Mission Produce (AVO) 13 Sep 212021 Q3 Earnings call transcript

Good afternoon, and welcome to the Mission Produce Fiscal Third Quarter 2021 Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please also note, today’s event is being recorded. At this time, I’d like to turn the conference call over to Jeff Sonnek, Investor Relations at ICR. ahead. go please Sir,

as forward-looking to current presentation Litigation well forward-looking considered and hosted These Officer. are expectations statements. Bryan call results assumptions statements and the materially of statements management’s future uncertainties presentation during statements Today’s the beliefs unknown to a than historical meaning Such Chief facts harbor are statements. other Act safe from The Steve of actual and results Executive today’s concerning provisions as contain accompanying based the Officer; statements Giles, could of Private and within known number forward-looking on will in cause discussed you. risks the by of forward-looking differ that Securities be the Barnard, events. comments statements Reform are Thank of and Chief subject All Financial the XXXX.

are filings non-GAAP We’ll discussed risks in the and in found turn identified the be of today. to earnings Barnard, measures financial reconciliations GAAP to refer CEO. Company’s I website, the comparable the also refer release, Please and tables Some to included SEC. the to uncertainties with investors.missionproduce.com, like most can non-GAAP over financial which our measures Investor of their now would measures. the directly on call to Relations for Steve certain

third call. earnings quarter joining XXXX Thank fiscal for our you for us

brought that of with pleased by harvest was volatility are our delayed We about industry timing performance fiscal quarter crop. the intense Mexico’s third new the transitional on amid

a of proved industry. nearly of outside owned to network, during volume with of which the and and the this quarter, significantly Mission’s greater of Mexican advantage job third the an a per-unit the produced we margins lower with that us result our along than being excellent is distribution pricing the our though quarter XX% sourced range sourcing did volatility. expectations, team period distributed of global Mexico, toward our believe navigating be production significant U.S. to Peru in end as Our within complex

key mitigate prior positioning Our ability to the increase of our markets was export significantly versus our while our also XX% drive Mexico’s in an to vertical year. the distributed to us integration volume influences in the unpredictability,

that stay Mexican and cadence value bring distribution the and the to that furthering value consistency a bring of in and to consistency we quality our potential customers in ability manage we taking disruptions vertically demonstrates their to cohesive, program. is the sourcing Moreover, really can we the such integrated demonstrate are Our our to The customers customer critical third value relationships, the of the program. the allowed as quarter, worldwide nimble and of disruption provide to opportunity avocado of with to harvest us advantage unpredictable our Peruvian the the vertically situation remind network. integrated operations we full our

look and through drive our Laredo preparing in help our that annually. been crosses of both us as a growing nearly hired swing so the full We $X toward through In commitment shift coming employees avocado element growing support far And of to the our We’ve to our this trade significant to that to our fall a We’ve design consumption powerful latest domestically demand prepared future, the global both made abroad, will and that’s driven XX ahead billion trained trends. that we team. the in import share and region well as building the approximately of business shared, meet the we by we’ve continue been are Port to industry we’ve of and spring. the later Laredo, carry in facility through key leadership terms will into for next in this, community, Texas, ramp-up to position. carefully that as production is advance expand Mexican seasonal Laredo the ensure

our rates, strategic we improve serve to Although as alleviating costs term, adding to our better position. we incremental in are long-term near enable in while facility In seasonal these advantages the needs carrying pressure in us. our are us network an Mission This infrastructure utilization will the and effectively facilities, rebalancing capabilities very throughout North new customer our is summary, America, while capacity. ideal clear other

and volumes, in over track and healthy we While This The for the make diversified third his meet network quarter to Bryan profile. preparations to it is to showcased continue includes for on to of able logistics volatility, distribution own our still production, margin vertical fruit and position the needs remains million and million that We global were planned guided. the us our great network customer to This which our Giles, season XX navigate very productive, expect puts network. CFO, a financial the commentary. dynamic XXXX. maintain in we industry-leading environment, pass presented as capabilities, terms call solid drive some an challenges expansive integration, team. pricing the XXX we’ve that, pounds our produce a I’ll from With of yields fiscal growing

