Earnings call transcript Q3 2023

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Operator

Good afternoon, and welcome to the Mission Produce Fiscal Third Quarter 2023 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

Jeff Sonnek

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

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

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

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

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

Stephen J. Barnard

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

higher last was prices volumes Our that selling continuation where market of expectations, were this returned earlier average generally topline the elevated offset lower following to $XXX.X industry performance and conditions. of million year, fiscal conditions with by consistent reflects a year's the industry

quarter, higher unit our sequential the in during per initial harvest. environment, margins substantial a sites quarter, a increase volumes strong significant that million suggested in on However, the fiscal and to pricing Peruvian were adjusted the lower drove EBITDA continued achieved in of below set estimates second relative expectations, we based came despite while $XX.X and sales improvement

with to we the took pricing strong key accelerate. Furthermore, our the still customers began so with lock our experiencing secondary Peruvian time, seasonal advantage a would volume export be of some a Mexican decision completion increase At volume distribute optimize ahead of to in harvest, we made rapid to in harvest, the to in early that we position markets. and the also prices to markets believe

to the experienced through midway abrupt the source and nature adjusted growing farming service own a However, fixed impacted with size excessive third Peruvian negatively in onset suboptimal of markets primary cost growing during our change key our and the volumes sizes of lower region. volumes that were of the an than our mix quarter. lower industry margins and heat conditions fiscal segment The across production the pressured of quarter, the performance anticipated the expected fruit from export with operations combined fruit EBITDA

lessen fiscal expect help pricing Industry which events, and the to responded fourth since has we moved margins. impact to of quarter our higher these

distribution As as fundamental mitigating are have, with too sound large philosophy network efficient in of can fashion, in efficient thoughtful diversified set that an our under per margins and through the the strategy player and risk our Mission. sourcing circumstances. impacts can this maximizes capabilities bad, familiar This significant a visible global all weather is manage global unit good and and a any our in agricultural volume both business, of core that that we

for the following Mexican completion July. industry support export the distribution key season generate which segment quarter, an third across instance, markets. able during more to quarter period, harvest supply faced extended deliver our completion each rapid of our due of For of Other Mexican options with limited the the this Moreover, volume greater we challenges players growth volume growth and able the our we to marketing were in were to reflects harvest. XX% ability during to

distribution network, regardless Mission XX of America, bring and of our distribution seeking bear of value to eight to new the customers forward existing value in for position UK, EU remain demonstrates growing We This which integrated to North ripening in the circumstances. service customers global allows managing in sourcing the year-round vertically our diversified primary and are our our centers the regions and who services. and the benefit and other added sourcing from China, and

support encouraged While second the had we the half the and quarter, fiscal by allows market a element to per the half help environment new we third the consumption same markets drive drive key of during of to margins the current the rational doesn't to first pricing environment that growth. of growth for fiscal that through opportunity which us us afford long-term hoped the demand year, is open level unit were

April distribution Our and in to the continues in forward well. center opened UK perform new

the We ports major transportation seeing already direct of strategic to this are its access and location benefits with networks. international

curve In the despite on summary, we the focused the we remain Peruvian we maximizing ball have crop with development. opportunities encountered

expected, route customer position remain this a season. we utilize Although counter great service during lower Mexican are initially we our to volumes in to the and size global base than

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

Bryan Giles

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

lower volumes XX% quarter, XX% pricing supply period of decrease there year, third limited the last Total the avocado revenue with contrast sold. last XX% for partially fiscal year when per compared industry prices, pricing the during was drove levels. near same a in a the unit by was which Mexico higher avocado by to of million, the and period sales supply in XXXX by average to driven $XXX.X decrease out same quarter driven a that record were increase higher volume Both offset

our our International was Farming Gross own in to from million segment, $XX.X concentrated quarter. profit on pricing decreased by lower $XX.X third The driven production. the by million avocados sold in decrease

