Mission Produce (AVO) 9 Mar 232023 Q1 Earnings call transcript

Good afternoon and welcome to the Mission Produce Fiscal First Quarter 2023 Conference Call. [Operator Instructions] 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. Sir, please go ahead.

Thank you, and good afternoon. hosted Chief Barnard, Financial be and Executive will Giles, Bryan Officer. presentation by Chief Steve Officer; Today's

subject The comments safe based statements during a of historical contain to the Such cause forward-looking facts today's current management's Securities XXXX. expectations call and within Private forward-looking than meaning are known the on All forward-looking of events. discussed concerning future actual from the are as risks as statements and of unknown statements. results assumptions statements Reform number well considered are the could Litigation statements harbor other of the and statements provisions Act differ accompanying to and of that forward-looking in presentation the beliefs These uncertainties materially results statements.

and risks the Some and in with SEC. identified are uncertainties discussed the these filings company's of

financial investors.missionproduce.com, certain which earnings Please We'll most website, Relations found non-GAAP to refer GAAP be financial non-GAAP directly the can measures also in comparable tables release to measures. measures the for of today. their reconciliations Investor included the to refer on

like turn With now Steve to I'd the to call Barnard, that, CEO. over

adjusted total our of you We volumes summarized reversal the joining pricing call. low first $XXX.X strong in and produced first $X.X of most Thank industry quarter that performance for million earnings XXXX fiscal largely reflects million for us of and the EBITDA This revenue quarter. of XXXX. the

and of customer supports pleased quarter report the in that that a first drive kicked Mexican global of we of I'm the As position our base. distribution to season our is growth which XX% that a to during to capabilities testament were XXXX, new infrastructure volumes, industry, and our exceeded in great

to the ahead and pricing ultimately unit since volumes, as to of environment the industry per velocity we to outlook drive circumstances more had higher make the outpacing the margin, believe generating our year although improved that realized, comes the XX% has found conditions the pricing these constructive looking volume stability, conducive deceleration season is price unfavorable which growth with created we more the pricing decreasing exist online. reversed, However, balance fruit some profitability of a for market

in improved such equation. quarter having party and third markets access new we new the of only are facilitates are and the we Furthermore, consumption lower access growth markets emerging saw in our via drive high first year. to fruit volatility global equilibrium the during that footprint. is ability ultimately to fruit drive consumption rational capabilities this quality unfavorable, pricing environment optimistic last was depressed the the sourcing capita compared a Europe to more to with to as year year While half uniquely rates and per consumption these will round price penetrate this shift greater to sourcing our owned we Asia, and deliver diversified able But that coming

other need year of is well value infrastructure, unmatched manage global and added distribution of to also remain where We network volumes our shines. Mission You volume higher distribution to precisely product the ripening assets. positioned this which

ways leveraging Looking on Kingdom United new in to diversification our advancement our facilities, creative our ahead, global and and presence as of of as such center the Blueberries. forward focus in the business global remains distribution core our investments such by competencies new in our

performance our inflation, the in improvements in historical allow We range. avocado to cost XXXX. generate coupled of this unit margins, also with our what market, in fiscal backdrop, has easing better will of albeit we been year expect expect deliver targeted below us that the to improved With stability a sequential per operating

European expanding transportation operational is international physical in network. networks in direct footprint this that source expected and strategic international is access strengthen This to project years. investment will optimize represents people base to direct the located the strategically center in our distribution in major coming a global in and growing distribution United up mission's with with quickly April. forward market Kingdom assets and to ports our Our become to help and product access customer It us will scale

We are get very ability our model. facility to region this open and excited elevate effective efficient properly and to with our this service cost

the quarter benefit access premium us new an optimistic although our a which provide With respect premium, by the about early extending Blueberry are elongated at are the varietals, expected stages opportunity to in marketing be we the to our sell unfavorable an quo. impacted with long status These business, disrupting continue the to first harvest. our new to performance environment, added of with of also but pricing varietals term not window was given only

goal the optimize our scaled market our production the While initial and avocado management into our of unique was entry value for to experience labor business, operationalizing in put one crops industry. seasonal but us us, we will This time. is a to play in a for the position valuable long-term prove be on quite broader a make think that to over high impact

our pass Giles financial over commentary. for his CFO With to I'll call that, the Bryan

everyone Thank call. Steve, a on review you and start with brief good the I'll afternoon to

we provide fiscal our first financial position that current the with three a conclude are some snapshot segments. our some of of on reportable seeing. performance drivers Then quarter the on and of touch and conditions within industry thoughts I'll our

