Mission Produce (AVO) 8 Jun 232023 Q2 Earnings call transcript

Good afternoon and welcome to the Mission Produce Fiscal Second 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 our to refer on

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

pricing into this those the the stability that earlier fiscal and fiscal well. you conditions fiscal quarter’s call. to quarter by also was continuation conditions a quarter increased per as a a quarter XXXX current first returned and fairly unit delivered sales These for We season, us in earnings volumes. adjusted have second fiscal saw for sequential $XXX.X Mexican which quarter. metrics volumes in with industry demonstrate of realized a $X.X in continued second solid third million consistent year. margins the of quarter, million, both our market driven joining We through revenue improvement second We and Thank of our relative EBITDA to the XX% in the increase first

harvest inconsistent volumes the to levels, per significant of volatility. year our record end the and historic timing This where which price low ranges. swift led Notably, toward prompted pricing and a prior turn from departure in is were a high to led that in this industry to increase normal margins box disproportionate

the environment year’s margins short this pricing distribution stable environment leverage afford market global growth the drive Mission advantageous us penetrate consumption markets. unit to doesn’t more our opportunity term, in per to new growth same is and the for long-term footprint to allows While rational

produce XXth demonstrate Hass our As celebrate anniversary distributing vertically continue of world-class integrated avocados we and we differentiates our other model and from year, us the to sourcing, producing competitors. this

driving capabilities on bringing remains focus year-round markets. sourcing consistent Our consumption growth new by growth globally to diversified

ports the international April. excited optimize customer in product On distribution network. note, major European about This with in distribution with direct networks and global direct center expanding our located our footprint to will and opening to access base transportation access we that strengthen Mission to the facility source our forward growing are strategically is international UK of and

making in this region. pleased is cost-effective are efficient are developing our UK this the And the early, still about it excited we very growth progress long-term further are are We in and with to important facility. committed we model although and

farming markets our vertical global Peru. of ability growth Our operations integration is these by support bolstered to own the in

of in year. the the production and basis own higher the improving second in adjusted fiscal season lower Despite the year, in As to the pressures the provides per half fiscal margins positioned. combination us year prior born production inflationary from easing the comes to Mission our unit we second half Peruvian online well our owned relative support is and enter continue pricing, our very basis the of step-up and the on a volumes distribution sequential of seasonal EBITDA

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

of of Steve, conditions and our our snapshot and the on and within fiscal I’ll provide with financial afternoon on position everyone good quarter segments. that current second seeing. review a conclude on some some Then three brief with drivers performance you, we thoughts touch of call. I’ll start Thank the the a are our to reportable industry

a for the unit lower revenue XXXX year, was $XXX.X second of fiscal Total quarter sales the last driven decrease by pricing. same compared to million, per XX% period avocado

in of unit the per the last volume sold. Both The quarter. period limited was drove of the XX% Mexico a pricing impact sales same relative XX% supply decreased higher average offset driven were which near-record that lower pricing to during in higher supply levels. out the to and increase Our avocado by partially by industry pricing volumes year

unit second Gross sales, the which mix was impacted to margins source substantially the quarter, XXX gross $XX.X on of revenue. points while The million was profit lower margins $X.X driven to increased by percentage decreased per negatively above. by by avocado regions. noted Per X.X% in profit higher decrease volume were of unit volumes million from the basis by offset

year Current Mexico was market concentrated fruit, from high prices. by positive year California the prior the about advantaged heavily an period source by were influence accelerated volumes in whereas harvest brought

quarter box experienced per at a match and point. year, ended the elevated prior not margins levels the we meaningful sequential did versus fiscal high the improvement While from first quarter

in share primarily year. or EBITDA to $X.X last million $X.X period compared the signal the margins. due per segment. the with Blueberry core Normalizing our is increased to $X.XX year prior which the was to period expense positive a net period decreases was compared Adjusted consolidation were were or same expenses million this or to accounting attributed for the last both X% environment. inflationary unit last to million from to year. for The $X.XX profit consistent per compared diluted per diluted this same lower period, year, million of SG&A for these million amid figures gross lower share income $X.X dynamic, Adjusted same the expenses primarily of SG&A $X.X $X.X due

Turning to our segments.