balance third of segments. and and thoughts our to to the our with and leverage conclude X% volume within to with call. strong operating I’ll touch in I’ll I $XXX.X on managed $XXX.X million revenue reiterate the service is global to price. of X% targets, but around we price X% a would by fiscal in provide revenue Steve, our year in the on in some quarter fresh increase I’ll afternoon the to as our business a good the brief quarter for in volume some outlook fiscal increase the volume to performance snapshot year. dynamics on customers. million share from like review increased period. two financial our moment, food of prior and a Then, driven drive The was of and presence that July a XX, our increase our retail start ended a position Total you, everyone XXXX touch third drivers XXXX, of Thank avocados

quarter, of influences excessive given While pricing. In certainty. in fluctuate harvest and control something volatility sporadic demand, and prices cadence the usual stops, regular any the as in exacerbated Mexico, with which forecast pricing global the not a supply is pricing dynamics a spot industry dictate the experienced the degree starts of with result Mission third can or of that market

such As gross position we’ve by distributor value-added tends ripening, as and to these leadership fresh sought-after our profits, unaffected and insulate global price noted previously, distribution avocados value-added marketer are services a largely bagging our of as as changes.

global inventory we excessive However, be the balance we spot customer in buying volatility commitments. pricing as the problematic are market can against

temporary in our margins, we able still near above the bottom but some targeted achieve were realized range targeted we that we whereas were I’d per-unit the to note of result, range, compression a in our prior As that period. were the year levels end

year, Third period revenue. of profit XX.X% quarter gross to points margin a of basis the XXX profit last decline driving decreased gross same X% compared to

income the as were of from to the gross International our quarter per-box still impact prior year. per $XX.X compared our to million million XXXX our estimate incremental gross period million for Company-owned period Farming experienced Beyond Adjusted diluted $XX.X per audit the now than our utilization. and for margins, cost our status. of increased required to margin XX is year. fees $X.X last fiscal generate share margin. quarter the growth attributed income the to liability from negative or due professional anticipated partially $X.XX related our growth same by cost third-party infrastructure for compared higher higher related was new status process SEC also sold same $X.X a fiscal million The within public $X.X of which quarter These an to for impacts million XXXX that professional per accelerated October to large $XX.X & year. public in quarter net segment the of with farms offset external on impact million lower segment Steve period an third Laredo by EBITDA the lower or estimate to in third diluted Distribution to share to or fees company points quarter avocados $X.XX third of basis was a or from sales $XX.X per due XX% our basis. the same of of facility, higher was change company $XX.X million filer emerging approximately higher third the ramping diluted the filer the quarter Adjusted of to insurance for third by higher costs $XX.X associated volume million million sale to XXXX, compared headwind as XXXX costs compared be in amplified for were the premiums the gross per-unit this year. impact diluted Marketing $X.XX primarily company. last SG&A other $X.XX share fiscal million We costs. The for mentioned, XX, up We to within growers of decreased is profit or and last third Net as pressured which, share has $XX.X to

increased our & company, associated third-party Distribution the This I both, EBITDA generated mentioned with corporate In terms margins, Laredo increases $XXX.X of due and expenses to revenue year-over-year. lower in the the for adjusted million that a Marketing Segment contribution quarter. XX% that and above. that X% described results per-unit price to Marketing I added of within & the drivers, to is segment $XX.X to consolidated decreased public virtually net segment all the segment. similar Distribution to infrastructure drivers our million surrounding due for being fact sales our The higher with this the segment is for those slight are volume

own different our Marketing the of International & Farming Distribution those farms primarily are this from manage segment segment. we Naturally, business dynamics quite Our Peru. that in represents in our

to we quarter, the this exposed to apparent and in this more smaller to are strategic for our we price worked highly mitigate volatility initiative Marketing and to Mission is crop. value of third impacts Distribution, was very While & California in a compared as the a its the enterprise segment Mexican

base of supply keep key Our global international requires can’t today’s demand. year-round with and growing growing up regions customers

through operations. made a supply that we a we to able segment own sell customers Marketing a where control our to & we result, to Distribution a As our commitment presence decade establish close to our are ago

our forward, run, within our we in growth maturing will improvement yield As dictated the be Farming segment by look within orchards. International short

by subsequently be longer-term and expect We additional to will come on that producing supported line mature. acreage growth

