Q1 2024 Mission Produce Inc Earnings Call

Operator: Good afternoon, and welcome to the Mission PRdc fiscal first quarter 2024 conference call. All participants will be in a listen only mode.

Good afternoon, and welcome to the mission protest fiscal first 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.

Operator: 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 Sonnek, Investor Relations at ICR. Sir, please go ahead.

At this time I'd like to turn the call over to Jeff Sonic Investor Relations at ICR.

Please go ahead.

Jeff Sonnek: Thank you and good afternoon. Today's presentation will be hosted by Steve Barnard, Chief Executive Officer, and Bryan 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 Provision of the Private Securities Litigation Reform Act of 1992.

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

Jeff Sonnek: All statements, other than statements of historical facts, are considered forward-looking statements and 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 those discussed in the forward-looking statements. These risks and uncertainties are identified and discussed in the company's filings with the SEC.

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.

Just in the forward looking statements.

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 Dot mission produce dot com for reconciliations of non-GAAP financial measures to their most directly comparable.

Jeff Sonnek: Also, I'm going to refer to certain non-GAAP financial measures today; please refer to the tables included in the slides, which can be found on our investor relations website, investors.missionprdc.com. Reconciliations of Non-Gap Financial Measures to Their Most Directly Comparable Gap, With that, I'd now like to turn the call over to Steve Barnard, CEO. Thank you for joining us today.

GAAP measures with that I'd now like to turn the call over to Steve Bard CEO, Steve <unk>.

Thank you for joining us today, we're off to a strong start in fiscal 2024 with the delivery of the first quarter the demonstrated solid execution across all facets of our business.

Stephen J. Barnard: We're off to a strong start in fiscal 2024 with the delivery of a first quarter that demonstrated solid execution across all facets of our business. Total revenue for the first quarter of fiscal 2024 increased 45.2 million, or 21% year-over-year, to $258.7 million, and adjusted EBITDA increased by $16.9 million to $19.2 million. These results were a direct result of our team's focus, underpinning our strong adjusted EBITDA performance with significantly improved per-unit margins across the marketing and distribution and blueberry segments, which translated to nearly 700 basis points of gross margin expansion and a 69% increase in gross profit dollars versus the prior year period. This improvement was spurred by strength in avocado margins in our marketing and distribution segment as well as the achievement of record quarterly revenues in our blueberry Blueberries are notable this quarter in that the strategy is becoming visible in the financial results.

Total revenue for the first quarter of fiscal 2024 increased $45 2 million or 21% year over year to $258 $7 million and adjusted EBITDA increased by $16 9 million to $19 $2 million. These results were a direct result of our team's focus underpin.

Our strong adjusted EBITDA performance was significantly improved per unit margins across the marketing and distribution and blueberry segments, which translated to nearly 700 basis points of gross margin expansion and a 69% increase in gross profit dollars versus the prior year period.

This improvement was spurred by strengthened avocado margins in our marketing and distribution segment as well as the achievement of record quarterly revenues and our blueberry segment.

[noise] blueberries are notable this quarter and that the strategy is becoming visible in our financial results within this business, we have been investing capital in new premium varietals and not only offer additional yield opportunity to drive higher returns on investment, but are also differentiated in terms of the appearance and flavor profile, which offer retailers in there.

Stephen J. Barnard: Within this business, we have been investing capital in new premium varieties that not only offer additional yield opportunities to drive higher returns on investment but are also differentiated in terms of the appearance and flavor profile, which offers retailers and their customers significant value. Similar to our international farming segment, we were able to generate higher margins as a result of behaving as an operator with a greater capital intensity; the blueberry business is providing us with incremental levers to drive per unit margins at the consolidated level. In an environment such as this, where industry volumes are constrained, we are well positioned to capture the additional margin upside that is created from advantageous prices. Together, these businesses contributed meaningfully to our overall adjusted EBITDA generation in the first quarter and demonstrates Mission's unique ability to drive value through its leading global market position.

Customers significant value similar to our international farming segment, we were able to generate higher margins as a result of behaving as an operator with greater capital intensity. The blueberry business is providing us with incremental levers to drive per unit margins at the consolidated level.

In an environment such as this where industry volumes are constrained.

We're well positioned to capture the additional margin upside that is created from advantageous pricing together. These businesses contributed meaningfully to our overall adjusted EBITDA generation in the first quarter and demonstrates missions unique ability to drive value through its leading global market position.