pricing and decreased $X.X Distribution EBITDA XX% volume sales and the Marketing million million the decreased quarter, to dynamics XX% adjusted and previously adjusted and or sales were due for million. Net described. avocado segment Our net $X.X segment declines to $XXX.X EBITDA to

Our segment which substantially Marketing and Peru. under sold produced from to are segment in are International is areas operates of EBITDA derived from The Farming this and operations other is each smaller an year typically absolute Production America. from concentrated in segment’s revenues season, the August second our development in with the all The segment. and April fiscal Distribution contributions be currently our tend harvest first basis. orchards relative year. through in fiscal half Segment runs our Latin on half of Peruvian the avocado which of to alignment of from year free

at our of during runs season, fourth to alignment generated our mango due total $X.X and With to and losses January. primarily year International mind, fiscal decreased concentrated sales with quarter. Blueberry the the XX% the the early-stage million, our period were first revenue. segment compared segment this through in the the service quarters lower cooling Activity Farming and in from Segment typically last packet to in EBITDA which impact due Peruvian is year, harvest in $X same by adjusted negative July of improved million farms in segment lower primarily million $X.X to blueberry

a million with were of adjusted result, sales Blueberry segment for negligible quarter net April, $X.X results $X.X segment EBITDA As ended the million. and our second of

XX, XX, and million as of October equivalents XXXX, compared million Cash were position. financial our cash $XX.X to at to April XXXX. Shifting $XX.X

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

and its inventory is Farming the the half ultimate in harvest its International company addition, during the crops of the during occur building growing In the that fiscal of sale year. will first half year for second segment

individual is that unfavorable indicative expects year. operating not in While to capital it cash management increases cash working flows realize quarters, cause to these the operating performance can for of full be in

the in That the working $XX.X activities compared of months April of $XX said operating last by operating improvement same XXXX, driven The the non-cash XX, with for net was capital. for better period performance, combined cash favorable primarily to net in effect changes million net ended X was items, used year. million

capital our of stable from period, fruit. year the benefited current the unit per position on During Mexican working price points relatively impact

XX, was the plant whereas in not that capital experienced by payable ended half X April Current working limited the million we months of million last and compared million our $X.X year segment, prices Stable installation prior inventory spend XXXX, balances, to year. was rising the Blueberry and year for the environment first with impacted the movement associated price $XX.X accounts negatively in of the during which cultivation grower movement in consolidated were receivable, $XX.X year. prior expenditures include expenditures year. irrigation Capital early-stage

in improvements preproduction Capital maintenance Guatemala. both included orchard land expenditures in development, orchard years Peru and avocado and

new UK our construction addition, of in XXXX capital included facility fiscal expenditures year. costs this opened on In that distribution April

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

are industry modeling of inform conditions around for we near-term your to our In expectations outlook, terms context some providing help assumptions. our

to compared experienced due off third XXXX fiscal a combination in Pricing be year by a to industry to is pound in blue quarter year-over-year primarily expect of expected XX% $X.XX California’s on to quarter average of larger and XX% shifting approximately harvest. versus to outlook year, the to fiscal the harvest third be volumes basis third basis, to prior strong The sequential Peruvian quarter consistent on but higher a a XX% the second continues the versus the XXXX. lower Mexican per approximately last quarter harvest the period,

in range million million our In XXXX own in of terms season. to be volumes harvest the the we for Peru, pounds XXX XXX to farm anticipate of production

generation. consistent higher own corresponding our remain cost our while of fiscal quarter, our elevated heavily on sales first remain half. EBITDA fruit levels have which inflationary expect peaked, assuming realized the to effect to be the that in headwind at costs fourth those fiscal adjusted levels driving should a remains and margins Note a per We to EBITDA has adjusted impact unit more pricing and the the structure of weighted with on cadence

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

Instructions] the question. Please Thank Benjamin your with Inc. proceed first Our from you. [Operator with question Stephens, line Bienvenu comes of

for a Thanks questions. lot guys. my Hi, taking

Good no Hi, problem, talking to you. Ben.

in here Obviously, momentum with the strength industry the So I in in the want year, first cited to volumes story. having you returned. growth volume building the start

slightly talk Can growth that about a relative Your kind then you forward, little performance up talk puts that you industry the look that XX% quarter the industry talked you of industry expectation growth to the Can growth. for saw. And your on about you and about takes very as in volume the differential? strong, bit we below shoring growth?