As year. adjusted see a in as fourth harvest of August a reminder, And runs EBITDA the each quarters third from April through significant in Peruvian a International for fashion. season Farming avocado contribute and segment emerge the typically result, farms you and

from improved maintenance quarter, maturing $XX.X For yields million, above, to $XX International offset the by by costs third strategic million operations million as improved at associated to were the prior fruit are revenue increased July of initiatives resulting our enhancements. drive harvest $XX.X farming XX, EBITDA as financial sales cash higher to adjusted on drivers with $X.X XXXX, our of XX% due yield and fiscal Farming volumes Segment by XXXX. noted driven primarily and higher orchards. to partially intended position. million, XX, million Cash in to October our Shifting segment equivalents that $XXX year-end to compared

in cash capital regions. and to can operating influenced from growers nature terms source flows varying are resulting by payment Our shifts be in seasonal temporarily working different

sales year we for International Farming the second during during growing the will half the the in ultimate addition, that year. our are of the fiscal and half crop first building segment harvest inventory of In occur

and compared growing realize of unfavorable change cash by in of provided last crop million operating hand to farming as driven cash acre crop to million increases $XX.X operating the cost be year. it working cause million net XX, in were these driven XXXX, a combination in full due The change well per unfavorable inventory nine flows ended a performance higher cost per months the that was quarters, the year. increases cash production by year. operating to yields. of as The Mexican same to Net activities growing working drive compared within for for primarily to individual inventory. inventory of can we higher prior not in capital higher concentrated on is While expect unit primarily Peru July to capital fruit indicative buildup $XX.X by $XX.X were Changes period was in in

lower relative a Additionally, estimated of were inventory year. contributing harvested percentage sold with buildup to the prior differences, crop seasonal and that was the to fiscal the of timing third through crop quarter

assumes pricing latest the prior in outlook, completing results, distribution to for range on to the our lower-than-anticipated our which farming XXXX million construction reduction fourth margins our Peru quarter, continued for total the of and but annual future on is that of to the by drive compared see to updating the the guidance of That our and year QX, fiscal operations. million, approximately improvements unchanged a view primarily call now challenging Expectations $XX EBITDA a are our per-unit into Mexican expected ability in cash owned the may our guidance. XXX in in net the of fiscal fiscal concentrated prior and in dynamics. due curve supply adjusted influenced and shortfalls move from the the pounds same $XXX are in compared aid were and conditions As which that, $XX guidance the have to we fiscal XXXX smaller combined $XX.X to range quarter. ended gross quarter, year. adjusted XXXX, EBITDA Full-year reflect size million period Laredo, million, Peruvian to in over to third Guatemala million to $XX fruit. in for July of Operator, Texas. Full we in Capital fourth farms production facility continued in remarks. we XX, pounds, been to concludes avocado range the volume the through XX orchard by operations to XX early working capital, season partially expenditures lower in XXXX with in to the of reduction on Please part $XX.X fourth million I’ll last pounds open pressure due are Q&A. revision fiscal of is X expect months quarter shift from With expenditures The remainder XXX from a Mexico. is for due experienced million will we extending million prepared higher to now be Capital million land million is which development pounds. million XXX to prior to in This and of you. than which margin pricing margin for million $XXX our remains sales our expected range pounds,

of America. with Bank first Please is Our from Thank question. you. [Operator Bryan question Instructions] Spillane proceed of your

operator. you, Thank Hi. And good afternoon, guys.

