Good afternoon, and welcome to SunOpta's First Quarter 2022 Earnings Conference Call. By now, everyone should have access to the earnings press release that we 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 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 future performance, and therefore, undue reliance should not be placed upon them. We refer you all to the risk factors contained in SunOpta's press release issued this afternoon, the Company's annual report filed from 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. 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 in 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. Please go ahead.

Good afternoon. And thank you for joining us today. With me on the call is Scott Huckins, our Chief Financial Officer. We are pleased with the first quarter results which exceeded our expectations. We are especially pleased with a strong rebound in top-line growth as we made solid progress working through the various constraints that negatively impacted Q4. Before we begin unpacking the Q1 results, let me offer some takeaways from the quarter. We saw significant sequential improvement versus Q4 up and down the P&L and across the business. Revenue was up 18%, gross profit was up 52%, and EBITDA was up 46%. Top-line growth was strong across the portfolio fueled by pricing but also supported by volume growth. We had record production in our plant-based manufacturing facilities, which drove gross margin improvement versus Q4. Production was up 19% versus Q4 and 8% versus Q1 2021, which was the previous best quarter ever. This record output allowed us to improve service levels, and importantly, rebuild depleted safety stock. Oatmilk sales continued to be very robust with sales up 59% versus Q1 2021. Led by strong growth from Dream oatmilk in our largest food service customers along with our partner brands. The brands we support, in part or in full, are now roughly one-third of the U.S. oatmilk market and are gaining share every week. We are firing on all cylinders from the supply of oats to extraction to customer development. We are maximizing every drop we can produce. We are producing volume above the projections from our original capital project underwriting and benefiting from very strong demand for fruit snacks and better alignment of costs and prices in Frozen, which delivered a better than expected Q1 in our fruit business units. We are on track with plant expansion projects including our Greenfield plant in Texas, and we are making real progress in pre-selling capacity. We are tightly managing the inflationary environment. Despite double-digit inflation in Q1, we only had $2 million of inflation that wasn't covered by increased customer pricing. Given macro uncertainties and how early we are in the calendar, we are not updating our financial outlook today. That said, we are increasingly optimistic about our ability to manage the controllables and enhance execution in our clients. Now let me share some highlights from the first quarter. Total revenue was up 16% to $240 million, including solid increases in both plant-based and fruit-based, driven by a combination of pricing and broad-based volume and mix gains across our portfolio. Of this 16% growth, approximately two-thirds came from pricing and one-third from volume gains and the 2021 acquisition of Dream and WestSoy. Gross margin declined 270 basis points to 11.7% on a consolidated basis, but was up from the 9% we reported in the fourth quarter. There were several puts and takes which Scott will cover in more detail, and we continue to take steps to mitigate the impact of inflationary factors remaining firmly on track for further margin improvement. Adjusted EBITDA was down $2.7 million versus the prior year to $15.6 million, primarily due to the slight reduction in gross profit. We also incurred higher labor costs related to a one-time bonus to recognize the outstanding turnaround in our plan in Q1. Importantly, adjusted EBITDA was up 46% from the fourth quarter of 2021, reflecting the anticipated improvement and strong execution in the business, which we discussed on the Q4 call in February. Inflation is probably the leading topic on everyone's mind. So I’d like to provide some additional context for you on how key inflationary factors are impacting our business, and how we have successfully addressed these items in the quarter and beyond. This sets us up well for margins over the balance of 2022 as well as our longer-term review. We experienced $23 million of cost inflation versus last year. These costs were covered by $21 million of customer pricing actions. We also have additional pricing being executed in Q2. There is obviously inflation impacting other cost areas, such as SG&A, but overall, we are keeping pace with the unprecedented inflationary increases. However, one caveat is that at almost any point in time in the last nine months, our assessment of our business would be that we were effectively addressing all known inflationary costs to customers. But as we have seen, that could change the next day. I will describe the pricing environment with customers as constructive. While a few companies may be using the current inflationary environment to enhance margins, we have chosen to take a more long-term approach to building and maintaining partnerships with our customers. Now we'll turn to our segments starting with plant-based. I'd like to remind listeners that we have three strategic priorities. First, strengthening and fortifying our competitive advantages. Second, building a strong ingredient business focused on both to drive growth in refrigerated beverages. And third, building a multi-pronged go-to-market business that includes co-manufacturing, private label, and owned brands. Plant-based revenue increased 13% to $136 million in the first quarter, another record and our 14th consecutive quarter of revenue growth. Of the 13% growth, approximately 60% came from pricing and 40% from volume gains including the acquisition of Dream and WestSoy. Growth was broad-based within the portfolio across sales channels, product types, and customers. Strong demand for oat-based offerings led the segment once again, increasing 59% versus the prior year period. Oats as a percentage of the plant-based milk portfolio have doubled in the last 24 months approaching one-third of sales and underscores the value of our innovation focus. As we have seen for almost a year now, our oat-based derive from an often proprietary oat extraction process is winning in the marketplace. As I mentioned earlier, brands we support contribute roughly a third of the segment market share, as measured by Nielsen retail scan data. Oat has been the big winner and our plant-based milk sales are up 18%. The total category has seen a bit of softness of light, but we believe some of this is due to COVID overlap. As