Stephen J. Barnard: Our primary goal is to drive long-term volume growth by supporting our markets with consistent supply, creating an environment to drive per-capita consumption growth through greater access. To support opportunities in emerging growth markets such as Europe and Asia, we are methodically building our capabilities in those regions in a measured fashion. In the United Kingdom, the construction of our new Forward Distribution Center is progressing according to plan, with our Phase II build-out to expand capacity, including additional ripening rooms, storage, and sorting, as well as building handling capacity for our very popular mango category. While our mango program is still in its infancy, first quarter revenue grew nearly 50% compared to the same period last year to over $10 million. The opportunity ahead is immense. Mangoes are among the most consumed fruits globally, yet in western markets, they have lagged behind, primarily due to the lack of consistent, year-round, high-quality sources.

Our primary goal is to drive long term volume growth by supporting our markets with consistent supply, creating an environment to drive per capita consumption growth through greater access.

T sport opportunities in emerging growth markets, such as Europe, and Asia were methodically building our capabilities in those regions in a measured fashion and the United Kingdom and the construction of our new forward distribution center is progressing according to plan with their phase II build out to expand capacity, including additional ripening rooms storage and sorting as well.

L as building handling capacity for our very popular mango category, while our mango program is still in its infancy first quarter revenue grew nearly 50% compared to the same period last year to over $10 million.

The opportunity ahead is immense mangoes are among the most consumed fruit globally, yet in the western markets. It has lagged behind primarily due to the lack of consistent year round high quality sourcing.

Stephen J. Barnard: We are eager to bring some greater execution to this fragmented industry and help drive greater consumption. In fact, we recently reinvested in this business with new leadership that is already generating early wins through improving our third-party sourcing, enhancing our operational capabilities, and meeting the needs of retailers in a more consistent fashion, all of which is translating to growth. We think we are in an ideal position to compete for market share globally, and this focus has immediately yielded new customer engagements and is very complementary to our avocado program from a merchandising perspective. Supporting these strategies are our physical distribution and ripening assets, our expansive third-party sourcing network, and our vertically integrated growing operations in Peru. This allows Mission to provide year-round sourcing to established markets such as North America but also strategically penetrate new regions as well. This is a playbook that has served us well over several decades and remains the core tenet of our long-term strategy.

We are eager to bring some greater execution of this fragmented industry and helped drive greater consumption. In fact, we recently reinvested in this business with new leadership that is already generating early wins through improving our third party sourcing enhancing our operational capabilities and meeting the needs of retailers and a more consistent fashion all of which is translating to grow.

We think we are in an ideal position to compete for market share globally and this focus is immediately yielded new customer engagements and it's very complementary of our avocado program from a merchandising perspective supporting these strategies are our physical distribution and ripening assets.

Our expensive third party sourcing network, and our vertically integrated and growing operations in Peru.

This allows mission to provide year round sourcing to establish markets such as North America, but also strategically penetrate new regions as well. This is a playbook that has served us well over several decades and remains a core tenet of our long term strategy.

Stephen J. Barnard: Although our international farming segment doesn't contribute materially until our fiscal second half of the year, when the harvest commences, we have already started a rigorous optimization process that is intended to drive down our operating costs while ensuring that we maintain the same quality standards that our customers have come to expect. We are encouraged by the progress we are making with this initiative and expect that it will translate to improved operating performance later this fiscal year. Although it is still early to provide a reliable forecast of volume from our Peruvian operations, weather conditions have improved, and El Nino conditions have dissipated, which should lead to a more predictable harvest for this coming season.

Although our international farming segment doesn't contribute materially until our fiscal second half of the year and the harvest commences. We have already started a rigorous optimization process that is intended to drive down our operating costs, while ensuring that we maintain the same quality standards that our customers have come to expect.

We are encouraged by the progress we are making with this initiative and expect that it will translate to improved operating performance later in this fiscal year. Although it is still early to provide a reliable forecast of volume from our Peruvian operations weather conditions have improved and as El Nino conditions have dissipated, which should lead to a more predictable harvest for this coming season.

Stephen J. Barnard: We believe that the improved growing conditions combined with enhancements to our operations will create a more constructive backdrop for our international farming segment performance later this year. In summary, Mission remains in a strong position with a network of global assets to drive growth, a strong balance sheet, and a focused team that is generating enhanced margins and cash flow through thoughtful capital allocation. On that note, I wanted to take a moment and comment on the executive appointment we announced last week. I'm excited to have John Pawlowski join our executive team as President and Chief Operating Officer beginning in April. John is an exceptional leader who brings more than 25 years of experience in the global food and food service industry, driving logistics efficiencies, market access, and strategic partnerships at large global organizations such as J.M. Smucker.