I and questions, of supply. earlier fourth alleviate related of should crop on saying but early by exit that that the couple it as pressure guess, you I quarter, in Mexican a to quarter. a just begin first, expect So, sounded in by I comments, guess, the do the the guess, the sort like to you it’s still quarter,

the through or understanding So, wise, this continue timing just trying expect XQ? worst of to is due, to past an the the exiting of would you as way you’re all supply get constraints and

look we year. alternate if to other Bryan, they history, in think, I at cycles, tend it goes every and Well,

future, flower the way to they It’s we’re it’s And, a today, to because due if and stays coming it road, does. new change just tough to would into estimating it say and back never alternate. looking a is I be but the right. tend it So, you’re going

week Bryan, or I’ll of off-bloom Yes. sowing within two. start We regular we’ll at bloom Yes, little harvesting that the on bit. we’re through that a this believe elaborate next crop the kind point. still the

case be a be transition and So, that lot dynamics expecting at year. that point into ease the that we’re will market there again point, volume this will comes the time, tends that up at in kind And that we’re of a point. to supply right bit. Typically, that that the at of

we of sorry, -- got challenges through the -- end QX the I’m at continued quarter. the do move saw or the of of we we think I but some we QX, August, as off through half expect certainly, So, improvement latter

And Okay. the just cost That’s pressures. then, second terms of helpful. in is

color moving port for So, just has congestion, like it, freight challenge way beyond little getting a been shipping into put that as Just of of dynamic trying base? containers, us fully more give just understanding which of worse? bit a a costs, to getting lack lot thinking just an to of or just for you on really companies supply, about it the again, baked idea, there? of stuff it the And a like most the well. Can availability of better kind is same companies. Is things

Well, let’s are China containers lot of just freight The you an take these and in Asia, journals in read stuck issue. there. somewhere or one time. out is at all a a deal of to still get these trying Like

which less mostly say, Peru, a much Fortunately, pretty of lot starting freight. have Mexico, freight ocean freight is compared we out to, or

So, pressure I it’ll our side which to bit. the little a be us going think most that truck of U.S. by because it’s on of should change or will don’t it, that but here, ease will up facility, through too. the help, into shipping help the Canada Laredo

But you’re necessarily to labor inflation labor. but just So, that from I wants the one side home due mean, see Chile, today same the Mexico, they’re of going I problem on and got getting stay to in work. not paid everything to in materials it. no thing, to this they’ve read here, and to fact yes,

get over us. So, a not we’ve that got as country, get to just work and back to

even little overhead on elaborate further those costs. a I’ll Yes.

sold, I largest component think certainly, is of goods the cost of Bryan, the our fruit. third-party purchase of

aren’t issue. dynamics in I inflationary think are we They’re supply-demand kind of really nature. that more of play at understand there, a the

think Steve’s a towards largest cargo. through our item we to slant point, came transportation second ocean And with is cost. heavy I The preseason the

early that they And fairly terms were actually our have, we this negotiated scale we think, year. with I favorable on.

And big carriers. well, cost it more volume experience in with really didn’t us our year-over-year. itself with ocean gave ramping I as So, leverage the -- increases don’t just up we cargo

significant Steve’s is land Mexico transition which, I we to when transport, season. the think, to point, the on

We’re be it a a a to stable this operating now. than ago quite but year year pretty level right at that time, higher at is bit seems this

We three seen two have months. the not big last to increases over

So, if stabilized certainly, but as I predict has to that can’t what’s market it feels happen next, a bit. going

we’ve has same that, the that be have being If the operating and with there been this And the we year, we the that. have play, in increased don’t our haven’t and you over But maybe of deliver changes labor same would behind located in in of issue go we’ve course wages the at our kind Mexico labor some to an think that next ability extent one. -- the had really our who’s part Peru we to of we’ve of our Peru, don’t kind costs with in impacted the in of dealt somebody But, that that certainly, experienced managed where in down I majority to the farming does. customers. operations. That’s laws said, U.S. product dynamics that yet higher of it’s

next Our state JP from question Morgan. your is of Palmer Please Tom question.

