Good morning, and welcome to SunOpta's Third Quarter Fiscal 2019 Earnings Conference Call. By now, everyone should have access to the earnings press release that was issued this morning and is available on the Investor Relations page on SunOpta's website at www.sunopta.com. This call is being webcast, and its transcription will also be available on the company's website. As a reminder, please note 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 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 morning, 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 in any forward-looking statements. 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. 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. Also, please note that unless otherwise stated, all figures discussed today are in U.S. dollars and are occasionally rounded to the nearest million. And now I'd like to turn the conference call over to SunOpta's CEO, Joe Ennen.

Good morning, and thank you for joining us today. I'm pleased to start by saying we had a productive third quarter with strong revenue growth and adjusted EBITDA of $9.9 million. I will take you through our third quarter performance and brief you on some organizational update. For the third quarter of 2019, we generated $296 million of revenue, which on an adjusted basis represented a 6.6% year-over-year growth rate. The growth was driven by our Global Ingredients and Consumer Products segments and was led by particularly strong performance in Healthy Beverages. During the third quarter, we generated exceptionally strong revenue growth and margin expansion in our Healthy Beverage platform. Specifically, the Healthy Beverage platform generated an impressive adjusted revenue growth of 31% during the quarter driven by growth across every beverage category. Additionally, our margin performance exceeded our internal expectations and is within the range of our previously communicated long-term target. This is encouraging in a quarter where we just brought on a significant increase in capacity. Our plant-based beverage and ingredients business is seeing strong demand across all channels and product categories. Following our recent capital investment, we are in an improved position in both capacity and capabilities. The added capacity, including two new fillers in Allentown, has allowed us to get an early start to the broth season this year, driving both increased revenue and margin. Further, the growing demand for plant-based beverages, particularly in the promising oat category, continues to drive a return on our investment. Finally, in contrast to last year, when executional issues and capacity limitations weighed on our fourth quarter results, we are looking forward to a well-planned and well-executed 2019 Q4. To sum up, we expect the momentum in this business to continue. The Healthy Snacks platform posted a revenue decline of…

Thank you very much, Joe, and good morning, everyone. I am excited to join this talented team and look forward to meeting and speaking with all of you in the future. Let me begin with some initial impressions from my first two months here at SunOpta. First, I joined the company because I saw opportunity, both in the attractive positioning in on-trend product categories and the transformation the company is undertaking. Having now been able to evaluate the business from the inside out, it is very apparent to me that there are incremental opportunities to drive profitability improvement through enhancing and streamlining processes across the organization. This should not only enhance margin, but also accelerate growth. I look forward to working with the entire team to create a stronger and more efficient organization. Let me walk through more detail on gross profit and the rest of the income statement, given Joe's discussion on the commercial activities and revenue during the quarter. I will also cover our balance sheet and cash flow results. Gross profit was $26.3 million for the third quarter of 2019, a decrease of $7.8 million compared to $34.1 million during the third quarter of 2018. Consumer Products accounted for $3.4 million of the decrease, mainly reflecting the impact of the weather-related strawberry shortfall in Healthy Fruit. Our financial results in Healthy Fruit were in line with our previous communication, which was a total impact to margins of $20 million to $30 million for fiscal 2019 and 2020. Based on Q3 performance, we would expect to be in the center of that range, and we have absorbed slightly more than half of the impact to date with sequential decreases expected in each of the next 3 quarters. The decline in Healthy Fruit was partially offset by increased gross…

[Operator Instructions]. Our first question comes from Amit Sharma with BMO Capital.

Scott, just a quick one on the global asset buying -- asset-based facility. As you're talking to the bankers, any early sense for how much incremental it may cost the company to renew this facility?

Not a lot there, and I think at the moment, we're really focused on drawing closure to whether it's an extension or refinance, and those efforts are underway. But at the moment, I'm not seeing any material headwind on that.

So as we model for next year and year after, we shouldn't really look for interest expense to be a bigger hurdle from a company perspective.

I wouldn't expect that to be a material adjustment.

Got it. And then, Joe, really encouraging performance on the beverage side. But I just want to make sure that we understand the ramp-up as we go into the fourth quarter and 2020. Can you talk about, like last year, fourth quarter '18, how big of an impact did we see on both margins and top line from poor execution around the broth business so that when you look at Q4 this year, most of that will be gone.

Just so I understand your question. So you're asking how significant is the overlap between Q4 -- upcoming Q4 and Q4 last year?

Yes, exactly.

Yes. I mean we're obviously in a much, much better position. You saw the results in Q3 of the beverage business. Q4 is obviously a very seasonally strong broth segment. It's worth noting that more than half the growth in the beverage business in the third quarter came from plant-based beverages, not from broth. So while it might be easy to orient around Q3, Q4 performance being driven exclusively by broth, the majority of the growth that we saw in the third quarter was from plant-based beverages, which obviously have less seasonality than broth. So going into the fourth quarter, I mean, we would expect a significant improved overlap versus Q4 of last year on the beverage business.

And just to confirm the additional broth business that you're winning and the additional plant based as well, the margin profile of these new business wins is at least as good as we had historically in the beverage business, if not better.

Correct. There's not a material difference between the margin profile of our broth business and the margin profile of our plant-based beverages.

And obviously, you benefit from better utilization of your asset base as you continue to grow up volumes here.

Absolutely.

Right. And on food, Joe, again, encouraging to hear you confirm that 3Q is probably the trough in terms of margins. Can you just help us understand a little bit better, like what gives you the confidence and the visibility that this is as bad as it gets from a margin perspective for this business?