Ben. Yes,

available. Mexico-centric we to. certainly higher fruit very prior ago core I the we particularly supply a that in our feel, looked been in access retail that country at like competitive, do We customer to know it’s at where Mexico, last the building particularly think Again, that’s base, we to compared the on share origin year, the this time. when with to our that trying fruit we came which has over we’ve base, that as is U.S., the quarter. focus of it’s that that really second point our obtain market attention only to our year And than were primary year,

base, those of I from to And been all, believe we’re growth But the relative Peru, industry. access more like the pretty to in half think year, as within we’ve I the second feel export think California to the to and grown of I we’ve with we’re that we’ve general, where built seen. we then Certainly, in all tandem customer going historically. transition we’ve countries we as significantly with origin. think our sources that either some markets rates we or will we grow held have core of that, from we’ve our pleased share have in

numbers with China, in of some are a Europe year up and Especially export way to particular, the markets, ago. the compared

Got it.

you’re the over at the volumes talk talked margins, could about absorption have had across industry about year. supply the pressured some costs I just you lingering if then little cost lower a more bit that last And as your the of you fixed into higher in success maybe the to there absorption along improves? you’ve elevated same your time, fixed that And chain Okay. cost you improvements Can having talk those then little and of costs some are what passing progress business. a customers? permanent pricing bit about volume And seeing

prices think a which see size year, historically, things along you’ll Well, when where But big And – you pretty are on growth with they it is I’m see consumption it crop big couple this lower they good year you going the you up really are Mexican the improved. stable, value. crop, like is I a down substantially the slightly next Peruvian the have one levels have years when crop crop, down, ago, prices the this. California less that costs of of not this, a ocean especially but have saying of are like a in are and a we freight, you happen usually going as you’ll and step after go notice to of a

So a then the ledge don’t what the in going climb change that’s it’s to think historically the and you it here next ledge, happened, will road and has or year like and on climbing you get so. again, regroup and I down

XX% saw the in absorption, really distribution North that’s – when capacity network. a specific second our North which our And capacity volumes, primary American Yes. within American about about your what increase to we quarter question during consumes

So are how yes, in those absorbed through network. improvements being seeing we’re substantial costs the

stabilized If point, but its transportation terms, back certainly, bit a costs a point. years be that you We we peaks much in costs, higher level they whether year. at Steve’s cost over-the-road or level it’s in level it’s costs reductions still packaging to were think off in level. to normalized now, ago. that’s say it XXXX that’s sitting then look some that at labor a little than some at and were from XXXX, settled freight, certainly at a few and in last come ocean absolute than To were than higher where in a higher but we where starting we’re more to ocean little our even well. of And I’d is where closer see freight as back a a

can the we’re benefits have available. that you more think vendors starting of think degree out suppliers, that see capacity our in to a there. more I signs – is have more of competition I see And There results. they small some

good. And I Very if then could. one more, Okay.

production, about kind you farms talk thinking farm out talked we out down of Peru? you of your Mission-owned production, sources road. the also Can new own alluded Just nice drivers expected And pipeline production and kind might what your you’re that own of the the of to growth about there there about seeing then development Can expect? about talk year-over-year. you of range for you

Sure.

improved. improvement. that’s and the notable year, large the year is XX%, is which XX%, as the and had lot to fruit. it Let’s midsized say XX% XX later a was a than It’s of we Peru and the for thing cold which larger, ton. a fruit cool first – had big. We also about there crop rain point. last a much Last sell too very harder a which curve fruit, week, It last the they is there. was on by weather, not size crop, sell size I was weather a is was I problem is substantial only big X we year El is has had it the by think, fruit each because that large other them that about of versus because than of the in is here Nino, weeks maturity X to And here last

don’t calendar, noodle the apples-to-apples example, is to a tilted overseas. all variables, it’s but not China, they a promotion. know promotion now on got if up. ago. little especially an retailers bit as year out from a volume their last can. track It’s They the the with good, are which it’s summer on we’re triple slightly kids So hard be fast here crops have coming soup/avocado smoothies And eating several compared as with this at across at as – to of can country. young gross looking Demand a year you as is

So there, we’re seeing far. over offense and results so playing good we’re

Yes.