Distribution improvement quarter. second Marketing were margins driven while last of levels The Within see volume avocado higher per we’re improvement relative elevated below sourced segment, sold. in the fiscal was and from higher year, unit of to prior and year, versus by per meaningful unit mix California the the margins pleased to impact the fruit sequential

pleased in XX% to achieve Texas helped of larger American which growth volume to are harvest, programs markets We driven volume. strength improvement a export and and in international all absorption. across cost The in markets, by Peruvian later deliver our contribute Laredo, Mexican us facility fixed our North the our helped increase a leverage further end growth our supported by in

same to due to million $X.X year, processes. XX% incentive company ERP primarily maturation employee our public compensation lower related costs, to lower the period decreased reengineering last professional compared or of due the process expense fees and lower SG&A accruals,

last Adjusted a due for lower net of lower as per million period figures same the to margins was the $X.XX within unit same or pricing. a result decrease was was compared in diluted $XX.X both Adjusted income period for of per the $XX.X year, or $XX.X to International $X.XX market million share these to million, last million Farming segment EBITDA diluted per share year. compared $XX.X

segments. our to Turning

$XX.X and The million impact gross for avocado Our lower largely unit Segment volumes avocado EBITDA net described. Distribution primarily $X.X pricing due lower SG&A. volume adjusted million to margin the by quarter sold. dynamics million, to XX% segment and to of increased due X% previously decreased Marketing $XXX.X higher per sales was to the or offset

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

$X.X decreased from $XX.X $XX.X supply. sales as this by driven Farming gross million mind, last elevated primarily compared farms, to pricing and in from Segment by avocados year Mexican to primarily ago by year's were the industry to in sold supply. the constrained to resulted compared pricing margin period about With environment, period, pricing lower XX% the adjusted brought as last were which the million, the to limited total company-owned elevated in compared same due decreased on million, levels year, International from segment EBITDA lower which resulting lower segment

first January. in is the concentrated fiscal Activity of alignment with and in quarters from season, fourth in July Blueberry blueberry Peruvian which typically harvest our year, our segment the runs through

to the As negligible, Net higher third quarter and segment results cash yet October blueberry same the start $X.X respectively. of and an XXXX, in million due financial July $X.X adjusted last million year, million million, position, $XX year. cash XXXX. EBITDA harvest our negative relative was in $X.X Shifting as to to $XX.X equivalents of our segment of million compared XX, compared period and as $X.X to sales to the early a were last were result, which Blueberry were million XX,

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

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

Thus, in when third cash fiscal million three-month quarter, $XX for we on a period operating flow approximately looking at generated cash.

operating nature of was our basis, The capital, However, million activities $X cash for compared given on in $X.X million relative period year-to-date the seasonal working by working lower a net to used in our the year. last capital. same performance segment to change and movement a to combination International unfavorable $X.X in was driven slightly Farming prior year, million decrease of due a income net

year, environment movements current in the grower the driven prior payable the changes and capital by comparable lower being were balances working pricing offsetting to Overall year. inventory in with

concentrated avocado construction compared maintenance and the Guatemala $XX July Current year million new our pre-production on Capital the distribution were XX, in in XXXX nine million last expenditures costs Peru $XX and for in to facility ended UK. were months year. expenditures orchard

to prior expenditures in year. to related operation, Capital $X.X development the $XX.X also Blueberry’s our the million compared of included million

decreased versus our core $X.X influence Blueberry's year-to-date million the of X% our Excluding prior operation, avocado period. the associated or CapEx with business

to hold trend this for fiscal expect balance the of XXXX. We

our to today. since the With Company Company permits of our first next stock out impact million mitigate and authorization XX a the appropriate, framework, to approval, repurchase market. the and been This shares public point of The stock stock no last [intend] the that over up to is (ph) common week, our incentive capital to as stock as dilutive repurchase which approved tool of the as provide $XX a allocation plans I'd our have support Board repurchase open entire outstanding in remains to program authorization the respect our primary the is company. a There the for months.

