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SI

SunOpta Inc. (STKL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue rose 12.9% year over year to $191.5M, driven by 14.4% unit volume growth; adjusted EBITDA increased 13.9% to $22.7M and adjusted EPS doubled to $0.04 .
  • Versus S&P Global consensus, SunOpta delivered a revenue beat ($191.5M vs $185.4M*) and an EPS beat ($0.04* vs $0.025*), while EBITDA (GAAP) was below consensus ($20.2M* vs $22.5M*) due to tariff timing and non-GAAP adjustments; adjusted EBITDA was $22.7M .
  • Management raised FY25 revenue guidance to $805–$815M and reaffirmed adjusted EBITDA at $99–$103M; H2 guidance explicitly incorporates ~+$8M revenue and +$10M COGS from tariffs and pass-through pricing with a timing lag .
  • Call commentary emphasized a strong multi-year pipeline, continued capacity unlock, and margin initiatives; near-term headwind is tariff timing and Midlothian wastewater constraints, with mitigation via price pass-through and operational programs .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and earnings momentum: “Second quarter results were outstanding…both revenue and Adjusted EBITDA growth continued their double-digits trajectory…” (CEO) as revenue hit $191.5M (+12.9% YoY) and adjusted EBITDA reached $22.7M (+13.9% YoY) .
  • Robust unit volumes across beverages, broth, and fruit snacks (+14.4% YoY volume), reflecting new product launches and improved plant utilization .
  • Raised FY25 revenue outlook to $805–$815M, reaffirmed adjusted EBITDA $99–$103M; pipeline “has never been stronger,” with new fruit snack line announced for Omak, WA (online late 2026) to meet demand .

What Went Wrong

  • Adjusted gross margin fell 80 bps YoY to 15.2% (reported 14.8%) due to tariff pass-through timing lag, labor/infrastructure investments, and incremental depreciation; company expects similar timing lag in Q3 .
  • Tariffs cut gross profit by $1.6M (−90 bps gross margin) in Q2 and will elevate revenue and COGS in H2 while neutralizing EBITDA dollars; pass-through mechanisms may lag by 1–2 months .
  • Midlothian wastewater constraint persists; management expects roughly $0.5M per quarter of excess haul-off fees until solution installation (mid-2026), limiting maximum output in protein shakes near term .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$193.9 $201.6 $191.5
Diluted EPS - Continuing Operations ($USD)$(0.04) $0.04 $0.03
Adjusted EPS ($USD)$0.06 $0.04 $0.04
Gross Margin % (Reported)10.9% 15.0% 14.8%
Adjusted Gross Margin %16.1% 15.3% 15.2%
Operating Income ($USD Millions)$2.7 $10.5 $10.5
Adjusted EBITDA ($USD Millions)$26.1 $22.4 $22.7

Actual vs S&P Global Consensus (Q2 2025):

MetricConsensusActual
Revenue ($USD Millions)$185.4*$191.5
Primary EPS ($USD)$0.025*$0.04*
EBITDA (GAAP) ($USD Millions)$22.5*$20.2*

Values retrieved from S&P Global.*

KPIs and Balance Sheet Highlights:

KPIQ2 2025 ValueNotes
Unit volume growth YoY+14.4% Price down −1.4% due to raw material pass-through
Gross profit impact from tariffs$(1.6)M (−90 bps) Similar timing impact expected in Q3
Net leverage2.9x Target 2.5x by year-end
Share repurchases163,227 shares, $1.0M at $6.04 avg $24.0M authorization remaining
Cash from operations (H1)$17.8M Working capital efficiency improvement