we look at the category on a two-year basis, it is up 10% and has grown steadily for over a decade. Additional growth drivers for SunOpta were our tea business, which rose 26% and ingredients, principally oat-based, which were up 37%. From a customer demand perspective, demand was broad-based. Revenue from our top five customers grew 14%, slightly ahead of overall plant-based and reflected significant contributions from new products and a large new plant-based customer. Our ability to develop innovate and rapidly scale new products remains a core competitive advantage. In fact, during the first quarter, the majority of our growth came from new products or new customers. We continue to make progress on the development and execution of our branded portfolio. As a percent of overall plant-based business, our own brands represent approximately 9% of the total compared to under 2% a year ago, and private label increased approximately 11% driven by gross sales, and we also had solid similar gains in our co-manufacturing business. Finally, ingredients continued to show strong growth, up 30% in the quarter. We are a growth company and as such, business development is of paramount importance to our sustained growth trajectory. We onboarded a significant new plant-based milk customer in 2021, which will contribute to growth in 2022 and 2023. We are also working on a contract extension with one of our top three customers that will extend our relationship out to 2027. Let me share an update on our expansion initiatives, which are foundational in our plan to double revenue and more than double gross profit from 2020 to 2025. By the end of 2022, we will have effectively doubled the manufacturing capacity of the business versus 2020. This doubling is achieved through six capital projects, four of which are complete and have added over $150 million of revenue capacity. The fifth project comes online in Q3 of this year in Modesto, and is on track. A big one, our Texas Greenfield plant is impressively still tracking toward the Q4 startup despite all the macro supply chain challenges. While we have a lot of work left to do in Texas, we are within four weeks of our original schedule and have already hired the majority of the management team. This is a testament to our ability to execute. We broke ground on a 30-acre dirt field on September 8, 2021. And in the 245 days since then, we've poured 80 million pounds of concrete, stood up walls, installed HVAC, electrical and plumbing. And believe it or not, this week, we started the installation of the processing equipment. This week alone, we have over 165 contractors working on-site. While I'm sure we'll face more challenges between now and the end of the year, success always comes down to people executing, and our ability to execute is fueled by our culture of entrepreneurship, passion, and accountability. As I mentioned on the last call, we are making great progress on the selling off of capacity. We will provide a more fulsome update at investor days including how this new facility contributes to our long-term growth algorithm. I referenced a second oat extraction facility on the last call, which is over and above this doubling of capacity. We are currently at capacity on our first extraction system. And as I mentioned, our oat-based products are winning in the marketplace. Our existing oat customers continue to grow at a rapid rate. We are confident based on customer discussions and commitments that this new system will be highly utilized. This project is now underway and will be online in Q3 of 2023, giving us 80% more oat capacity and taking our overall capacity to nearly $200 million. Importantly, this new system will add oat capacity to the West Coast where it's needed. Moving onto our first segment, our three strategic priorities are number one, de-risking the business through geographic diversification, customer pricing programs, and better grower relations. Two, becoming the low-cost operator in frozen fruits through automation, footprint reengineering, and aggressive cost takeouts. And three, evolving the portfolio via innovation towards more value-added offerings. We were very pleased with the performance of our fruit business unit in Q1, as our strategies really took hold. Fruit-based revenues increased 19% to $105 million in the first quarter, two-thirds of which was driven by pricing. Volume and mix accounted for roughly one-third of the increase, which also benefited from some one-time volume from our largest customer. Frozen fruit revenue grew 16% and was largely driven by pricing. We continued to experience very strong demand for fruit snacks with revenue up 29% in the quarter, which was primarily driven by volume gains on the base business, along with the smoothie bowls, which we recently launched via a private label offering at one of the largest retailers in the world, via a co-manufacturing brand with a massive global food company, and also via our own brand. Sales to our top five customers in frozen were up 37% year-over-year and accounted for 80% of the total versus 68% in last year's first quarter. In snacks, our sales to our top five customers rose 30%. Fruit snacks remain a large non-trend category that continues to demonstrate strong growth dynamics. Nielsen data for the 13 weeks that coincide with our first quarter show the total fruit snack category up 9%, which implies significant share gains for SunOpta and its customers. Before closing, I want to touch on our efforts around sustainability. Last year, we took steps to formalize our environmental, social, and governance framework, harnessing the passion of our employees to move us forward into a new era of awareness, engagement, and responsibility. Our most recent ESG report, which was released roughly two weeks ago, summarizes SunOpta's approach relative to four key areas: products, plant, people, and governance. It highlights our commitment and actions as we continue to advance sustainability and communicate transparently. We are proud of our progress so far, and we embrace the opportunities that lie ahead as we work to sustainably fuel the future of food. In summary, 2022 is off to a strong start. And we are very confident in our direction and outlook. Our strategic growth priorities around portfolio transformation, innovation, and doubling the plant-based business have not changed. We remain committed to our long-term growth algorithm of annual double-digit plant-based revenue and profit increases, and continue to focus on increased return on invested capital. SunOpta offers investors interested in plant-based foods and beverages the rare combination of both strong top-line growth and profitability today. We expect year-over-year adjusted EBITDA growth in Q2, and every quarter moving forward. Now I'll turn the call over to Scott to take us through the rest of the financials.