Total XXXX quarter $XXX.X revenue first essentially fiscal at were year flat with the of the for million. prior

avocado decrease both by marketing of largely in of the out being was a within revenue distribution in average the sold quarter by Blueberry it an in increase offset year the looking $XX beginning due when volumes were function However, lower our consolidation to the higher note prior XX% which prices, during industry a quarter at quarter took that and unit approximately Thus, XX%, per first of sales first to comparable avocado driven by in segment, of was of Mexico place quarter. drivers last avocado isn't million but period. year, fiscal advantaged supply third reflected the the that partially the yet

million first by to XXX $X.X in million increased the increased of points profit and $X to profit quarter, revenue. gross percentage Gross X.X% basis

by margin disposals. the implementation profit that were issues and operational new a negatively system inventory by affected prior year ERP within and led percentage segment large unusually distribution created gross fruit to As and of a management challenges marketing our reminder,

for margins the as period, ability Normalizing impact lower cost impact areas of buy gross fixed the a in prior year-over-year. pricing year favorable segment that volumes profit avocados. distribution environment while sell the flat within year limited relatively had in on to per box the on was absorption such distribution, generate and current our marketing In higher

versus box our targeted improvement range. per remained margins While we experienced quarter fourth some below sequential fiscal

and Maruga negative associated In million markets experienced business strong of as of addition, Blueberry quarter approximately with margin within as segment $X a prices result our supply industry of well by the accounting combination first the XXXX. the European gross during sales adjustments amortization during as purchase driven U.S. weak fiscal of the

for expenses, ERP period. of primarily fiscal period see to $X.X Maruga, in to Normalizing the this core to SG&A added million positive first compared which last inflationary due accounting SG&A XXXX expense. the is the of or period consolidation $X.X of are prior this expense the we for implementation dynamic in amid costs stabilization million, a signal pleased of excluding year, year our nonrecurring quarter million same and increased $X.X X% which approximately

same XXXX to diluted first Adjusted was $X net share, year. the quarter compared diluted share, $X.XX And million, for gross a per EBITDA the same of or fiscal to compared XXXX, was million, period of million loss for or which last improvement attributed period of higher per quarter margin. adjusted to the $XX.X the $X.X last for $X.XX $XX.X loss was first for million The of year. fiscal primarily

segments. Turning to our

described, segment increased million. quarter million sales avocado XXX% $XX.X Our sales for to net the primarily EBITDA year to Net segment our $XXX.X by marketing million gross was were adjusted XX% driven declines distribution pricing implementation to and while the margin challenges prior ERP to $X.X improvement dynamics higher decreased quarter. volume EBIT due due in or the the previously and

fruit farming from is this though from substantially our segment. are operates orchards derived segment the from marketing international currently distribution Production smaller which is other in sold development segment Our and to under all operations and produced typically Peru, year from Peruvian concentrated of fiscal America. Latin runs each Segment our in of half of alignment harvest year. avocado which August the through areas season, revenues with April second in EBITDA are

in lower packing $X.X Segment as adjusted result farming increased SG&A With international of for total segment the sales segment to sales service a the loss of for million and primarily a period to million $X.X to higher revenue million this the segment last year improved same in Blueberries. and cooling EBITDA mind, $X.X XX% quarter compared expense. to due higher

product concentrated of joint includes alignment is globally results are fourth venture. Our typically of Maruga January. the Blueberry Sales our segment in Maruga's in and plantings Peruvian early cultivating runs Blueberry This the which season, harvesting harvest with our stage the the by mature segment in which blueberry activities, bushes. reflects first our farming to and marketed from fiscal July in blueberry year partner quarters

is harvesting our the in harvesting asynchronous us avocado the Peru season with season resources the allowing Blueberry for leverage off Furthermore, season, during to avocados.