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$788–$805 $805–$815 Raised
Adjusted EBITDA ($USD Millions)FY 2025$99–$103 $99–$103 Maintained
Revenue/COGS tariff impact (H2)FY 2025Not specified+$8M revenue / +$10M COGS embedded in H2 New detail
Interest expense ($USD Millions)FY 2025$24–$26 (pacing) No update provided in Q2 PR Maintained (implicitly)
Capex ($USD Millions)FY 2025$30–$35 (cash flow stmt) No update provided in Q2 PR Maintained (implicitly)
Free Cash Flow ($USD Millions)FY 2025$25–$30 No update provided in Q2 PR Maintained (implicitly)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Supply chain/capacity unlockQ4: start-up costs and network ramp; adjusted GM impacted by depreciation/start-up . Q1: capacity up materially; aseptic volume +6% QoQ; fruit snacks +7% YoY .Continued capacity unlock; “we’re on track,” operational improvement plan progressing .Improving
Tariffs & pass-throughQ4 noted duty accruals; outlook introduced for FY25 . Q1: pass-through planned; lag 1–2 months; neutral to EBITDA dollars .Implemented pricing by mid-July; $1.6M Q2 gross profit impact; similar Q3 lag; H2 guidance embeds pass-through math .Managing headwind
Gross margin trajectoryQ1 outlined bridge from 15.3% (Q1 adj) to 18–19% in Q4, driven by fixed-cost leverage, yield, labor productivity .Q2 adjusted GM 15.2%; timing lag on tariffs and investments temper rate; improvement expected over 2025 .Gradual expansion (near-term dip)
Packaging/formatN/A.Pipeline largely in Tetra Pak aseptic format; evaluating formats but pipeline built on existing TETRA capacity .Stable
Midlothian wastewater constraintQ4: wastewater haul-off charges noted . Q1: ~$0.5M per quarter until mid-2026; limits max output .Continues; mitigation underway; broader network supports growth .Constraint persists (solution mid-2026)
Capital allocation / buybacksQ1: leverage to 2.5x by YE25; buyback authorization $25M for opportunistic repurchases .$1.0M repurchased in Q2; $24.0M remaining authorization; deleveraging continues .Balanced (delever + selective buybacks)

Management Commentary

  • “Second quarter results were outstanding…driven by robust volume gains…We also made significant progress advancing our operational initiatives to improve margins, including unlocking capacity and improving yields” (CEO) .
  • “We’re on track…our new business pipeline has never been stronger…our categories are growing and in fact some are accelerating” (closing remarks) .
  • On tariffs: “By the middle of July, we successfully implemented new pricing arrangements with all of our customers…gross profit was negatively impacted by $1.6 million…We expect to have a similar fiscal third quarter timing lag impact” .

Q&A Highlights

  • Pipeline strength and customer cadence: Weekly/monthly engagement with top 15 customers underpins bullish pipeline; categories have structural tailwinds (health/wellness) .
  • Packaging: Pipeline is primarily Tetra Pak aseptic; format continuously evaluated but current capacity aligned to TETRA .
  • Tariff pass-through (from Q1 context): Price pass-through expected to offset costs with 1–2 month lag; neutral to EBITDA dollars over time .
  • Midlothian constraint (from Q1 context): ~$0.5M per quarter wastewater haul-off until mid-2026; network rebalancing supports demand; capital solution in maintenance capex .

Estimates Context

  • Q2 2025 results vs S&P Global consensus: Revenue beat ($191.5M vs $185.4M*), Primary EPS beat ($0.04* vs $0.025*), EBITDA (GAAP) miss ($20.2M* vs $22.5M*). The miss on EBITDA reflects non-GAAP adjustments; company’s adjusted EBITDA was $22.7M .
  • Implications: Consensus likely moves up on revenue/EPS given beats; EBITDA modeling may require alignment to company’s non-GAAP definition and tariff timing cadence. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue and EPS beats vs consensus with sustained double-digit volume growth across core categories; demand-side narrative intact .
  • Near-term margin optics pressured by tariff timing and operational investments; underlying gross profit dollars protected via pass-through mechanisms .
  • FY25 revenue guidance raised; adjusted EBITDA reaffirmed—signals confidence in operational plan and pipeline conversion into 2026 .
  • Deleveraging trajectory continues (2.9x net leverage); buybacks underway ($1.0M in Q2), leaving $24.0M authorization flexibility .
  • Watch Q3: expected similar tariff timing lag; monitor adjusted gross margin recovery pace and capacity unlock milestones .
  • Structural growth tailwinds (better-for-you fruit snacks, plant-based beverages, broth) plus multi-channel/customer diversification reduce macro sensitivity .
  • Medium-term: Midlothian wastewater fix (mid-2026) should unlock output and add ~50 bps to margins longer-term; Omak fruit snack line in late 2026 positions for 2027+ demand .