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SI

SunOpta Inc. (STKL)·Q4 2024 Earnings Summary

Executive Summary

  • SunOpta delivered solid Q4 performance: revenues rose 8.9% to $193.9M on 12.8% volume growth, and adjusted EBITDA increased 20% to $26.1M with adjusted gross margin at 16.1% .
  • Reported gross margin compressed to 10.9% as Midlothian start‑up costs, incremental depreciation and short‑term supply chain investments weighed on profitability; management cited a 10+ day switchgear install causing ~50 bps margin impact in the quarter .
  • FY25 outlook introduced: revenue $775–$805M (+7–11%) and adjusted EBITDA $97–$103M (+9–16%), with H1/H2 revenue growth cadence of +8%/+10% and adjusted EBITDA split ~44%/56%; management reaffirmed a path to exit 2025 at a $125M adjusted EBITDA annual run‑rate .
  • Balance sheet strengthened: debt fell sequentially by $24.7M, achieving net leverage of 3.0x; FY24 cash from operations rose to $52.3M as working capital efficiency improved .
  • Wall Street consensus (S&P Global) was unavailable at time of analysis due to API limits; beat/miss vs estimates cannot be determined at this time (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Broad‑based growth and share gains: revenue +8.9% on 12.8% volume; four of top five customers grew double digits; volume growth across fruit snacks, broths, and plant‑based beverages .
  • Adjusted EBITDA up 20% to $26.1M and adjusted EBITDA margin improved versus prior year; management emphasized operational efficiencies driving margin expansion through 2025 (“confident in exiting 2025 at a $125M run rate”) .
  • Deleveraging and cash generation: sequential debt reduction of $24.7M; FY24 cash from operations increased to $52.3M vs $3.6M in FY23, supporting leverage target achievement at 3.0x and a new 2.5x target by YE25 .
  • Management quote: “Volume growth resulted in significant revenue growth…we could satisfy a 21% expansion in volume, grow adjusted EBITDA, improve operating income and increase cash flow” .

What Went Wrong

  • Reported gross profit decreased by $3.9M to $21.2M; reported gross margin fell to 10.9% (from 14.1%) and adjusted gross margin fell 110 bps to 16.1% due to incremental depreciation and short‑term supply chain investments .
  • Loss from continuing operations widened to -$4.6M vs -$3.0M prior year; diluted loss/share from continuing ops was -$0.04 vs -$0.03 prior year .
  • Midlothian start‑up completion caused 10+ days downtime and inefficiencies; management estimated ~50 bps margin impact in Q4 .
  • Customs duties correction: company accrued $7.4M for underpaid duties (2022–2024), recorded in COGS; prior periods revised, increasing FY23 losses and reducing prior Adjusted EBITDA, complicating year‑over‑year comparisons .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$178.1 $176.2 $193.9
GAAP Diluted EPS – Continuing Ops-$0.03 -$0.05 -$0.04
Adjusted EPS – Continuing Ops$0.04 $0.02 $0.06
Adjusted EBITDA ($USD Millions)$21.7 $21.5 $26.1
Reported Gross Margin %14.1% 13.4% 10.9%
Adjusted Gross Margin %17.2% 17.0% 16.1%

Notes:

  • Adjusted EBITDA as % of revenue reported as 13.5% in press release vs 13.4% cited in prepared remarks, reflecting minor presentation differences .

Segment breakdown: Not disclosed; management does not provide detailed customer/SKU commentary for competitive reasons .

Key KPIs (Q4)

KPIQ4 2024
Volume Growth (YoY)+12.8%
Adjusted Gross Margin %16.1%
Adjusted EBITDA Margin %13.5% of revenue
Debt (End of Q4)$265.2M
Sequential Debt Reduction vs Q3$24.7M
Net Leverage (End of Q4)3.0x
FY Cash from Operations (Continuing Ops)$52.3M

Non‑GAAP and adjustments (Q4 detail):