Yes, a couple of things. Number one is the third quarter, we had some pretty significant costs related to reworking inventory, previous inventory. Those costs will not materially impact us in the fourth quarter as well as the pricing that we've talked about extensively since really, the -- my first call, where we're seeking to remedy some overly aggressive pricing positions from 2018. And the majority of that pricing gain will be fully realized by the fourth quarter.

And the last one for me. This $8 million to $10 million run rate savings from SG&A, Scott, how should we think about that? Like if you -- at least I look at my model, I have total $115 million of SG&A in my model for 2019. And should I take $8 million to $10 million out of that bucket as we think about the flow-through of these savings for next year?

Okay. So the way to think about it is that the cost savings are on an as-realized real-time basis. So obviously, there could be inflationary costs that exist in the business. As an example, many, if not most companies will provide some level of merit increases and the like. And for those of you who spent time out in the West, you look at labor costs in California markets and the like would be some offsets to that.

Okay. But you would expect to take some sort of pricing to offset the net-end inflation in your cost bucket, right?

Yes, over time. I mean I think that the point I'm trying to drive at is that there will be some absorption of inflationary pressures against that 8% to 10%, but that's the action we've taken today.

Our next question comes from Jon Andersen with William Blair.

Clay Williams on for Jon Andersen. And I guess the first question would just be, I guess, the priorities going into 2020 as a...

Yes. I mean key priorities, execute our fruit optimization plan, continue to drive growth in the beverage business with very aggressive posture around driving innovation, winning new business and expanding our capabilities and capacity through some capital investments, which we previously discussed. And then on the Tradin Organics side, continue to leverage our global network to source additional organic supplies in key emerging commodities as well as leverage our manufacturing footprint that we've established around the world to add value to the ingredients that we're sourcing.

All right. And I guess, secondly, I was -- I guess, we talked a little bit about the global credit facility due in 2021. I guess is there any initial plans regarding the, I guess, the bonds that are due 2022?

Yes. I mean the way I think about it is, job 1 is to extend the maturity of the ABL. I think, job two, from purely a financing standpoint, is to continue to drive and improve the performance, specifically the EBITDA performance of the company, which obviously facilitates down the road a refinancing of the 2 elements.

And lastly for me is that, I guess, as we think about EBITDA in the fourth quarter, I guess, we mentioned the improved sequential and year-over-year improvements. I guess, kind of breaking that down, I guess, the reasons we're thinking the full -- I guess, the quarterly run rate for the corporate cost savings as well as, I guess, the reduced frozen fruit drag. I guess, as we think about -- I know that the incremental beverage business, you have installed capacity, I think about $70 million in September. Will we have the full run rate of that in the fourth quarter?

Well, I guess, maybe to try to take it in steps. So I think your premise is generally right. We have lift from the fruit business. We'd have some level of those SG&A savings. Again, I think as we described earlier, those are implemented across the fourth quarter. There'd be improvement in the beverage business, as Joe was just talking about, but there's also seasonal activities. Some of the businesses aren't sequentially as top line rich in the fourth quarter as they are in the third quarter. So like always, it's a series of puts and takes.

[Operator Instructions]. Our next question comes from Chris Krueger with Lake Street Capital Markets.

First question is on healthy beverages. You indicated a strong margin improvement as you fill up new orders and got the capacity up to speed. Did that margin improvement get better and better as the quarter moved on?

Yes. Yes, it did.

Okay. And can you repeat again, I think I've asked on other calls, but what are your margin goals for each of the two segments, longer-term goals?

Between -- you're talking...

Just Global Ingredients and then Consumer Products.

So on Global Ingredients, we've indicated 14% is our long-term goal. And on CPG, our goal is kind of 19% to 20%.

Okay. And then just last question. I know you guys have sold some businesses and done a lot of work in the last few years. But are there more assets that you could potentially monetize?

We're not about to announce a sale on this call. But as we've indicated previously, we have an active strategic review committee on the Board and are active in looking at what is the optimal portfolio. And do we feel like the long term -- the assets that we have are going to provide long-term shareholder value and returns.

We have a follow-up question from the line of Amit Sharma with BMO Capital.

Scott, just a question for you. Given your real deep experience on working capital and balance sheet, should we be thinking about free cash flow a little bit more for SunOpta? So long, it's been focused on the EBITDA line? As you look at the working capital line especially, do you see any opportunities for you to be a little bit more productive there? And just a word on CapEx. Should we expect it to stay in this $25 million to $30 million range?

Thanks for the question. So I think that there's always scrutiny on working capital and balance sheet efficiency. It's something that I'm focused on. So at the same time, we're obviously trying to grow the business as well. So remember, if we have -- we're reaching the growth initiatives that Joe just described to you, you have a put and a take. You have an opportunity to squeeze some working capital out of the business. But at the same time, we have to be prepared to invest in working capital to grow the top line. Joe commented on the beverage business growing 31% last quarter. There's obviously some working capital consumption on that. I think your next question was around CapEx. I think something in that $25 million to $30 million range on a longer-term outlook basis makes sense to me, recognizing that we obviously have the opportunity to finance some of that CapEx as well.

Got it. And Joe, one for you. Obviously, a very large strategic holder for you in the holder list. What's the interaction between the Board or between you and them? Is it still a healthy relationship? They're fully onboard with some of the changes that you're putting in place?

Absolutely. It's a very productive relationship. They're incredibly supportive of all of our activities, both at a strategy level as well as an execution level and are -- an absolute asset to the business and a great, great partner.

And I'm showing no further questions in queue at this time. I'd like to turn the call back to Mr. Ennen for closing remarks.

Okay. Thank you, operator, and thank you all for participating in our third quarter conference call. I look forward to speaking to you in the future and appreciate your interest and support in SunOpta. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.