equate the that count to into increase think of production follow-up a much in I curve, the you those year-over-year. account in piece point, more to the of to actually increase even And significant on year-over-year. trees, numbers is if kind I down higher. think Peru, terms in smaller the Steve’s size for Then on it’s somewhere XX% take close farms

think maturity farms. of some existing I of continued is this

year. we’re farms have our an about up a pick a That some Those uptick mature, did little we range, acreage, was new to some our year. but we of over hector started has level now. coming had farms are again, significant see I many are number don’t that been to still XX years but While that see X growth, production. in still – mean, a per off, have bit yields farms to this oldest up benefits, each still ones other in And of and still number X-year where are continued I more of to little expect we seeing the into

think sizes yields the So where where that being I we’re with are said, at. pretty are happy at, the

I we farms as a this year almost up in had region of northern better well. our the off production think

all well. Peru all, So in produce tracking

you I Guatemala, assets we think down some have other our farming about our talk farms, there. if of

expecting. are We

the none start those fruit profits farms of have means, in that out Guatemala ‘XX. will come beginning they that trees this yet that sourcing production have similar meaningful believe and of and situation we I be going there, production. of are small we been don’t in those doing ‘XX, own third-party European but this of aren’t see generating actually with will of state initial amounts about XXX by move year, we Again, we it our Guatemala kind Asian year-round supply – supplement this be into markets. in of that transition start that the I that quantities a is hectares down as trees marketing. will going While well. any a of of just and/or will QX having off will a come to into some fiscal go productive to to off planted. joint fiscal we have venture Colombia, Colombia, And lot fruit are into

productivity We amount of will before year full start in see little small that and they up XXXX XXXX this a to more production. reach probably with bit ramping

to the bit Colombia little the like just different from are Guatemala. a in what environment And therefore, Guatemala. then we than take maturity growing is the a cycle bit and little to think in in than seeing planning likely reach a tree I are longer there conditions

Thanks Very of Best luck. helpful much. so color.

Okay. Thanks Ben.

Ben. Thanks

of comes JPMorgan. proceed with Our next question your from the line with Palmer Tom Please question.

Hey. Good afternoon. Thanks the question. for

Tom. Hi

and think parts, just Maybe the I of on see really we but out, does but up outlook. as How lot XX% and all lot better. meaningfully, are detail of we the are cost about And kind it net I moving I farming follow-up, this a harvest like avocado better, sounds the year? volumes appreciate a there midpoint quality the know is side. down of environment are The prices guess is your like,

thinking for years? recent outlook lower degree we in pricing? the to have So, I maybe EBITDA even to mean in relative that be what segment I step-up seen of guess for some think instance, this the with should about about how it we year-over-year year reasonable is

on number to that at kind for Tom, this it’s still I would us say a lock point. of premature in

I mentioned things lot think a are of you accurate. that

where production land. know we costs are our a were last lower on what year. pretty input sense We to have going good they than is think I

for our time. good point be what cost at unit going is pretty a per in feel have we So, this to

season. part than we did I settles environment move year this as is at in pricing of the think pricing year ago, we know have season. the the lower ultimately a through where least early we a We the wildcard

But contribution create much margins strong, QX have year, more we this I to when challenging were So, had high. box said, year. very looked lower going curve. at last are a we the we that And because being on mean size better from points environment still extremely price per that like Prices perspective. that’s a

this year. fruit that than we commercial the more did within year for last promotion grade have spot of kind retail sweet We fall

have of that a time. seasonal big of that’s condition, number mark customers, have is the pricing, working a point So, locked – at volume with have the but pricing a don’t but We there this been retail significant pricing amount through of positives, commitments we we have our foodservice number and there don’t market the of a we is at in that our point. this kind lot question of

So, – than there. am other It’s it’s any feel it guidance as to impacts overall, But lower was we or not. offset will specific just land just it I the what year. believe those do I of where on the pricing be last favorable give year to this may environment that average hesitant will matter a we

to you about it’s don’t thinking are you Tom. we if be give be whether way, this better going to out. net tell or you when point think right enough just going I it to worse the it’s at I have info to everything

freight from that. the year is But will significant, say savings we last

still said, to year I of have Yes. lower because last for than talked better be generate And of savings, the about. things margin all other and because did like we have we those we margins pricing

and is even going least from typically that, it’s the be quarter, Thanks about I that. because to note maybe that And How segment. the XQ? sell-through standpoint, occurs it costs it’s just third be kind you because the to skewed if did is allocate that a harvest I a standpoint, skewed Okay. timing. the a more harvest harvest know to in than therefore, fourth think going from we at harvest. cost that see on volume that’s balanced it mean delayed Because how for to quarter the of normally you typically make more I pretty then in

