Mission Produce, Inc.

Good afternoon, everyone, and welcome to the Mission Produce Fiscal Second Quarter 2024 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 call over to Jeff Sonick, Investor Relations at ICR. Please go ahead, sir.

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 our 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.

Steve? Thank you for joining us today. We are pleased to deliver a second consecutive quarter of record results fueled by continued strong momentum in our marketing and distribution segment. Total revenue for the second quarter of fiscal 2024 increased 35% to $298 million. Growth was driven by robust Consumer demand for avocados, which translated into an 8% increase in avocado volume sold in our marketing and distribution segment, which is an encouraging sign, giving our per-unit sales prices were up 22% versus the prior year. Further, the volume growth demonstrates our ability to drive per capita consumption through providing consistent access to our customers through our global sourcing network. The stable industry environment in the first half of our year not only aids in volume growth, but it also allows our business to operate with greater efficiency, and this showed up again in the second quarter with another strong adjusted EBITDA performance. Adjusted EBITDA increased 166% to $20.2 million in the second quarter, and our cash flow from operations improved by $39 million year-to-date in fiscal 2024. Our performance was driven by a combination of factors that generated higher per-unit avocado margins, including stable industry supply and a heavier emphasis on fruit sourced directly from growers in Mexico, an earlier start in California harvest season, and tailwinds from the price increases we implemented for value-added services in the fall of 2023. We also progressed with our efforts to reduce corporate expenses. The combination of higher volumes, stronger premium margin, and cost control contributed meaningfully to our profitability and cash generation. Looking to the second half of the year, while El Nino weather conditions had appeared to have eased, we are still seeing its effect on the development of the Peruvian avocado crop for this year, resulting in notable decreases in industry and own production volumes. The unseasonable warm temperatures, particularly during the night hours when the tree is recuperating, has stunted fruit development and reduced fruit sizing across the Peruvian growing region. Although this will negatively impact the global supply of avocados, we remain better positioned than most to deliver the same quality of fruit that our customers have come to expect by leaning on the strength of our world-class sourcing team to augment these shortages through accessing third party fruit from Peru and other regions. As I touched on last quarter, we started a rigorous cost optimization process within our international farming operations after the close of our 2023 Peru harvest season. Our actions here focused on driving down operating costs across our farming and packing operations. While the growing conditions in Peru won't allow us to showcase the impact we expected to see in our international farming margins this year, the approximately 10 million of annualized cost savings we plan to achieve in fiscal 2024 are nevertheless impactful in mitigating the impact of the smaller crop on our second half results and we expect these reductions will translate into improved financial performance when growing conditions improve. Mission has been in the avocado business for over four decades and weather has always been a variable that has influenced our business and the industry. Over time, we've been intentional in taking steps to minimize the adverse impacts that weather can have on our results. This is exactly why diversification has been a key component in our overall growth strategy, namely diversification across other crop types and geographies. For example, we have been making strategic investments to bolster our rapidly growing blueberry business, and we believe we are well positioned to lead the next revolution in the produce industry in mangoes. In 2023, we sold approximately 48 million pounds of mangoes. However, we believe we are still just beginning to tap into the fruit's immense potential with current U.S. per capita consumption at only 3.5 pounds compared to avocados at over 8 pounds. Mangoes rank 11th in produce volume velocity in 2023, demonstrating the opportunity retailers see in developing this category. This fruit also aligns with key consumer trends like the increasing Hispanic and Asian populations' interest in health and wellness and desire for versatile global flavors. Additionally, mangoes are a nice complement to our avocado business, with 87% of mango buyers also purchasing avocados. Our current capabilities in mangoes include advanced global sourcing of multiple popular varieties from six countries and leveraging our state-of-the-art avocado ripening technology across North America ripe centers to provide supply that meets the product quality, texture, and flavor that our customers expect. Our advanced global sourcing, ripening, and distribution networks may have been built on the potential of avocados, but with all the synergies between both products, we're now in a prime position to replicate this success with mangoes. The blueberry business was a highlight again this quarter. We've been allocating capital alongside our partner towards planning new premium blueberry varietals that offer higher yields and attractive returns. Moreover, these premium varietals are differentiated by their appearance and flavor profile, providing more optionality and added value for retailers and consumers. The blueberry business grants us additional levers to increase margins on a per-unit basis across our consolidated operations. We remain committed to continuing to invest in this growing business, and given the significant improvement in our operating cash flow performance within the joint venture, we are allocating incremental resources this year to advance projects that have been planned for future periods. We also continue to penetrate new regions and support opportunities in emerging growth markets such as Europe and Asia. In the United Kingdom, we have finished construction on the phase two build out of the forward distribution center we opened in 2023. The build out includes additional ripening rooms, cold storage space, and handling capacity for our expanding mango category. While it would take some time to completely grow into our new capacity, we are excited about the opportunities that it affords us within the UK retail and food service markets. In closing, Mission remains in great position with our diversified network of global assets. I'm proud of our team for their tremendous focus and execution, keeping Mission well-positioned to drive long-term growth, enhance profitability, and maintain a healthy balance sheet. With that, I'll pass the call over to our CFO, Brian Giles, for his financial commentary.