Thank you very much, Joe. And good afternoon everyone. First quarter revenues of $240.2 million were up 15.7% year over year, with solid gains in both segments. Plant-based revenue increased 13.4% driven by strong demand for our oat-based offerings and teas, along with pricing actions and the impact of the Dream and WestSoy acquisition. Fruit-based revenues increased 18.7% as we benefited from pricing actions implemented in the second half of 2021 alongside strong demand for fruit snacks and smoothie bowls, and some one-time orders from our largest frozen customer outside of normal distribution, which represented nearly half the revenue growth. Gross profit was $28 million for the first quarter of 2020, a decrease of $2 million compared to the first quarter of 2021. And consolidated gross margin was down 270 basis points to 11.7%. Most of the decline was attributable to temporary factors in our plant-based segment. Importantly, gross margin expanded 270 basis points from Q4. In the plant-based segment, gross profit decreased $3.2 million and gross margin was down 470 basis points to 14.7% versus the prior year. The 14.7% margin rate improved 300 basis points from Q4 and was consistent with what we communicated during our Q4 call. We expect further sequential margin rate improvement in Q2 and significant growth in gross profit dollars. Unrecovered inflation represented $2 million, which along with $1 million of increased depreciation expense accounted for the decline in year-over-year gross profit. These factors were partially offset by higher production volumes and improved utilization at our plant-based beverage ingredient operations. In fact, Q1 production in plant-based notes was up 8% over last year, and 19% sequentially from Q4 2021, exiting the quarter very strong. On a margin rate basis, we estimate that the passthrough of costs created 150 basis points of margin rate dilution, as the pricing gets added to each revenue and cost of goods sold on a similar basis. Given the transportation availability challenges in the quarter, we estimate that we left $7 million of revenue and $2 million of gross profit on the table due to the challenging environment, with even some of the global leading consumer packaged goods companies unable to arrange carriers to pick up their products. In April, with some additional focus, we did see some improvement in this transportation dynamic. In the fruit-based segment, gross profit rose $1.2 million and gross margin of 7.7% was flat with the prior year. Gross profit and fruit benefited from portfolio rationalization along with manufacturing efficiencies stemming from our consolidation efforts last year. A lot of passing gross profit dollars on a margin rate basis, we estimate that the passthrough of higher costs represented 100 basis points. Segment operating income was $3.9 million in the first quarter, compared to $6.1 million in the year earlier period. The year-over-year decline was attributable to the previously mentioned $2 million of lower gross profit on a consolidated basis, a $1.1 million increase in SG&A, including a special one-time bonus recognizing the significant improvement in production, and $0.4 million of incremental amortization for Dream and WestSoy. Partially offsetting these factors was a $1.3 million improvement in year-over-year foreign exchange results related to our Mexican operations. Earnings from continuing operations for the first quarter were $0.7 million, which was down from $1.7 million in the prior year period. On an adjusted basis, we had earnings of $0.6 million or $0.01 per diluted share in the first quarter of 2022 versus adjusted earnings of $1.3 million or $0.01 per diluted share in the prior year period. In the first quarter, adjusted EBITDA was $15.6 million compared to $18.3 million in the prior year, and $10.7 million in the fourth quarter of 2021. The primary driver of the year-over-year reduction in adjusted EBITDA was the $2.2 million decline in operating income. I'd like