Mission Produce Inc. (AVO) 2024 Q3 Earnings Call Summary

Optimistic Highlights

• Record Revenue and EBITDA Growth

Revenue grew by 24% year-over-year to a record $324 million, and adjusted EBITDA increased by 49% to $31.5 million.

• Strong Cash Flow Performance

Year-to-date operating cash flow improved by $62.7 million compared to the prior year period.

• Successful Cost Optimization

Cost optimization initiatives helped mitigate lower volumes, resulting in positive adjusted EBITDA similar to the prior year.

• Blueberry Segment Expansion

Exceptional cash flow performance allowed for accelerated expansion plans in the blueberry segment.

• UK Market Profitability

The UK facility achieved profitability for the first time since opening, reflecting successful market penetration and strategy refinement.

Pessimistic Highlights

• Adverse Weather Impact

El Nino caused poor growing conditions in Peru, leading to a smaller crop and lower harvest yields.

• Increased SG&A Expenses

SG&A expenses increased by $2.8 million or 16% due to higher employee-related costs, including performance-based and stock-based compensation.

• Lower International Farming Segment Performance

Despite cost savings, the International Farming segment saw a reduction in sales volume and gross profit due to adverse weather conditions.

• Lower Blueberry Segment EBITDA

Blueberry segment adjusted EBITDA decreased slightly due to lower average sales prices.

• Anticipated Lower Avocado Sales Volume

Sales of exportable avocado production from owned farms are expected to be slightly below the fiscal third quarter volume.

Company Outlook

• Positive Long-term Health of Orchards

Proactive steps have been taken to ensure the long-term health and productivity of orchards following adverse weather conditions.

• Continued Cost Optimization

Cost optimization efforts are expected to translate into improved operational efficiencies when growing conditions normalize.

• Strong Demand and Pricing

Higher price points at comparable volume levels indicate continued strength in demand for avocados.

• Blueberry Harvest Season

The upcoming blueberry harvest season in Peru is expected to see meaningful volume increases, although revenue impact may be offset by lower average sales prices.

• Focus on Debt Paydown

Debt paydown remains a near-term priority, with expectations to continue strengthening the balance sheet.

Q & A Highlights

• Q: Upcoming Peruvian Harvest Expectations (Ben Klieve, Lake Street Capital Markets)

A: The Peruvian harvest is complete, with lower volumes due to extreme heat from El Nino. However, prices were higher, offsetting some volume loss. Trees look healthier for the next season. (Stephen Barnard, Bryan Giles)

• Q: California Market Share Increase (Ben Klieve, Lake Street Capital Markets)

A: Record share of the California market was achieved through strong relationships with growers and proactive strategies. Approximately 30% market share was attained. (John Pawlowski, Bryan Giles, Stephen Barnard)

• Q: Future Capital Allocation Given Strong Cash Flow (Ben Klieve, Lake Street Capital Markets)

A: No significant changes in capital allocation strategy. Focus remains on debt reduction, with some acceleration in blueberry investments. M&A opportunities are always evaluated. (Bryan Giles)

• Q: Long-term Margin Improvement and Cost Savings (Gerry Sweeney, ROTH Capital Partners)

A: Margin improvement driven by marketing segment performance and cost savings in farming. Future focus on maintaining cost control and leveraging investments for growth. (Bryan Giles, John Pawlowski, Stephen Barnard)