around compared per context expectations on conditions to assumptions. some In terms expected is fourth pound Pricing and the for a by on the growing XXXX. be basis fiscal XXXX providing our impact our outlook, be of The your the near-term reduced expects flat by of to to higher year-over-year about modeling Peru approximately average flat period, versus to we XX% conditions. quarter of are slightly to to sequential $X.XX lower supply year help higher fourth on the due brought in inform prior quarter, industry experienced slightly to a volumes basis fiscal the in industry from weather

our is in our XXX which to growing region. volumes of pounds million in In million expectations, a XXX the decrease we to Peru, exportable pounds the decline be production farm anticipate for range throughout conditions terms harvest from reflecting of the the in owned season, initial XXXX now

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

Operator

you. Thank

Thank We Instructions] [Operator will conducting question-and-answer a you. session. be now

proceed your question Our from with Please first Ben with is question. Stephens. Bienvenu

Ben Bienvenu

everybody. Good Hi, afternoon, thanks.

Stephen J. Barnard

Hi, Ben.

Bryan Giles

Hi, Ben.

Ben Bienvenu

of want pressure in about I the the seeing Farming the what recognizing nice margins, What So, you you're to in this ask, improvement Can some degree that managing could you're the are the Obviously, Can diminish the could quarter? to talk SG&A improvement of what you in segment sequential fairly fourth nicely. outside that And that it? International in things operations, to and see that segment? trends expect margin you persist amplify that, harbored you quarter. you the about International quarter. alluded that, concentration talk fourth improvement into then to or the the Farming

Bryan Giles

$X.X and the that I year-over-year the I quarter, kind third our segment, equivalents happy Hi, that sold to during Marketing million we're Ben. volume at growth we of, the When certainly look think at, things lug with saw close look Distribution through.

into we fruit high-end. more on helped growth much fruit Mexican that's the -- Peruvian Because in with when very we the our saw grew rates the to North U.S. fruit price utilize in XX%. available, the year, a really lot faster U.S. think export lower it able which lot we with of support primarily, our to a We the And I of looked and of about last to at market, that much that happening, were at Europe than So, America what Mexican growth. that that came the way markets drive Asia volume that. points, and brought

the were worked. So, to had integration pleased extent marketing fruit I think available strategy needed we We the we our that that for the segment. vertical

coming think we had and end. the we were an the looking is from probably look to sourcing Mexico, fourth I a we quarter, through between California we're as Peru we nice quarter, at certainly balance transition third crop as -- California to

to second the the quarter. move coming looking half the the Mexico close crop as Peruvian the and of of at season looking quarter, during online new of You're at a we kind through you're out coming

mean, think volume last year. a from this bit was hearing I bit a that season, it Mexico maybe than the lighter will was than last be lower point, supply what we little all-in-all, for coming what what So at it we're year, little industry

California that. margin. for tends And bit has of little and that that with a that drive could piece be help coming end preparing we're the it generally, quarter. But the during think business up contribution pricing an fourth to So, our the highest to we again,

that we've past. think I to referred the in

as help we as a what margins. probably per XX%, typically a when the and challenges extent. fourth a in but will in of pricing somewhere quarter quarter, it have volume that neighborhood, the some think that in higher quarter. market, different of segment, And about It's creates larger at would we we yes, XX% third Farming set fourth to It not third our the and we typically, with XX%, when I per se quarter -- in the box talked favorable we in the the past comes the then in proportion third look

expect won't extreme as think, but quarter. I fourth than I it have volume we a year, in the more to do had third we be this variance of in the quarter think

And bit well. sitting market higher So, as little pricing environment be should that beneficial. be where a will is a helpful

Europe Now good volume of Asia. again, that to, so and in isn't is U.S. case programs, alluded as Steve but portion our the with much

-- So

Stephen J. Barnard

And China.