to remind listeners that adjusted EBITDA and adjusted earnings are non-GAAP measures, and a reconciliation of these measures to GAAP can be found toward the back of the press release issued earlier this afternoon. Turning to the balance sheet and cash flow. As of April 2022, total debt was $250 million and reflects $159 million drawn on our asset-based credit facility, $84 million of capital leases, with a balance representing smaller credit facilities. Leverage stood at 4.3 times at the end of the first quarter, just above our previously communicated range. It is important to point out that our current leverage position is largely reflective of the timing and scale of our significant and planned investments in capacity expansion over the last two years. As we have said for many, many quarters, these investments are needed to double the capacity, revenue, and profits of our plant-based business. As we hit stride with some of the 2021 and 2022 projects, and as Texas comes online at the end of the year, we would expect a reduction in leverage in 2023. We believe executing this magnitude of capacity expansion in this environment will be rewarding. From a cash flow perspective, cash provided by operating activities of continuing operations during the first quarter of 2022 was a strong $15.5 million compared to cash used of $7 million during the first quarter of 2021. This result is essentially a 100% drop through of Q1 EBITDA. Cash used in investing activities from continuing operations was $24.5 million, compared with $7.9 million in last year's first quarter, primarily reflecting investments in capacity expansion projects. Let me close with some comments on our outlook for the balance of 2022. Recognizing the environment is very fluid as it relates to inflation, supply chain, labor, and raw materials. We are maintaining our prior guidance first introduced on our Q4 call of revenue in the range of $890 to $930 million, which translates into a growth rate of approximately 10% to over 14% compared with 2021. As we have said for several quarters, we generally expect the first half of 2022 to be more challenging than the second half of the year. As such, we would expect margins to be stronger in the second half of the year compared to the first half based on our existing capacity. I also would like to remind listeners about how we see the plant-based facility in Midlothian, Texas, affecting 2022 gross profit and gross margin. As we previously stated, we expect commercial production to start at the very end of the year. To be ready for year-end production, we expect to incur approximately $10 million of startup costs primarily in the second half of the year, roughly evenly distributed between Q3 and Q4. While these startup costs are added back to adjusted EBITDA, they will affect gross profit and gross margin rate as reported. From a profitability standpoint, we remain very confident in the previously communicated adjusted EBITDA range of $67 million to $75 million for 2022. This represents 10% to 25% growth over 2021. As Joe mentioned, we expect year-over-year improvement in gross profit and adjusted EBITDA for the balance of the year. We also reiterate our expectations for $100 million from adjusted EBITDA in 2023. From a capital standpoint, we continue to expect capital expenditures in the $110 million to $115 million range, as reported on the cash flow statement, driven primarily by the new facility in Texas. As a reminder, this facility is being financed through the company's credit and leased facilities, and we do not need equity capital to fund these investments. Finally, I'd like to remind listeners that we are holding an investor day on June 2, where we plan to unpack the business in detail, further depict our sources of competitive advantage, and share additional financial metrics, including our outlook for performance through 2025. 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. And with that, operator, please open up the call for questions.