  • Start‑up costs recorded as revenue reduction ($1.306M) and COGS increase ($8.207M); wastewater haul‑off charges ($0.755M) in COGS; adjusted gross margin rebuild to 16.1% after these exclusions .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD)FY 2025N/A$775 – $805MIntroduced
Adjusted EBITDA ($USD)FY 2025N/A$97 – $103MIntroduced
Revenue Growth (YoY)FY 2025N/A+7% – +11%Introduced
Adjusted EBITDA Growth (YoY)FY 2025N/A+9% – +16%Introduced
Revenue CadenceH1/H2 2025N/A+8% / +10% YoYIntroduced
Adjusted EBITDA SplitH1/H2 2025N/A~44% / ~56%Introduced
Gross Margin ExitQ4 2025N/A18% – 19%Introduced
Interest ExpenseFY 2025N/A$24 – $26MIntroduced
CapEx (Cash Flow Statement)FY 2025N/A$30 – $35MIntroduced
Free Cash FlowFY 2025N/A$25 – $30MIntroduced
Net Leverage TargetYE 20253.0x achieved2.5xLowered target
Adjusted EBITDA Run‑RateExit Q4 2025Prior narrative target$125MReaffirmed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2024)Previous Mentions (Q2 2024)Current Period (Q4 2024)Trend
Supply chain & margin trajectoryOutput +20%; journey of 1,000 steps; expect back‑half margin expansion Short‑term investments to accelerate sustainable improvements; margin expansion starting Q4 Supply chain improved; hiring maintenance/reliability roles ($2–3M H1 impact); 18–19% GM exit Q4’25 Improving toward H2’25 targets
Category growth (plant‑based)Mid‑single digit growth tracked/untracked; foodservice/club strength Mid‑single digit shelf‑stable; protein shakes robust; fruit snacks strong Mid‑single digit plant‑based; coffee shops parity drives oatmix adoption Consistent growth tailwinds
TAM expansion (protein shakes)TAM expansion capacity ramping; Modesto extraction online 330ml format growth; TAM contributing to revenue Continued TAM expansion; pipeline of distribution wins and innovation Expanding
Capital allocation & leverageTarget <3x by YE; CapEx $25–30M; FCF $35–45M (FY24) Under 3x by YE’24; focus on deleveraging Achieved 3.0x; new 2.5x YE’25 target; CapEx $30–35M; prioritizing deleveraging Positive deleveraging
Operational excellence pivotEmphasis on sweating assets; ROIC focus Efficiency creates non‑CapEx capacity Pivot to operational excellence‑enabled growth; exec incentives tied to EBITDA/revenue/ROIC Structural shift entrenched

Management Commentary

  • “Q4 performance unfolded substantially as we anticipated…Adjusted EBITDA increased 20%…margin improved 130 bps to 13.4%” (prepared remarks) .
  • “Together, revenue growth in the 7% to 11% range, Q4 ’25 gross margin between 18% and 19%…gives me great confidence in achieving our targeted annual adjusted EBITDA run rate of $125 million as we exit 2025” .
  • “We have revised each of our executives’ incentive metrics…adjusted EBITDA, revenue growth and return on invested capital” .
  • CFO: “Revenue of $194M was up 9%…adjusted EBITDA increased 20% to $26.1M…debt was $265M, down $25M from the end of the third quarter…we achieved our year‑end net leverage target of 3x” .

Q&A Highlights

  • Revenue composition and guidance drivers: ~2/3 growth from categories/customers outperforming their categories; ~1/3 from known distribution wins/innovation; timing drives range outcomes .
  • Margin cadence: H1/H2 adjusted EBITDA split ~44%/56%; new roles ($2–3M H1 impact) will pay for themselves; gross margin exit 18–19% by Q4’25 .
  • Midlothian downtime impact: 10+ days of downtime from switchgear install likely cost ~50 bps of margin in Q4 .
  • Supply constraints and capacity unlock: tighter on fruit snacks than plant‑based; still expect fruit snacks to grow 10%+ in 2025; pass‑through pricing mitigates commodity inflation .
  • Foodservice and coffee parity: oat performs well in coffee; parity pricing with dairy enhances trial and penetration .

Estimates Context

  • S&P Global consensus EPS/Revenue/EBITDA for Q4 2024 and FY 2025 was unavailable due to request limits; therefore, formal beat/miss assessment vs Wall Street consensus cannot be provided at this time (Values from S&P Global unavailable).
  • Given management’s FY25 guidance and H2‑weighted margin trajectory, estimates may need to reflect +7–11% revenue growth and +9–16% adjusted EBITDA growth, H2 margin ramp to 18–19% GM, and exit run‑rate adjusted EBITDA of $125M .

Key Takeaways for Investors

  • Volume‑driven growth remains robust across categories and customers, with continued share gains and TAM expansion into protein shakes supporting top‑line momentum .
  • Near‑term margin pressure reflects deliberate, short‑term investments and start‑up costs; trajectory points to sequential EBITDA improvement through 2025 and high‑teens gross margin by Q4’25 .
  • Balance sheet improvement and strong operating cash flow provide flexibility to prioritize deleveraging to 2.5x by YE25 while maintaining maintenance/productivity CapEx .
  • Operational excellence pivot (over growth CapEx) and executive incentives tied to ROIC should enhance capital efficiency and sustainable margin improvement .
  • Q4 margin headwinds included Midlothian downtime (~50 bps) and customs duty accrual; both are being addressed and are not expected to recur at 2024 levels .
  • Guidance suggests H2’25 strength; catalysts include capacity unlocks, distribution wins, and disciplined price pass‑throughs to mitigate commodity inflation .
  • With consensus unavailable, trading narratives should focus on management’s reiterated path to a $125M adjusted EBITDA run‑rate exit in 2025 and the H2 margin ramp as key stock catalysts .