Mission Produce, Inc. (AVO) Earnings

Management highlights

### Leadership Transition - Leadership transition is complete: John Pawlowski formally stepped into the CEO role, with former CEO Steve moving to Executive Chairman and remaining actively engaged with the team and board - Andrew Pearson joined as new Vice President of Investor Relations and Strategy ### Quarterly Operating Environment - Q2 2026 faced an unusual market environment with the largest Mexican avocado crop in years, leading to multi-year low avocado prices - An unfavorable temporary imbalance between supply and demand for core fruit sizes in April further compressed per-unit margins; the company deliberately continued supporting customers to meet demand and preserve long-term value - Supply has now transitioned away from Mexico to California and the start of the Peruvian harvest, normalizing fruit supply and sizing curves, with per-unit margins already recovering - The company outperformed peers during this period due to its vertical integration and multi-region sourcing network, a durable competitive advantage designed to perform across most market environments ### Category Growth - U.S. avocado consumption reached new all-time highs in Q2, with strong double-digit year-over-year growth, and 1.6 million new households entering the category - Avocados remain a high-growth category in grocery with substantial long-term runway, benefiting from steady penetration gains, broader everyday consumption, and consumer preference for fresh, nutrient-dense foods; additional growth opportunities exist in Europe and Asia where the category is still in early stages - The company saw strong early growth in avocado consumption and penetration in Europe during the quarter ### Colabo Acquisition - The Colabo acquisition closed earlier than anticipated on May 28, 2026, creating a combined platform - The acquisition solves capacity constraints that impacted Q2 profitability: the larger combined footprint of packhouses will allow the company to better manage high-volume environments and align supply to demand, including matching fruit size curves to customer requirements - Colabo strengthens the company's position as the most reliable year-round avocado supplier across North America, a key value for large retail and food service customers - Colabo adds a fast-growing guacamole and ready-to-eat prepared foods line, a natural adjacency to Mission's core avocado business with meaningful long-term growth opportunities - A minimum of $25 million in annualized cost synergies is expected within 18 months of close, with upside potential; synergies will come from eliminating redundant operations and SG&A costs - An integrated dedicated workgroup has been planning the integration for months, and the earlier close allows for accelerated synergy realization; synergies will begin showing benefits in Q4 fiscal 2026, ramping up through 2027 ### Financial Performance Summary - Total Q2 2026 revenue was $290.9 million, down 24% year-over-year, driven by a 36% decrease in per-unit avocado prices from the high-supply environment, offset partially by 15% volume growth - Gross profit was $20.5 million (7% margin), down from $28.4 million year-over-year; gross margin decreased 50 basis points - Adjusted net income was $0.8 million (one cent per diluted share), down from $8.7 million (12 cents per diluted share) year-over-year - Adjusted EBITDA was $7.1 million, down from $19.1 million year-over-year; the decline was driven by the temporary supply and sizing imbalance and low price environment - Core SG&A was flat year-over-year; $6.4 million in separate one-time transaction advisory costs for the Colabo acquisition were reported separately for transparency - Cash and cash equivalents totaled $33 million as of April 30, 2026; capital expenditures totaled $22.9 million for the first six months of fiscal 2026, in line with previously communicated guidance

Guidance

- Industry avocado volumes are expected to increase 5% to 10% year-over-year in Q3 fiscal 2026. Exportable avocado production from the company's Peruvian farms is expected to reach an all-time high of 120 to 130 million pounds, up from 105 million pounds in 2025, with most sales weighted to Q4 fiscal 2026 - Average avocado pricing is expected to be 15% lower year-over-year in Q3, a smaller percentage reduction than the decrease seen in the first half of fiscal 2026 - Q2 2026 margin pressure is now in the past, with per-unit margins expected to improve meaningfully through the second half of fiscal 2026 - Consolidated Q3 2026 adjusted EBITDA guidance is $28 to $32 million, including a partial quarter contribution from Colabo; the lower guidance reflects a delayed Peruvian harvest pushing more sales to Q4, and residual carryover impact from Q2 supply mismatches - Consolidated second half 2026 adjusted EBITDA guidance is $84 to $88 million, driven by a full quarter of Colabo results, higher blueberry yields, and improving avocado margins - No material synergy realization is expected in Q3, with synergy benefits becoming visible in Q4 and accelerating through fiscal 2027 - Full fiscal 2026 capital expenditure guidance is approximately $45 million, including modest expenditures for the Colabo business - The board approved an increase and extension of the company's share repurchase program, reflecting management's confidence in Mission's long-term growth outlook and disciplined capital allocation strategy

