Mission Produce, Inc.

Good afternoon and welcome to the Mission Produce Fiscal Third Quarter 2022 Conference Call. All participants are 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 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 statement. 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 2022 third quarter earnings call. We produced strong revenue growth at 27% to $313.2 million, and we generated $31.6 million in adjusted EBITDA for the third quarter. which was supported by sustained strength in pricing amid a lower industry supply backdrop. Additionally, our per-unit margins performed well in the third quarter, which have remained at the high end of normal historical ranges and demonstrates the flexibility of our diversified global sourcing platform, even in periods where we experienced volatility from the large Mexican source market and capacity absorption headwinds that we are incurring from our new Laredo facilities. On the Laredo point, we continue to feel great about the flexibility that this 261,000 square foot mega facility will provide us in the future to drive volume efficiency throughout North American markets. We've made substantial investments in our network over the past several years, including Laredo, and we feel great about the capacity we have in place to support our anticipated growth over the next several years. While we've been absorbing those incremental overhead costs over the past year, they are largely fixed and have stabilized, which provides us with an opportunity to leverage those investments as utilization rates improve and we move more volume through the facility. To that end, earlier this week we announced a long-term third-party logistics partnership with NatureSweep, which is one of the largest growers and marketers of tomatoes, bell peppers, and cucumbers in North America. Given the size and scale of our business, Mission is uniquely positioned to offer 3PL services that streamline operations and create logistical efficiencies for complementary products. This 3PL deal will leverage our state-of-the-art Laredo forward distribution center in Texas to handle approximately 70% of their Mexican volume that's destined for the southwest, midwest, and eastern regions of the United States. We designed our Laredo mega facility to serve as a major hub for U.S. avocado imports, and we are leveraging the facility's size and advanced technology to drive volume and generate additional revenue through synergistic partnerships with produce importers. While enabling those partners to benefit from economies of scale, this business model allows us to maximize utilization of the facility, especially in times of lower avocado supply. And speaking of supply, the ongoing inconsistency of Mexican supply continued during the third quarter and the harvest ended more abruptly than what we expected. For context, only about one-third of U.S. distributed volume was Mexican fruit in the fiscal third quarter. Nonetheless, we were very well positioned to fill the gap with alternate sources such as California, which was especially strong, and our own Peru production and other emerging global source markets such as Colombia. As compared to the prior year, our Mexican volume was down over 40% in the third quarter, but by leveraging our global sourcing advantages, We offset the vast majority of this shortage by generating over 25 percent volume growth in other source markets, much of which we own. With respect to Mexico, we are looking forward to the production from the Jalisco growing region this coming season, which on a relative basis is about 10 to 15 percent the size of Michoacan's annual production, but one that presents an opportunity for long-term growth with younger plantations and more organized and sophisticated operators. Mission immediately capitalized on the opportunity to import Alisco fruit following the recent USDA certification for that fruit's entry into the U.S. market. It is a region we know well, having established a presence there with some of the largest regional growers and packers in 2009 to service other global export markets. Aside from the additional volume to the large U.S. market, Alisco provides other important benefits, including the high-quality fruit and serving as an alternate supply to fill gaps during the season, complementing our already existing source from Michoacán very nicely. This product will also go through our Laredo facility, where we can ripen, bag, and go straight to our customers. While Mission's global footprint provides sourcing advantages relative to the industry as a whole, there are not enough ample sources of fruit available to meaningfully offset the impact of the Mexican supply shortages. This resulted in persistently high pricing this year, which were approximately 45% higher year-to-date versus the prior year. Despite these higher prices, we remain encouraged by the resilient demand in the core U.S. market. Food inflation has been intense. and yet consumers are continuing to consume avocados on a regular basis, which speaks to the broader health and wellness trends that underpin the avocado industry, elevating the avocado to a must-have staple in many households. Our goal is to access globally with consistent year-round supply. This is the key to supporting long-term consumption growth and is the catalyst to drive new market development. Mission has played a critical role in the industry's growth. It has required foresight and a constant focus on continuously assessing opportunities to optimize our sourcing capabilities with third-party growers, as well as investing in our own farms to ensure that we can control the quality and supply that our customers have come to expect. To this end, I'm excited to have Tim Bulow, our new president and chief operating officer, join our executive team in August. Tim is a versatile and results-driven executive who has a great appreciation for global commerce and the development of new growth markets through his 30-year career working for large multinational enterprises. With Tim's operational and commercial expertise, I'm confident that we will expand upon our industry-leading market share and meet our long-term strategic growth plans. Our strategy is to invest in vertical integration has proven to be an unparalleled competitive advantage. Specifically, our own Peruvian production gives us reliable access to fruit to meet customer needs on a scale and at volumes that only Mission can deliver. In fact, approximately 25% of our total distributed volume in the third quarter was from our owned production. Our Peruvian farming operations are performing well this season, and we expect to produce approximately 15% more volume than what we achieved in fiscal 2021. As of the end of the third quarter, we distributed about one-third of the season's harvest, with the balance of the harvest being sold primarily in the fiscal fourth quarter. Reliable access to our own fruit during the transitional Mexican season and the ability to commit to long-term programs with retailers and food service customers demonstrates the strategic advantages we have over our competitors. In summary, Mission continues to be in a great position with strategic assets that provide value-added supply and services to our customers. We are focused on our long-term strategy of generating consistent growth and enhancing market share by increasing capabilities and capacities while continuing to adapt to industry dynamics. We are excited about what's ahead and believe we have an undisputed advantage 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.