Yes.

more typical the fruit the the a wanted little of see about to typically quarter. – two-thirds of third in opposed we the Tom, come fruit see earlier off having harvest in of because quarter. I point, to about think much fourth this two-thirds sell-through to that balance sell-through At during kind we in little thinking of the we the came year so place happening taking actually a as we but fourth of what year, into So, a try that quarter, this

because I quarter, reality we what happen XX%. low if of seen sell-through I think maturity back where at X have will in that be probably I looks as kind of as year a in to it the think the what’s we seen XX%, fruit, the the historically, this go breakdown third of last going similar years, it then the to have

We it like as XX%, XX%. have seen high as

in the I that think going was on to than is don’t probably in end we breakdown. different be will low of range, maybe last what this be the think towards point percentage at of it. But mix I it dramatically sell-through terms year

Okay. that. for Understood. That’s

it harvest to to we yes, really But a driven on our what like – the while it is we you yes, focus And sell-through XX% bottom from the really off that that last feeling – meaningfully sell-through. probably than is more harvest. line, EBITDA in be this that’s point is the And And that the lot our by keep made think I was like won’t year. I year. said, around

Great. Look to forward Thanks again. seeing.

Thanks Tom. Okay.

Thanks Tom.

America. line our Bank Contreras of question comes proceed with from with And question. final Christian of the your Please

guys. our question. Bryan. Hey on for taking is Christian Thanks for This

positive you so on briefly your touched that in guys in briefly one consumption, should low-pricing consumption. upon responses. potential have one to higher remarks touched this environment We But lead your and upon – prepared is of

those helpful. the seeing more year, could you if that? behind have who category out last return are the are marketing Thank would you You differently, guys up data doing displays, you. any Maybe noticed, consumers on provide be category? Just you color are of more retailers priced anything setting

in not the there retail, but – Well, myself I you depends can’t comment some it reasonable. they good. the I on look, seeing because to tell But I we movement think to in I been look. know is at a early know you are lately the price displays. where pretty making have am going store great Prices more on are been were has margins that year, but I I

of just price more year last proportionately. which an we the consumers, drives fruit. more is secondary I demand the you up and you and more have throughput because if think over obviously, as have following get year drives more benefit mentioned I a But earlier, supply increase, the

So, seeing pretty think Europe I think Balance-wise, good we great mentioned China. I growth are in I we are earlier, and shape. as in

Just opened in recently, a we expectations. the center our have UK and big exceeded distribution already

We have opened a been month.

The because people China numbers forecasted with than of young trends of of we are substantially over better So, lots there. happening the there. good consumption things

there is So, things happening good industry. in the

definitely, product Christian have That’s was second it time. XX% lower in than about little Yes. the point at this we year sold the into last a in of America. North what came bit quarter

last was are still at supply available year, in supply a and markets. another of we strong domestic they year-over-year supply are – I the think lack Mexico. where last – our back Not the were point, area we of levels XXXX To the COVID issues saw ample driven we with and we by certainly market out saw lot dealing saw Asian of a But that growth in there chain yet. to consumption, disruptions, we that was area where again Steve’s big increase was in just year.

So, we of under already our results pleased full with one thus begun in seen QX have I we and have belt UK to opened, far. month in with the ramp Asian our now, very we Steve’s that think transition facility are And point markets. we see the kind got have to we pleased up are we into then back QX, as and

helpful. Very you. Thank Perfect.

Christian. You’re welcome,

further closing showing time, remarks. questions. for would at the to like gentlemen, end no management I session to and and I ladies am And the conference turn question-and-answer this any call over back

today. us joining for you thank Well,

Europe penetrating to excited XX. We have XX we about and work on Investor growth as look opportunities towards you of We us event very the mentioned. Day are our we many seeing front Asia, June of markets and as in at new in forward

in For for those us, have Thank Sonnek great participating. of Relations joining a an you you please our to interest Investor reach evening. Jeff out Have that ICR. contact, at

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

your You lines. may now disconnect