Your first question comes from the line of Brian Holland with Cowen and Company. Your line is open.

Yes, thanks. Good evening, everyone. When looking at gross margin in a sequential context and considering the ongoing market factors along with the corrective measures implemented, shouldn't we expect Q1 to be the low point for fiscal 22 gross margin? You've mentioned potential rebounds ahead, so it seems likely that we will see a significant year-over-year increase in Q2. Could you clarify if Q2 will be higher sequentially for gross margin, but still down compared to last year, while the latter half of the year shows an increase compared to the previous year?

Hey, Brian, this is Scott. So I think you've got to generally right, if we would expect as we work our way through 2022, sequential improvement and margin, again, sequential from four to one in Q1 and Q2 etc. So that's the core of your question; the answer to that is yes.

I wanted to expand on the topic of elasticity, particularly regarding the strong performance in fruit and the distribution benefits we experienced in Q1. However, we made significant pricing changes. Additionally, we should consider the impact of inflation, as we have exposure across various pricing tiers. I'm curious about the dynamics you're observing in plant-based products, as well as your thoughts on the fruit category. Any insights would be helpful.

Yes, Brian, it’s Joe. We're certainly keenly watching elasticity as we look at volume growth as a lever; obviously, we have two ways for volume to grow: aggregating or growing share within existing or new customers. And you certainly heard us reference that as a volume growth driver as well as our core underlying category growth. So, we did see certainly dollar sales growth in plant-based unit growth was slightly down, but as I mentioned on a two-year basis, and any longer timeframe in plant-based, you continue to see pretty strong upward momentum. We reference plus nine on snacks, which is fantastic. And then on frozen, it's holding its own in the face of some pretty significant pricing drop in the category.

Appreciate the color, Joe. Last one for me, I'll get back into queue. You mentioned several more customer updates here on the second slide. Just stepping back, can you talk about what's driving—I don't want to talk about specific customers, etc. But can you talk about what's driving the wins right now in this environment? I mean, conceptually, we understand it—you're adding capacity, partnering with a broad manufacturing network, etc. But what's happening right now, is that all just coming to fruition? Is this demand outstripping supply? And people are just looking anywhere they can to help break for us? What's bringing in this new business right now?

Yes, Brian, either the one I referenced specifically, which will end up being a very significant customer for us has been in development for a considerable period of time. It wasn't an emergency rush to SunOpta because we happen to have production output. Unfortunately, our business doesn't fit it that quickly. This is really long-term customer development, as we shared many, many times. I mean, in this category, in this industry, customer development is a 12 to 24-month cycle. And so, really, we felt like it was worth referencing today, simply because the efforts are starting to pay dividends in terms of revenue growth and was worth highlighting, but this is something we candidly have been working on since probably the end of 2020.

Your next question comes from the line of Andrew Strelzik with BMO Capital Markets, your line is open.

Hey, good afternoon. Thanks for taking the questions. I guess I wanted to tack onto the question about elasticity and just talk generally about plant-based demand. I guess, what's your sense for how the category holds up in a softer spending environment? I guess that the customer for that category probably skews more higher income. I don't know if there's an interplay with food service to think about. I'm just curious how you think about generally speaking the plant-based category in the event that we get into a type of consumer environment?

Yes, Andrew, I think there's a couple things to consider; one, the category does skew higher income. Second, this is a category where many people are in the category for either health reasons, meaning they believe that these are healthier products to consume versus the alternative, or they have a dairy allergy and the alternative isn't available to them. So typically, what I've seen in 30 years in food is, consumers are loath to trade off a product that they're purchasing for a health reason and make an unhealthier choice just to save $0.50; they’ll cut something else in their overall spending budget before they'll sacrifice their own personal health.

Okay, that makes sense. And then, on the operational side, some of the strides that you made this quarter really kind of tighten down the execution, some of those things, and the productivity. Can you just talk about what drove that? I mean, was that really getting over the hump from a training perspective and a staffing perspective? Or was there just curious kind of how you think about what drove those dynamics?