Bryan Giles

China, And yes.

some be benefit So, there could there.

Stephen J. Barnard

China this, one positives have a look over in got of When of year, of they've that now at we're out some you two the people lot ripe obviously came there the to we centers. building shipments tripled and -- while more

help kids to well-positioned growth market pretty crazy. there. avocado we're over So, drinking that are The like smoothies

on So, EU the train And alone. in again, built positive to we're position and a then just leave we're future for in there the way. kind a and of runaway we're nature UK, the waiting mother it's and us

Ben Bienvenu

Yes.

the bit run quite quite reasonable Okay. baseline a terms Is year-over-year. tightly Fair rate SG&A we've expectation maybe what to SG&A? in could down manage that half the some a of versus talk if enough. of a the seen absolute last SG&A in what Understood. we've years? down doing of couple are On about you than sequentially expense, all of there things in you bit for the over first bit a dollars seen more year, the and this And

Bryan Giles

for the Certainly, sustainable year. performance say through on that decreases internally, reason Part the first months related based of to probably Ben, we wouldn't year, we I this nine this a delivered is compensation. level. -- the expected incentive necessarily the of to, the this haven't

foreign in around those profit profitability sharing specific segment the down our sharing isn't team operations, the go would kind resulted in Farming government with significantly segment, there's of we that drop geared operations. both or made accruals, Mexico, management lower our as forward in in in of accruals well. in earnings Peru Farming our So, But there's some and the case. profit And big been as hope in our also mandated in Peru to adjustments as of off we a which it

current SG&A, more think So, of that performance to the is component year. of isolated I the

where I big then after those after opportunity consulting of itself. (ph), other to we had ERP We think related down other don't repeating as that's sustainable. professional the in honesty see as fees, there might some [go And all things, year challenges some last more for that, be off, we forward. coming of come move live] the --

Ben Bienvenu

Thanks Okay. Very questions. good. so much taking for my

Bryan Giles

Okay. problem. No

Operator

you. Thank

Our next with proceed question is with from JP Tom Palmer question. Morgan. your Please

Tom Palmer

afternoon. good for Thanks questions. the Hi,

Stephen J. Barnard

Tom. Hi,

Tom Palmer

idea side, get start split. what Peru just maybe to an we're Wanted at the looking and off just on a from of volume

still even XQ. sell-through is toward bit discussion it and skewed a think XQ was the Is case the terms more quarter of in the balance that fourth ago, perhaps? a relatively or a between I quarter

Bryan Giles

in as so sell-through. profit impact and of mentioned, quite This I to it'll Typically, but that the be second, as loaded of about year, much first we're the terms XX% what about typically sell-through as in we back of not half in the XX% fruit probably see. not the harvest, customers,

did. might is we ran around of to I third to our volume and QX, a we it to a full-year in the third in relatively what to But on as during some based put would be quarter, would of probably potential amount well. quarter, into small compared be the the for where QX that say XX% us would projections slip amount XXXX fiscal split at over with if land, XX% going it

Tom Palmer

Oh, great.

And coming you then distribution expect just sounds solid a expected, got you of as which than you volumes And you. winding standpoint. Peru in on lighter gave down. like was from what Thank be then California, industry Okay. some to indication also you've

I the a be going industry is the in-line at as just the least we for or that but quarter, longer to So, to given is expectation would you little fourth with look tougher quarter? it's Peru? in-line, fourth expect term in-line know grow at

Bryan Giles

I actual at think quarter with make -- Peru, consumption would perspective. the is, advantageous the we mean, in overall we the a Peru, pretty fourth in look think up being still it's after of look share smaller still we'll growth if both our fact abroad, at would we if North even us I from for our that I And a and crop and in significant I think what with when Peru portion the with QX. position America

I the quarter it when more see has meaningful fourth our and us saw don't with or could Certainly the by had a think initially year, what and transitioning quarter. lower fruit, to But dramatic that it I I Peru our Mexico, in way we're new be, it. amount from we -- the their necessarily and in think bloom on than the don't definitely Mexico gives advantage off part over than an we'll that But last again, of of is it's it's crop influence a lower later of other. share the still that in what having we expected. peers one

Tom Palmer

Understood. Thank you.