and loss quarter, EBITDA were $XX.X was of blueberry segment For the sales adjusted our million. segment a million net $X.X first

the the industry quarter, While the the long-term continue business. to U.S. volumes, to pricing in blueberries this European for business we significant in and on growth bullish compression experienced during due markets prospects be

market the ability also to an the alongside our window. advantages value that our working creates to This stretch with premium margins opportunity improved driving to marketing have varietals harvest customers to to deliver to introduce are We while time. the over respect and extend partner new ideal

financial of were $X.X the used the activities of XX, compared $XX.X operating October XXXX, our XXXX. compared equivalents months in $XX.X cash for Net as Shifting million position. cash XX, same last and as year. $XX.X to to million for XXXX period million to three XX, was Cash January million ended January

fruit crops sourcing both of a the payment segment growth position period, the first balances capital our year. per within year inventory terms harvest During current Lower had accounts see sale our our working for of quarter typical in with and points. the international capital and prices impact favorable half as fiscal of working a of unit shorter on growing the result offset we lower of and inventory the build of and farming price from impact second the effect substantially receivable benefited heavy during Mexican

three to compared year the million not in stage XXXX Current prior early capital January This in irrigation was the $X.X for was million not $XX.X consolidated. in $XX.X year when our included of XX, spend the installation were operation. expenditures expenditures to year. include months plant million Blueberry cultivation Capital operation last and Maruga ended spend related

orchid Guatemala. pre-production, and improvements Peru both development, years Capital expenditures orchid included in in avocado land and maintenance,

scheduled is to expenditures on capital in our of addition, the UK quarter spring facility in XXXX. In open costs first construction included new that XXXX distribution fiscal

full the of incur as CapEx region continue business we XXXX, expect For we ramp up costs to development than the be year our the XXXX. That related avocado being fiscal core to almost of Peru. to will fiscal we in project lower Blueberries Maruga said, additional

expectations are prior our terms inform to term expectations is In some continued our The for near larger fiscal volumes outlook modeling second for due around higher industry the primarily providing assumptions. the industry conditions Mexican of in expecting versus to year context period, we harvest. to your XXXX a be quarter help

a California harvest Mexican from harvest crop quarterly we volumes overall be quarter, ticking uptick season. Mexico XX% start to to approximately partially prior the higher the lower the the expect increases during With season. due volume to year-over-year to up expect the offset than We later by be

fiscal and compromising dynamics We is sequential but the per are XX% basis, structure $X.XX rates higher average higher impact still movement contending basis to lower second stabilization, compared our This on experienced on a to margins by run on primarily with we pricing while pound noted XXXX. will of in volume higher EBITDA. shown above drive ability the year-over-year cost our the per due inflationary unit of the to to believe expense signs are has a quarter be adjusted and XX%, that

That Operator, now remarks. the to open Q& call you. our A. to concludes over Please prepared

will we from the comes and time ahead. Please [Operator this first conducting question answer at from Sweeney a question gentlemen, Capital. of Our Instructions] Gerry go and Roth be Ladies you. line Thank session.

Good afternoon, my Steve and Bryan. call. Thanks for taking

Gerry. Hey,

Jerry. Hey

Hey.

your even thinking wave this year sure to which on I'm there production consumption. detail Last to trying way. think drove I'm ways from or all louder right of lots a issues, anything little impact in fruit different out but just remarks, the logistics, maybe bit sizes, cost, about of make prepared the some So pricing,

to regression to normalcy We're at maybe to Sort stress around sounds as this if year, as the mitigation, of correctly? mean if the seeing, at continues a I'm going this of even may logistics. sort and looking we we're of though this some along Am seeing the see it should of beginning this years. size. volumes, terms you be If begin not looking continues, especially to throughout EBITDA with stabilization, I improve on cost all some in

volume retreating appears feeling where of off we the Well, easing on we to better agree And there's would that last up. everywhere, I for into inflationary I as We're far it's yes, of a volume. but major lot the as on volume. be and, in we're some challenges Peru built volume, all Mexico going We're Inflation mean, based is the still light fronts. were seeing, they're of are. issues. things year exception

part some some of pull seems volumes. of quarter. think Gerry, seeing at through we're we've than the more be we feel I saw they gain positive for retail in first moving the as early to much do I traction, QX signs Yes, through

seeing in we're pricing and is with high that. at conjunction So levels volumes increasing