Yes, I think, as we referenced on the Q4 call, we were slightly frustrated with our Q4 production simply because we had hired the majority of the people that we needed, and we just weren't getting the output. To say that the team rose to the challenge and started knocking the ball out of the park is an understatement. I mean, almost 20% production growth in Q1 versus Q4. And it's worth pointing out, I mean, Q1 was not without headwinds. To post those numbers, record quarter, flat 8%, versus our best quarter ever in the history of the company, I think really speaks to us as an operations manufacturing driven company who knows how to run these plants. I think you see that in the numbers. I mean, we're an operations company; we're not a marketing company, we're not just a brand, we're operators, and it was great to get our mojo back.

Absolutely. And then, just my last one, if I could, I guess I'm just trying to understand how to think about the food segment going forward, and you're talking about sequential margin improvement. Generally, there was the note of the one-time volume contribution; maybe you can frame how big that was. But knowing the context of that and what was for us, a better performance in that segment than we were anticipating, how should we think about the sustainability of that throughout the rest of the year? Thanks.

Andrew, this is Scott. The reason we called out the so-called one-time distribution was just from a go forward standpoint, by definition, we didn't assume that's going to repeat. So, the 18% - 19% growth in the quarter; roughly half of that or approaching half of that was driven by that outside of normal distribution revenue. So, again, I think we're pleased with the results in Q1. I'm generally bullish about seeing continued solid progress in fruit really for the balance of the year. So yes, I think it's consistent with the narrative of the company.

Your next question is from the line of John Anderson with William Blair. Your line is open.

Good afternoon, everybody. Thanks for the questions. Maybe just kind of tagging on to that last question. The piece of the fruit-based food and beverage growth in the quarter, it was related to that one-time order from a large customer. Does that come out of Q2? Or was that kind of a pipeline filler or something? Just trying to understand if that's going to have to come out of the Q2 revenues as we think about modeling that?

Yes, good question, John. No, it doesn't come out of Q2; it was that customer that had a shortfall from another supplier. They asked us if we could step in and fill in while they were scrambling, and we happened to have the inventory available to help them out. So we did, but it was outside of kind of the core divisions for that particular customer that we cover.

Got it. That's super helpful. And as you think about the fruit-based business for the balance of the year, let's say it grew 9% or 10% excluding that order? I mean, are you seeing a similar kind of level of growth through the balance of the year? Or is it not that simple given maybe some comparison issues or other factors?

As I understand, I think it's a good representation of what I would see from Q2 to Q4. Keep in mind, it's nuanced, because we have a bunch of SKU wrap that we're comparing year over year. But putting that aside, I think it's representative of what we would expect to see, even on a balanced view.

Okay, super helpful. Shifting over to the—well, let me actually stay with fruit. Could you talk a little bit about the harvest sourcing, fruit availability, food costs, and how that may impact your margins for that particular segment?

Yes, John. The core of our food operations is now based in Mexico as we've closed a significant number and taken almost 8% of the square footage out of California. Mexico has really become the cornerstone of our fruit business. We had a very successful berry season, and availability and pricing and quality were all good; that berry season is wrapping up. So almost all the fruit in Mexico that California season is just starting. So very early days, but no major reports, either kind of good or bad, just early days there. So nothing hitting us from a negative standpoint at that point. But as you know, it's a dynamic business.

Right, but it's good to hear because we've had kind of three seasons that have been let's call it less than normal, right?

Yes. So volumes and availabilities were at or maybe even exceeded our expectations a bit in terms of the availability of fruit. And again, pricing was in line with where we were expecting it, so no surprises.

Okay. So the next thing I want to do is dig into the plant-based business and talk about capacity because your plan is to double that business from 2020 to 2025. It was a $415 million business in 2020. So, implies a 30% compound annual growth rate. But you talked a little bit about your capacity expansion programs, and you had some capacity that you added in 2021. You have more capacity that you're adding in 2022 and then some more in 2023. So can you kind of walk us through where you are today in terms of total capacity to serve this business, and then, with the addition of Midlothian at the end of the year, how does that step up your capacity? And then with the ingredients, I guess, another extraction facility in the third quarter out west? Where does that take you? I mean, does that get you the capacity you need to aggregate to do north of $800 million? Or is there more on the come? I know there's a lot there, but I'm really just trying to understand the sequence here and how that builds your capability and capacity to hit that target?