Good environment strengthened. stagnant out wanted you pricing gave that pricing It It afternoon. that some for for Thanks quarter, seems had I side. you would the despite ask Hey. was plus quarter, constraints just like cost like last flow-through quarter to the more seems calling better exited May for little realized first thought have showed update the facing. bit and you’re a to the the I last that questions. on really supply relative

at as kind pricing, So, and fourth thinking about limited that? what the we that just how quarter, wondering look you’re of

supply. the to back up goes it again, Well,

keep European category both in digits, digits to U.S., mind, we and know too, same everywhere, the in double here the low high this have the single grow Union. I I in but in not to time, just here consumption to continues globally, at think,

alternate they to like delayed deal top bearing. when and these different Mexico, situation abundance in you sometimes have that, to In flowers on you So, three four And tend an there’s overlap with. are sometimes we’re then of avocados the right now. they’re

figured you -- the trouble, then tell because this people real you’re to around what in here, I So, out, thing guess, I like have you don’t. when

than up, So, to California. other mitigate we the the around your such options source just And it other as one or the you are vertically like be world tends head Mexico integrated with plan have we game situation. where

operations to not where want Africa of coming. side Guatemala, as on We’re Colombia, yet we quite we’ve South the we got, be timing-wise, supply in it, know, but is

risk to we’re of out So, and issue the it. that hard working mitigate take

Hey pound When ran Tom, more we numbers $X.XX. for few average in give on I’ll the per QX, well. quarter a kind details of our price the was as

pricing which think that quarter, the of an a the -- were where kind was come the average where fairly first end a and having $X.XX year. pricing of off average, is into I for during of $X.XX a building average then, the to May saw off July where at up those we of quarter at to an again the during quarter period in first we that the led peaked bit as coming of leading we maintained saw What month levels. of to month, at ran to we QX And we $X.XX close we during June it for whole. the

does come I than the came see shift towards of of lot Mexico out size does that kind to we here. sell -- kind the smaller pound fruit When per did of mix we’re that tend quarter. field, price a the that smaller getting a And the fruit of think lower during does. it for in larger play out into of curve fruit

where that go. cap does of pricing on kind a can So, put

come we’re to prices board that and in is to meaningful And start like bit as crop that with out to a I we expectation a August we internally, somewhere say to October that stable July. came pricing a with I September. then, It think higher has As in going $X.XX would a $X.XX remaining little we’re peak the look on when probably ran the what think were way in in than we’ve we new in, impact where seeing whole we came modeled off as of relatively pricing quarter I QX, the QX, to will pound. running feels the we around back comes for again.

detail. the I harvest. Peru to Thank on follow Great. And that for guess, all up, you

the quarter Just should think in about on fourth the how quarter? any split to volumes we relative third

as say projecting I whole. the number think, holding the for to is, we still we’re a year what can that we’re

We periods. are what than in the portion this percentage quarter year, heavier expecting we’ve a in seen a fourth basis, on heavier of the fruit prior

of I fruit during sold yes, this think somewhere neighborhood be So, will the the through QX plus that XX% year. in of

[Operator next from Instructions] of question. Please Our question is Stephens. Bienvenu Ben your state

Hey. follow afternoon. to the provided Laredo I that facility. on Thanks. Good up want comments on you the

headwind about a to next can, the you I think it should as said is sense, we you that Just of facility. us a that that? the to longer margins take it fiscal of be going of positive in duration Can in quarter. net XX And was headwind, ramp some basis-point to you if talk maturity? the of margins about ramp give year, that or thinking the than the to

Well, have Bryan it’s but again, give the all I’ll you numbers, volume-based.

and continue We going to volume January Laredo, in in aren’t probably in, it and of it anywhere pretty maintain spring. up, late close see that January much to the will through starts until down slowing start and in next weeks going the say, peak will we couple then

whole with there so today, off thing the speak. there. delayed a can volume year, prices, that it’s out different this volume. It’s flower based in but is So, And to harvester. It’s isn’t these tell of just you

product when even the makes U.S. than we of more went as I marketers, be Mexico low importing XX% it low that. is Ben, think, that still it’s QX, we at know other that up its we fruit for our Mexico. more QX point, than through But, And most to point tends the sell into Yes. from for

QX, give a work kinks any that we quite through also as that of weren’t So, required that were things operational knew we that to volumes would chance kind knew Laredo running in us be when out but would lower stressful.