So good is where I the think industry through quarter. we the going about feel second

on I that about think of the we're move us will like the base. we seeing happen quarter, some to Peru, for options close come countries our and fruit give end of second the sourcing California to for origin, more other of and customer start as excited

the of subside. are to inflationary some Certainly starting pressures

back for look the We're production right which we a our we've I we're think at later seeing farming yields of our I lot operations, farms. in to when seeing kick think up seeing levels are size We're that of things kind we're year, got favorable now. going last freight last year, in XXXX. so for that revert over saw importantly, And we saw curve an most seeing we rates us some commercial year of closer improved what the sizes. in hurt subside to significantly and

certainly we be see But the think feel is months. out a during prices those there There's we of kind that of will at I towards what definitely a lot still better. variable the summer. So big heading summer market positives

answerable, maybe Got to below little question, you I'm personal an got inflation like not Is and it. trading hot We're sure price to just there's I obviously inflation a higher, even or consumption level? lower, inflation seeing it own above I'm across level the food consumption, a but my haven't that you've seeing when really certain with there down it go any in board that it's This some bit bit seen there. out throw is a a supermarket. curious We topic. market if a this drives a years. any if seen thoughts or little for a data, around that? different

Yes, more at under attracts a on it an size. dollar, a average usually mean, it people, if gets least lot I

the in quarter the was. One between first the of what a issues was there had market the we was disconnect Mexico and retail in price

seeing competitive. be numbers, So throughput since record seems slowed say, changed as is and there I wise. And an industry. That was in normal, a has been we're pretty that Mexico would it ever big or picking has improved to stable substantially since price there Super gap demand down. volumes Bowl

say it. -- general, in I Got Mexico going was is but not to just stable price

going that. [indiscernible] to I on am comment

what next figured. appreciate, I'll early you That's week. I see I

Thanks, Jerry. Okay.

Thank you. JPMorgan. go question from next line Palmer [Operator Our the of Instructions] comes ahead. from Tom Please

Thanks guys. the Hey, for question.

Hi, Tom.

Tom. Hi,

of bit you on supply the past size terms in just move the be but then have maybe any Maybe Peru quality, noted and later, a indication the coming Mexico how same? the might through the harvest. maybe mean you of off kick we can outlook that coming anything harvest I early as how we on for do California in little

Sure.

may rain here getting of we've California. in a lot you been As know,

coming lot California. up. in size until seen that They help it's on here it will going really, volume I in of crop a a haven't to April We're thing. rain. size of while. So don't They type A starting little like that much pruning some picking bit of pick that now. kind of see really and out areas.

in We about sizing, is a remarks, Most more Peru his but going Bryan the past situation. although our week. this XX% up have normal of already overseas, that's slowly and started as mentioned much our crops harvest,

it's So positive in those regards. quite

maybe EBITDA. of on assumed range that looked the a at something annual year, it looks fair for a this of was Okay, just And in million. think value in a business for at And million I under blueberry least, like $X then the for it growing season was this little thanks this detail. side. the some right, disclosures check kind that I If I year this looking this guess bit I nature? in a maybe years mean, too? right? then years? been seeing first Or just leading kind abnormal and other the is of one in X million how that off at year? was am recent And this number the fell that unusual some is, to a you've I And suddenly then was was of up challenged

certainly past. We Tom. had Hi, in the some challenging years

seen. one this what more think it I than was I extreme think at you're wrong. looking don't we've

to we've the I for think $X million where operation. years generated EBITDA in $X had range million that we've

that business as a increases planted, We've industry the certainly seen But over time. the as yields as acreage over down crop the the improved. think seen that have is, have has we increased] I time. is pricing the come [whole volume one has grown, thing

at varietals, way of kind of now market, challenges I average you're the world the they into, sales years. over last price. exporter their a become generally looking and make the largest couple lower And in a can Peru's things blueberries which when did we big right terms they generate markets older at have of of we in the some one that limited they're aren't of is a varieties the initial and of think that premium plans considered of

on a pressure of as the that. result seeing pricing You're

like A harvesting China, alluded more window. the harvested today that between Right we've think varieties, will we with of are On that have able the Peru that, of in premium some I varieties the pruning, of forward, ways larger now, be plants lot which call. replaced in altering terms with and top get the to options blueberries into north them markets generate October the newer we the better of going of control stronger taste in that through some The to profile we're a XX% should fruit, a we blueberries new trying we're to return. hearing of of December. have

over stretched see time really getting And want what to is season that we out.