Yes, so six projects equal doubling the revenue potential of the business. So six projects add circa $400 million; four of the six are already done. They're already producing, cases are already in our run rate. As a reminder, we grew revenue $100 million from 2019 to 2021. So, we're already realizing the value of the capacity additions; this isn't all just hold your breath and wait for it. It's coming. Four of the six projects are completed. Those four projects in aggregate are equal to, let's call it $150 million is what I've referenced. So those four projects give us $150 million. Then we've got another project coming on in Modesto. We haven't quantified that. But between that project in Modesto plus Texas, call it the remaining $250 million to go.

Sure.

And as it relates to the second extraction facility, that is over and above the doubling.

Okay. And you mentioned, is that attack on to Modesto? Or is that a wholly new location?

Good question. We are doing that inside of Modesto, so much easier to execute. As you know, there are a lot of supply chain challenges doing construction right now, and we found a way to do it inside of Modesto. So that is expediting that project for us. We’re excited to get that project moving.

Okay. And I think if I heard you right, you said that you're basically sold out of your existing extraction capacity. And that's where I think much of the growth— I mean, you have broad base growth in plant-based; I think it's been higher within that ingredient portion. Does that slow you down? Is that a limiter here on the plant-based growth until you can get the second facility up in 2023? How does that work into the goal of delivering double-digit or mid-teen plant-based growth?

Yes, I thought you might ask that question. So we did $80 million in revenue in oat-based products in 2021, and on the Q4 call we said we could grow 50% off of that. So, we can grow out sales $40 million in 2022. And what we are communicating is we're kind of at that pace, meaning that $120 million pace in Q1. But if we do that same number in Q2, Q3, and Q4, obviously on a year-over-year overlap basis, that represents pretty significant growth because we can grow 50% for the full year.

Okay.

And then as it relates to—and your next question might be, what about Q1 and Q2 of 2023? Are you going to be stuck until Modesto comes online? We are aggressively working to find other sources of oats from other suppliers to help us bridge, we've got ultimately almost a year to figure that out. But we're working on that now to identify additional sources of oat-based and how to squeeze more productivity out of our existing facility, which we try to do every single day.

Yes. Okay. And then with your largest customer, are you seeing mix shift in your business with your largest customer? I mean, are some forms or crop forms declining in favor of oat? And do you still fully expect to be kind of a permanent factor in their oat-based business?

Absolutely. To the second part of your question, yes, we're definitely seeing some mix shift. Again, we're seeing category growth in plant-based milks within foodservice growing and oat milk doing well, both growing total kind of category if you will, but also sourcing some volume from the other formats. But you know, there's some promotional impact there, so really, it needs to be a kind of longer-term-based answer to the question. But the oat milk isn't 100% incremental; we've not seen it be 100% incremental in foodservice. And we continue to service all our old customers that are very, very high-level. We expect to be in business for a long, long time.

Okay, I've got so many here, I got to stop and let someone else ask? I think I'm going to do a couple more. So, you're seeing you covered? It sounds like on the inflation side, you covered everything that $2 million, is that right, in the quarter? So do you only need or do you plan another $2 million in pricing? Or have other commodities moved higher? Such that, what kind of price I guess, are you thinking, just generically speaking, which businesses? What kind of magnitude? And when does it go in?

It's a customer-by-customer answer to your question, John. So I don't want to kind of go down to that granular level. But yes, we—as you might expect, I mean, we certainly have pricing in the market that will cover that $2 million and then any other inflationary factors that we've seen subsequently.

But when you say in the market, you mean, you've communicated it? If we don't, we'll be effective at some date in the future?

Yes, I mean, that's what I was saying. I mean, we just went through this yesterday with the team, some are effective 5-1, some 5-16, some 6-16. I mean, it wasn't just one blast of a price increase to everyone. These are handled customer by customer, product by product, and plant by plant.

Okay, cool. And then to clarify, I just want to confirm this; I heard this right, gross margin rate and EBITDA margin rate will improve sequentially throughout the year. Ours is Q1?

Correct. You heard that right, John.

Okay. And last one, I promised the acquisition contribution in the quarter in dollars.

It’s around $5 million, John.

5 million. Great. I apologize for all the questions, but thank you for the time and see you on June 2. Is that it?

Yes. Correct.

Ladies and gentlemen, thank you for participating. This concludes today's call. You may now disconnect.