American margin. I facilities, the introduced running on as have times a is we where new North volumes we’ve of volume of substantial build capacity absolutely those the it third year as amount being in the That higher, less relatively at we’re Laredo, -- an were flat will think, that said, into of during market, in move impact quarter.

maximize to But, we’ve think going volume in this need what’s know that tough through introduced. growth Laredo by redistributed over It’s for the what continue a very feel certainly will the I we short-term some can make, where only on see seat over strongly be of our year-over-year running, exactly is that. well time capacity need were that facility going up see truly margin to coming today we to when to optimize that bringing as from before going a to to result there’s throughput of an just to But, basis, it’s for think, the we’re is but that looking to dynamics. it again, to time. haul. it’s I to future. This to of get profitable example to willing we this driver running opened. the standalone term me think of we happen operational I because in we’re that that facility, a We’ve to going of need we us And to continue absorb ability than growth investments significantly more profits wasn’t at not out and for position keep kind short the and that fruits say long size likely the is today, kind ourselves Mission

Yes.

forward, SG&A of and just the in if I our strange I a we rate SG&A swings because going a calibrate what gross of market. lot question And reality? baseline ask variable, then, based year-over-year. can know on makes in up the IPO. comparisons on growth of was the about is to is term, But, expense. there’s price to what us so the The be could can perfect relative margins some that a help could short margins think know I sense. a sort you try Okay, reasonable SG&A just

Yes.

look QX at we million $X.X a believe that is costs. public increase of standalone, if which in company to we of So, saw attributed SG&A, than we XX% more

it difficult much is of $X.X to over tough that, time. all to level to say of estimate going at me it’s continue it’s While that million for that how

putting there and year I think, be in two SOX that going XXXX and than and to are to going place like going it’s do year more audit to going we four. one internal be year than certain Act two items in to inside in three year year we’re in program the more expensive it’s know D&O three. be a We insurance, one, the know while in be is is

not plans the year. time. exact that out probably it to So, public measuring over other say baseline or we’re That’s a of going a whether support the staffing exact they’re I go time, said public in that difficult And say, continue investments And or forward to to to the are areas plans. say amount over something the components are going I in I would SG&A, rate that those to the add resources We’ve multiyear probably to this $X.X that I’d that least at you into things a of certain like be up are million, timing to would continuing invest strategy, we and mangoes, estimate, against. are we’re higher period, company a costs move over $XXX,XXX, the that to per that that if new be business over million have things off off of in our our that how separate We time -- that there likely estimate But to is there and would going year, long they grow over grow will. it those know it. away internationally, future. costs than from probably whether as our it much we are in to course like come and the are at if we come look with that’s Europe just that ongoing our at as into $X to in haul. we moved of going selling there know company Asia, SG&A the had inflation we because little don’t

It’s be growing typical stagnant inflationary where an going a I don’t it’s we’re to fixed think So, at your rate. SG&A just cost.

going the that, be in geared business is haul. long growth growth to there that I that’s -- around think investment for the in

I’d time, and the I’m call for further management back Ladies to and the end over like at conference any showing remarks. session question-and-answer no closing to this gentlemen, questions. turn

The Well, globally. continues always we grow as see of opportunity consumption a avocados to we great do. ahead,

continue side We only player our invest the diversify but the and we there’s get and supply consumption major not we overall plan so issues. everywhere. the But, being in ahead, business sourcing on opportunity don’t business, on industry’s to a the a into huge world, much around it, pretty of there,

tuned. stay So,

call. you conference attending. thank today’s Ladies and that gentlemen, for We do concludes

You may lines. disconnect your now