So I think still pretty we're happy.

we're last that the we're the of the year, happy outlook. where think the to have the planted. on planting I this are but varieties think truly going still going with with results advantage of genetics happy is planting people We I growers a in go, from this traditional weren't have over of with the distinctive that we're bullish are most Peru that to or kind

think we returns I fruit as is biggest to, that grow into generate So window those harvest out continue so yield we so can. average premium can our we get driver that cost stretch as to of again those kind lower can and customers our there much higher and our

all Great. details. Thanks the for

thing. Sure

you. Thank

question Spillane comes go the Bank from Bryan line of from next Our of ahead. America. Please

operator, morning or afternoon, good Thanks guys. good

the or a I a we bit one heard. I So per a guess talked I guess normalize, box guess you and about I profit beginning and this. we maybe profit maybe per is what But talked talking I marketing we're about of bit in just distribution sort carton had to talked about question. little

inflation, costs, transportation just I right. other the earnings call there's last labor, on think

marketing that the and So yet all in at distribution, and a kind normalized to Or time starting cover if will both of back will, the fruit on will reversion, pricing point profitability getting your take sort on also to mean to of trying where we're of you you more some non affect per discussions a in profit sort of a and incorporated box? segment that more farming are as costs? fixate have

the feet Asia, U.S. kind we just we're say better it it looking specifically dragging at seems get. either wait, continued they fall, process this like freight to rates. the Well, actually of Peru as And our in the week longer or of out to of Europe. We're

meet comparable years of to getting on rates two expectations our freight we're close of something cost we So on to could the Peru. where ago out

on down certain a country. some improvement every on too, are improvement internal to rates ocean seeing on and creep week coming the not across sure. continuing probably but the down on concerned as bit fast we're So rates in truck It's lanes they too freight specific that for in as little truck that rates is, truck

our fiscal we I say, our the And since will have to beginning Bryan pricing alterations made some year. of structure

those in for moving other we ripening and I freight used that prices for infrastructure bit cover are think value some intended services of provide, of we're the we that. around to But operations. like distribution some pricing adjust a customers, over our our regularly to quite related head added to

over pricing have We we've kind few it. that cost pressures there made and and those volume been years back gone last seen to operations in the absorb there, inflationary the of adjustments acknowledging growth some hasn't

So doing something months. that think it's we've we're last I been over pushing, the few

I still we're to making customers over kind do accept competitors the it. our progress we're think see of we we're pushing we'll time, need that. of higher kind kind expect, everyone to of getting kind doing, up of likely of outside I And are what that I think, end. but ourselves, of the think to don't range in

Okay, I up may is, an with that year. the now [almeno] some and then, guess, actually, that just point one prediction we there at additional this end question

California So, the Just Mexico? of years, remind been where from how Steve, be us to affect you which for might last thinking we can Peru, [almeno] affect there that and should just [lanino] that that how might about is there? flipping anything again we've couple

here. very year. starting some helps needed, whatnot sizing the we're much a not salts it's our they're long it's another but all up is in this Yes, we’ve so have And at rainfall flooding as is inches, some stops in actually far raining sweet getting rainwater. raining. couple I California twice doesn't trees water. it And call the have It but tonight, this of It actually and by Peru. the it, it’s just I positive a Peru almost mean We it here way. been – the of because as week, the normal team it's It's in The quicker here point, but water. had situation, already healthy. it fruit

the held it up a afternoon. So of afternoon. in harvest mostly couple It's

it wash there, long we're it bridges any and it stays as where there's from doesn't good. the is don't as So think today. out I of whatnot what I prediction that know And

Okay, thank you.

Thanks, Bryan.

and Thank you. time, showing to just Steve any question-and-answer I I am this for Barnard, no further at questions. closing Ladies and session over turn gentlemen, like call to back end the conference remarks. CEO the

your much to you soon. very Produce again you Thank for we Mission interest forward in and look speaking

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

may disconnect You your lines. now