Operator

Thank you.

with from Our Roth Sweeney Please next question is question. Capital your proceed Gerry with Partners.

Gerry Sweeney

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

Bryan Giles

Gerry. Hi,

Stephen J. Barnard

Gerry. Hi,

Gerry Sweeney

apologize, my mobile, on I in volumes decision you more dig little a movements but discussed down, that, you to think some wanted just Peru, I and on also made making. bit I'm but or were I understand

I'm the quarter from fruit. play you just but where changed Peru You some beneficial? this happened were Monday you change to harvest does during and and curious anything decisions that quarterback, with you processes I'm making if -- potentially And curious, or future just quarter, more process obviously can't but had maybe morning what the allocated the with would in decision be a in importantly,

Stephen J. Barnard

extremely it hot. the but little the California the trying due affected then water that hydrated, tree or exact because was of the Peru what all temperatures, at was and hot or We I of to that the way cold plus lot was and survival and it's because the early in and late, cold rain. further. winter, and which hot can't We a Peru and or of to possible to extremes. from But weather. a beginning, Well, very of suck to we mode temperature And close did the And when up two El rain the set, higher. and you it's stunts set looked had start good the the in point to the weather it cold. on situation degrees down XX had really summer hot it's It winter, with flowering on, the cold fruit they hot it give weather -- it to to it fruit, the Niño weather fruit does, went stay at -- weather the due and and stuns as had summer the early in tree, it but fast growth mid that got for as with kind probably etcetera. it

just two had season, else. effected everybody as that the extremes overall So, production the did we for

Bryan Giles

Yes, -- I mean

Gerry Sweeney

it. Got Yes.

Bryan Giles

we pricing like our weather we the later were I'm the that's say fruit where sure of liked side, have off we if Gerry, in say the environment, would had the to the if have harvest. to with But because not have have trees, going made. we I'd to on knew, conditions would drop higher decision, issues we a extended year, flip

would there's hand we as cut definitely in there's lot we're we data utilize clear think we're not to do I'm that move to we going the forward. sure track forward, differently a of we going have have future, if at to something data going points that need a I that but data here, but

Gerry Sweeney

Got it.

the was and, sure helpful Okay. there was That's -- terms if understand I what of situation helpful. in wasn't what exactly -- that's just

Stephen J. Barnard

Yes. We were

Gerry Sweeney

Yes. appreciate. I

Stephen J. Barnard

to this, were there's wait hold pretty fruit usually the pretty dropping trying a at but started rapid later a because We pace. out, the everybody good market, fruit

tree. the wake we anything not So, want didn't and have to up on

Gerry Sweeney

was the was the trapped and heat dropping overall, -- because tree and correct? it That both

Stephen J. Barnard

It out here. get out getting It's house, like of your everything. kids sheds the Exactly. of

Gerry Sweeney

you. All to that. can right. relate it. got I Got I

to stuff a was move -- or it. if helpful. now super around, like that's made little maybe but harvest I decision and No, sure I wasn't pick some you it it of understand strategic wasn't Okay. to drop. I was either some the if made caught earlier you a I a listening sure commentary,

Stephen J. Barnard

Yes.

Gerry Sweeney

it. Got

guys. Thanks, Okay.

Operator

time, and further and end no the Ladies the to over at I'm turn question like showing gentlemen, session a to management closing answer call and back this and questions. remark. I'd

Stephen J. Barnard

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

Operator

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

You may now disconnect your lines.

Mission Produce (AVO) 11 Sep 232023 Q3 Earnings call transcript