Segment performance

1. Marketing and Distribution Segment: Quarterly revenue was $277.2 million, down from $362.5 million year-over-year, driven by lower avocado prices partially offset by 15% year-over-year avocado volume growth. Adjusted EBITDA was $7.2 million, down from $16.8 million year-over-year due to compressed per-unit margins. First half gross profit increased approximately 5% year-over-year. This segment contributed 95.3% of total consolidated revenue in Q2 2026. 2. International Farming Segment: Quarterly revenue was $7.7 million, down slightly from $8.1 million year-over-year. Revenue is seasonally concentrated in the third and fourth fiscal quarters aligned with the Peruvian avocado harvest, with Q2 revenue primarily from mango farming and blueberry packing services. Adjusted EBITDA was a $1.3 million loss, compared to $1.5 million income year-over-year. The loss was driven by ongoing investments in mango production that did not yield improvements this season, and lower third-party blueberry packing volumes from an earlier harvest end. This segment contributed 2.6% of total consolidated revenue in Q2 2026. 3. Blueberry Segment: Quarterly revenue was $11 million, down from $15.7 million year-over-year due to lower sales volumes, partially offset by higher average per-unit pricing. Adjusted EBITDA was $1.2 million, up from $0.8 million year-over-year, as improved pricing more than offset higher per-unit production costs from lower yields on new, still-maturing acreage. This segment contributed 3.8% of total consolidated revenue in Q2 2026.

Risks & headwinds

- Unusually high avocado supply from Mexico combined with a temporary mismatch between available fruit sizes and customer demand created material margin compression in Q2 2026 - Super El Nino weather patterns pose potential risks to growing conditions across key production regions; no material impact is expected to 2026 (fiscal 2026) production thanks to prior investments in tree health, but there is potential for lower-than-anticipated Mexican production in 2027 (fiscal 2027), and possible impacts to Peruvian production in 2027 that require ongoing monitoring - Newer blueberry acreage is still maturing, leading to lower yields and higher per-unit production costs in the near term - Integration of the Colabo acquisition carries execution risk, though management has invested in dedicated planning and workstreams to mitigate disruption - Avocado pricing is cyclical and correlated with overall supply volumes, meaning high supply environments will always create near-term margin pressure, though these environments also drive long-term category growth

Analyst Q&A

• Q: The Q3 adjusted EBITDA guide is $28-$32 million and second half guide is $84-$88 million, leading to a large Q4 step-up. What drives this split between Peruvian production, full-quarter Colabo contribution, and improving fundamentals in marketing and distribution?

  A: The step-up largely stems from backloaded harvest timing in the international farming segment this year, compared to last year when Q3 had much higher pricing. The blueberry segment also follows traditional seasonality, with minimal Q3 contribution and a large Q4 ramp-up. In marketing and distribution, pricing is stabilizing after larger first-half declines, with margins expected to hold near historical ranges through the second half. With the backloaded business profile and the full-quarter addition of Colabo, management is confident in the guided Q4 results.

• Q: How could the expected super El Nino impact Mexican and internal production, and will impacts be felt this year or next?

  A: To date, there have been no significant El Nino impacts in 2026. Prior investments in tree nutrition and health over the past two years have Peruvian orchards well-positioned to handle expected warmer weather over the next 3-4 months, so management remains confident in 2026 production guidance. There is potential for volume impacts in 2027 (fiscal 2027), depending on the timing of heat/rain events relative to flowering, and potential for slightly lower Mexican production next year, which the company is already monitoring for planning.

• Q: Now that Colabo has closed, what are the immediate low-hanging growth and synergy opportunities for the combined entity?

  A: The immediate top priority is avoiding business disruption during integration. The clearest near-term opportunities are cost synergies from optimizing the combined distribution network and eliminating redundant SG&A and infrastructure costs across the two legacy businesses. Longer-term growth opportunities include cross-selling Colabo's prepared foods line to Mission's larger domestic and international customer base, expanding Mission's food service and mango footprints using Colabo's existing relationships, and enhancing overall supply flexibility to mitigate future sizing mismatch issues like the one seen in Q2 2026.

• Q: What is the current status of the fruit size supply and demand mismatch that pressured Q2 margins?

  A: As of May and June 2026, supply and sizing are much better aligned. The Mexican harvest is winding down, which has lifted pricing and encouraged delayed California harvests to begin. The mix of early-season California fruit (with longer shelf life) and new incoming Peruvian harvests has improved overall supply balance, creating a better margin environment, with trends continuing to improve through late May and into June.

• Q: What is typical long-term retention for new households that enter the avocado category during high-volume, low-price periods like Q2?

  A: More than 50% of new households retain avocado purchases long-term, and retention rates are higher for younger generations, making these new household gains very sticky. Historical 10-15 year trends show steady upward growth in penetration and per capita consumption following these expansion periods. Even with U.S. penetration already in the high-70% range, the category has additional room to grow, especially internationally, making these new consumer gains very valuable long-term.