Mission Produce, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Revenue Growth: Record first quarter revenue of $334.2 million, a 29% increase compared to the same period last year. Marketing & Distribution segment grew 32% due to avocado volume and price increases, while Blueberry segment had a 12% revenue increase.
• Segment Focus: Avocado segment saw 32% growth with a 5% increase in avocado volumes sold and a 25% increase in per unit avocado selling prices. Blueberry segment continues to be invested in, with over 100 hectares of new plantings and a total footprint of over 550 hectares. Mango program is in early stages but showing progress.
• Operational Challenges: Normalization of avocado margins due to industry supply challenges in Mexico and Canadian facility closures. Diversification strategy with global sourcing and category expansion helps navigate these challenges.
• Financial Performance: Gross profit was $31.5 million, up $2.8 million, but gross profit margin decreased 170 basis points to 9.4% of revenue. SG&A expense increased $1.5 million or 7% due to higher employee-related costs. Adjusted net income was $7.1 million or $0.10 per diluted share.

Segment Performance

• Marketing & Distribution: Net sales increased 32% to $295.8 million for the quarter. Segment adjusted EBITDA was $9.7 million compared to $11 million in the same period last year. Driven by a 5% increase in avocado volumes sold and a 25% increase in per unit avocado selling prices, but lower per unit margins on fruit sold and costs from Canadian facility closures impacted gross profit.
• International Farming: Total segment sales increased $3.4 million or 59% to $9.2 million compared to the same period last year. Segment adjusted EBITDA increased $2.3 million to $1.8 million, benefiting from higher blueberry packing and cooling service revenues.
• Blueberry: Net sales increased 12% to $36.4 million, driven by a 70% increase in blueberry volumes sold, but offset by a 33% decrease in average per unit selling prices. Adjusted EBITDA was $6.2 million compared to $8.7 million in the prior year period.

Guidance

• Avocados: Fiscal 2025 second quarter industry volumes expected consistent with prior year. Mexico volumes taper off, but California harvest starts faster due to improved weather. Pricing expected higher by approximately 5% year-over-year.
• Blueberries: Peruvian blueberry season harvest timing similar to prior year. Volumes sold expected to increase 35%-40% when applied to a larger total harvest. Average sales prices expected to decline sequentially but be consistent with prices in the second quarter of fiscal 2024.

Risks

• Supply Challenges: Industry supply challenges in Mexico, including a smaller average fruit size due to El Nino, affecting tonnage.
• Tariffs: Uncertainty surrounding tariff negotiations with North American neighbors, which could impact operations.

Question and Answer

Q: Elaborate on co-packer sourcing in the current quarter and current conditions A: Stephen Barnard stated co-packer sourcing sustained over the last several weeks. Bryan Giles added the industry expected a larger Mexico crop initially but it was smaller, leading to higher co-packer use initially, though better expectations now exist. Stephen also mentioned smaller fruit size due to El Nino affecting tonnage.

Q: Working capital build and unwinding A: Bryan Giles said working capital strains in the first half of the fiscal year are normal and typically unwind in the second half. Higher prices accentuated this year's working capital build, but moving to the second half with own fruit harvest should help unwind it.

Q: Supplier behavior around tariffs A: John Pawlowski said February was business as usual regarding tariffs, but March had more choppy conversations with suppliers and customers, though supply remained consistent overall