We believe that the improved growing conditions combined with enhancements to our operations will create a more constructive backdrop for our international farming segment performance later this year.

In summary mission remains in a strong position with a network of global assets to drive growth a strong balance sheet and a focused team that is generating enhanced margins and cash flow through thoughtful capital allocation.

On that note I wanted to take a moment and comment on the executive appointment, we announced last week.

I'm excited to have John Pawlowski join our executive team as President and Chief operating Officer, beginning in April John is an exceptional leader who brings more than 25 years in the global food and foodservice industry driving logistic efficiencies market access and.

In strategic partnerships at large global organizations, such as J M Smucker.

Bryan E. Giles: Sean comes to Mission from Lipari Foods, where he was president and CEO for the past two and a half years. With his comprehensive background in the international food industry, I believe his skill set will greatly contribute to our continued growth as we work to enhance our operating strategies to maximize shareholder value. With that, I'll pass the call over to our CFO, Bryan Giles, for his financial commentary. Thank you, Steve, and good afternoon to everyone on the call.

John comes to emission from the party foods, where he was president and CEO for the past two and a half years.

With this comprehensive background in the international food and Street I believe his skill set will greatly contribute to our continued growth as we work to enhance our operating strategy is to maximize shareholder value.

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

Thank you, Steve and good afternoon to everyone on the call I'll.

Bryan E. Giles: I'll start with a review of our fiscal first quarter financial results, touching on some of the key drivers within our three reportable sectors. Then I'll provide an update on our financial position and conclude with some thoughts on the current industry conditions. Total revenue for the first quarter of fiscal 2024 increased 21% to $258.7 million, driven by higher per unit avocado sales. Though the impact was less significant, we also experienced growth in mango and blueberry revenues, resulting from higher average sales prices that were driven by industry supply constraints during the period. Gross profit increased by $19.7 million to $28.7 million in the first quarter, and the gross profit margin increased 690 basis points to 11.1% of revenue.

I'll start with a review of our fiscal first quarter financial performance touch on some of the key drivers within our three reportable segments, then I'll provide an update on our financial position and conclude with some thoughts on the current industry conditions that we're seeing.

Total revenue for the first quarter of fiscal 'twenty 'twenty four it increased 21% to $258 $7 million driven by higher per unit avocado sales prices.

Though the impact was less significant we also experienced growth in mango and blueberry revenues, resulting from higher average sales prices that were driven by industry supply constraints during the period.

Gross profit increased by $19 $7 million to $28 $7 million in the first quarter and gross profit margin increased 690 basis points to 11, 1% of revenue.

Bryan E. Giles: These increases were driven by improved per-unit margins across our marketing and distribution channels and in Blueberry's sector. Within marketing and distribution, we achieved avocado per unit margins that were near the high end of our typical. This performance was bolstered by a decision to implement prices for our value-added services heading into this fiscal year to cover the structural inflation that has proven difficult to make. For blueberries, we realized a significant margin benefit from higher per unit sales, as a result of the advantageous industry. SG&A expense increased $1.6 million, or 8% compared to the same period last year, primarily due to higher employee compensation, including stock-based compensation and Performance-Based Incentive Compensation.

These increases were driven by improved per unit margins across our marketing and distribution and blueberry segments.

Within marketing and distribution, we achieved avocado per unit margins that were near the high end of our typical range. This performance was bolstered by a decision to implement price increases for our value added services heading into this fiscal year to cover the structural inflation that has proven difficult to mitigate.

Within blueberries, we realized significant margin benefit from higher per unit sales pricing as a result of the advantageous industry conditions.

SG&A expense increased $1 $6 million or 8% compared to the same period last year, primarily due to higher employee related costs, including stock based compensation expense and performance based incentive compensation associated with government mandated profit sharing in our foreign operations, a good portion of which was driven.

Bryan E. Giles: Associated with government-mandated profit sharing in our foreign, a good portion of which was driven by the strong performance of our blueberry segment during the quarter. Partially offsetting these costs was a reduction in our general corporate expenses of approximately one million dollars, which demonstrates our progress in reducing control. While off to a solid start, we anticipate that our expense optimization efforts will be more visible in our international farming segment gross margin during the second half of the fiscal year. Net income for the first quarter of fiscal 2024 was breakeven, or $0 per diluted share, compared to a net loss of $8.8 million, or $0.12 per diluted share, for the same period, Adjusted net income for the first quarter of fiscal 2024 was $6.7 million, or $0.09 per dilution, compared to an adjusted net loss of $5 billion, or $0.07 per diluted share, adjusted EBITDA increased $16.9 million to $19.2 million, as compared to $2.3 million for the same period, driven by the strong gross profit performance.

