Mission Produce, Inc.

Good afternoon and welcome to the Mission Produce Fiscal First Quarter 2022 Conference Call. All participants will be in 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 over to Jeff Sonick, Investor Relations at ICR. Sir, please go ahead.

Thank you and good afternoon. Today's presentation will be hosted by Steve Barnard, Chief Executive Officer, and Brian Giles, Chief Financial Officer. The comments during today's call and the accompanying presentation contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We'll also refer to certain non-GAAP financial measures today. Please refer to the tables included in the earnings release, which can be found on the Investor Relations website, investors.missionproduce.com for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. With that, I'd now like to turn the call over to Steve Barnard, CEO.

Thank you for joining us for our fiscal 2021 first quarter earnings call. Our first quarter results were disappointing and do not demonstrate the level of execution that has defined our business and its founding. On November 1st, 2021, we implemented a new ERP system that impacted our entire marketing and distribution segment. As every company who has undergone an ERP implementation knows, this is a highly complex exercise that requires extensive planning and testing, all of which is designed to mitigate implementation risks. However, despite the countless hours we spent planning and preparing for this conversion, we nevertheless experienced significant challenges with the implementation. As a result, we were unable to drive the per-unit margins in the first quarter that we have historically delivered. While we believe we've addressed the most acute issues that we faced in the first quarter, there's more work to be done before we get back to the level of efficiency and execution that we have come to expect of ourselves. And perhaps most importantly, despite the challenges, our team was able to quickly adjust to the disruption and largely protect our customers from any extended impact. It is our commitment to customer service that has been Mission's hallmark for nearly four decades. As we've stressed time and again, our greatest competitive advantage is our ability to provide our diverse customer base with a year-round supply of avocados from our vertically integrated farms and global network of growers, while also providing customized value-added services that precisely fit their needs. As simple as this sounds, it is anything but when you consider the sheer volume of fruit we are moving through the supply chain on any given day. On a weekly basis, we can move between 240 and 300 truckloads of fruit through our network. And to move that kind of volume, we need extensive operational capabilities, which is precisely what we have. Our network covers four packing houses in California, Mexico, and Peru, and 12 forward distribution and ripening centers with operations across nine countries on four different continents to serve customers in over 25 different countries. Mission is build a set of unique capabilities over the last 38 years, piece by piece, asset by asset, to become the global leader we are today. But growth has complexities. For many years, it has been apparent that our organization would need to upgrade our ERP infrastructure to be able to execute on our strategic growth plans. The new ERP system provides the necessary infrastructure for our growing business and establishes a security and control environment we need now that we are a public company. It was also designed to enhance our operational visibility so that we can scale our businesses to support an even greater breadth of customers across larger geography while maintaining our unparalleled standard of service. While we weren't naive to the risk of disruption to the business, the extent and magnitude was greater than we anticipated. I'll provide a few examples how the ERP implementation impacted our operations in the first quarter. First, there was a lack of sufficient visibility into on-hand inventory which resulted in considerable fruit that was moved at below average returns or not fit for sale in addition due to the struggles with visibility on inventory we sourced a disproportionately large amount of fruit from third-party providers where we typically do not recognize meaningful margins in order to fulfill customer commitments Separately, first quarter results were also negatively impacted by the smaller Mexican harvest and difficulties with sourcing the needed size curve and grades, which led to significant use of expensive co-packer fruit to meet commitments. Although we largely met our commitments to our customers, which is our first priority, the product of these operational complexities was exceptional margin erosion and working capital inefficiencies. So what are we doing about it? As I noted at the top of my remarks, we believe the worst is behind us. As part of our preparation for the ERP conversion, we hired a third-party firm to work with us on the implementation. They remain actively engaged with our teams on a daily basis to identify and remediate remaining issues. Additionally, we have activated additional protocols and developed new processes to enhance the needed functionality and reporting capabilities that provide visibility and insight into key aspects of the business. At the same time, we deployed our operational excellence teams to our distribution centers to assist with training and execution. Importantly, we have also heavily ramped up our cross-functional communication and collaboration so that the entire enterprise is on the same page and moving in the same direction at an accelerated pace. We are making progress. During the month of February, our per box margins have returned to historical levels. Despite the challenges, the fundamentals of our business remain intact. The trends supporting the industry and our business continue to be decidedly favorable. The demographics are advantageous, and our ability to help retailers and food service customers capture demand for avocados will be a key element of driving consumption trends in growth markets such as Europe and Asia that are at fractions of what we experience here in North America. Strategically investing in our own production to ensure year-round global sourcing is the key to maintaining long-term organic growth and is a key component of our long-term growth plans. In summary, we and our business remain resilient despite the challenges we faced with the ERP implementation. We continue to believe that the ERP conversion was a necessary step as we further scale our global footprint. We are focused on our long-term strategy of generating consistent growth and enhancing market share by increasing capabilities and capacities while continuing to mitigate and adapt to industry dynamics. We are excited about what's ahead, and we believe we have an undisputed advantage with our global network of value-added assets that will drive sustainable long-term shareholder value. With that, I'll pass the call over to our CFO, Brian Giles, for his financial commentary.