buy back some shares. And that's why we have that plan. It's good to have it. I think it's a great tool to have in our toolbox to continue trying to drive shareholder value. And that's the way we look at it.

Speaker Change: We don't envision needing growth Capex in 2025, so we wanted to get this authorized for authorization in place. If we're achieving that plan. If we are on track and we're ahead of that plan to de lever. We think there is an opportunistic area here to allow us to go buy back some shares and Thats why we have that that plan in place.

Speaker Change: Well, it's good to have it.

Speaker Change: I think it's a great tool to have in our toolbox to continue trying to to drive shareholder value and Thats. The way we look at it.

Speaker Change: Okay.

Daniel Biolsi: Thank you, Daniel.

Speaker Change: Thank you Daniel.

Brian Kocher: I will turn the call back over to Brian Kocher for closing remarks. Thank you, Kate. Thanks to everyone who joined today for your questions for supporting us.

Speaker Change: I will turn the call back over to Brian <unk> for closing remarks.

Speaker Change: Thank you Kate.

Speaker Change: Thanks to everyone, who joined today for your questions for supporting US I'd really like to summarize just a couple of key things. If you only remember four things from the call. Today. Please remember these for first Q1 results beat expectations and we raised guidance accordingly.

Brian Kocher: I'd really like to summarize just a couple of key things. If you only remember four things from the call today, please remember these four. First, Q1 results beat expectations and we raised guidance accordingly. Beyond 2025, the combination of sustained multi-category growth and an accelerating sales pipeline gives us confidence in delivering our 25 revenue and long-term growth algorithm. So that's a key point.

Beyond 2025, the combination of sustained multi category growth and an accelerating sales pipeline gives us confidence in delivering our 25 revenue and long term growth algorithm. So that's a key point to remember secondly, we've made real progress on our operational priorities, particularly an unlock.

Brian Kocher: Secondly, we've made real progress on our operational priorities, particularly in unlocking trapped capacity. There is more progress to come. We identified and quantified supply chain projects for you, and those will drive significant and sustained improvement in gross margin throughout the balance of 25, into 26, and then continuing into 27 as well. Although the tariff situation is fluid, we have a plan in place to mitigate substantially all of the direct impact on Sunopta's financials and outlook.

Speaker Change: King trapped capacity.

Speaker Change: There is more progress to come we identified and quantified supply chain projects for Ya and those will drive significant and sustained improvement in gross margin throughout the balance of 25% in the 26, and then continuing into 2017 as well.

Speaker Change: Although the tariff situation is fluid we have a plan in place to mitigate substantially all of the direct impact on <unk> financials and outlook.

Brian Kocher: And then finally, we have a disciplined capital allocation process in place. And our $25 million share repurchase authorization gives management another tool in the toolbox for the pursuit of shareholder value creation.

Speaker Change: And then finally, we have a disciplined capital allocation process in place.

Speaker Change: And our $25 million share repurchase authorization gives management another tool in the toolbox for the pursuit of shareholder value creation.

Reed Anderson: Thank you for your time. Thanks for your questions. We look forward to updating you on our continued progress and we'll talk to you soon. Thank you all.

Thank you for your time, thanks for your questions. We look forward to updating you on our continued progress and we will talk to you soon thank you all.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change: Yeah.

[music].

Speaker Change: Sure.

Speaker Change: Yes.