And by the strong performance of our blueberry segment during the quarter.

Partially offsetting these costs with a reduction in our general corporate expenses of approximately $1 million, which demonstrates our progress in reducing controllable expenses.

Well off to a solid start we anticipate that our expense optimization efforts will be more visible in our international farming segment gross margin during the second half of the fiscal year.

Net income for the first quarter of fiscal 'twenty, 'twenty, four which breakeven or zero cents per diluted share compared to a net loss of $8 $8 million or 12 cents per diluted share for the same period last year.

Adjusted net income for the first quarter of fiscal 'twenty 'twenty four it was $6 $7 million or nine cents per diluted share compared to an adjusted net loss of $5 million or seven cents per diluted share for the same period last year adjusted.

Adjusted EBITDA increased $16 $9 million to $19 $2 million as compared to $2 3 million for the same period last year driven by the strong gross profit performance noted earlier.

Turning now to our segments, our marketing and distribution segment net sales increased 24% to $224 $6 million for the quarter due to the favorable avocado pricing dynamics I described earlier.

Bryan E. Giles: Turning now to our segments, our Marketing and Distribution segment net sales increased 24% to $224.6 million for the quarter due to the favorable avocado pricing dynamics I described earlier. We believe that the meaningful price increase at comparable volumes is a strong indicator of demand growth during the. Segment adjusted EBITDA increased $6.4 million to $11 million due to the impact of higher per-unit gross margin, resulting from relatively stable avocado supply conditions in Mexico during the and the value added price increases previously. Our International Farming Segment revenues in EBITDA are concentrated in the second half of our fiscal year, in alignment with the Peruvian Avocado Harvest. It typically starts in April and runs into September.

We believe that the meaningful price increase at comparable volumes is a strong indicator of demand growth during the period.

Segment, adjusted EBITDA increased $6 $4 million to $11 million due to the impact of higher per unit gross margins, resulting from relatively stable avocado supply conditions in Mexico during the period and the value added price increase as previously discussed.

Our international farming segment revenues and EBITDA are concentrated in the second half of our fiscal year and alignment with the Peruvian avocado harvest season, which typically starts in April and runs into September of each year.

Activity during our fiscal first quarter is currently focused on packing and processing services for a blueberry segment and for third party producer to blueberries, though this will evolve over time as our operations developing in other areas of Latin America.

Bryan E. Giles: Activity during our fiscal first quarter is currently focused on packing and processing for our Blueberry segment and for third-party producers, though this will evolve over time as our operations develop in other areas of Latin America. With this in mind, total segment sales in the international farming segment were $5.8 million, approximately flat compared to the same period last year. Segment-adjusted EBITDA increased $1.3 million to a negative.5, driven primarily by cost savings measures within our Peruvian Farming and Packing segment. Activity in our blueberry segment tends to be concentrated in the first and fourth quarters of our fiscal year, in alignment with the Peruvia Industry supply conditions from Pru had a dramatic impact on sales pricing and volume sold during the quarter.

With this in mind total segment sales in the international farming segment were $5 $8 million approximately flat compared to the same period last year.

Segment, adjusted EBITDA increased $1.3 million to a negative point 5 million driven primarily by cost savings measures within our Peruvian farming and packing operations.

Activity in our blueberry segment tends to be concentrated in the first and fourth quarters of our fiscal year and alignment with the Peruvian blueberry harvest season, which typically runs from July through February.

Net sales increased 9% to $32 $5 million and segment adjusted EBIT increased $9 $2 million to $8 $7 million compared to the same period last year.

Industry supply conditions from Peru had a dramatic impact on sales pricing and volumes sold during the quarter in regard to sales growth, we experienced a 90% increase in selling prices that were substantially offset by a 43% decrease in volumes sold EBIT growth was driven by the significant increase in prices that resulted in substantial <unk>.

Bryan E. Giles: In regard to sales growth, we experienced a 90% increase in selling prices that was substantially offset by a 43% decrease in volume. EBITDA growth was driven by a significant increase in prices that resulted in a substantial improvement in per unit margins. Shifting to our financial, cash and cash equivalents were $39.9 million as of January 31st, 2024 compared to $42.9 million at October 31st, 2012. Operating cash flows are seasonal in nature, and they typically see increases in working capital during the first half of our fiscal year as our supply is predominantly sourced from Mexico under payment terms that are shorter than terms established for other sources. In addition, we are building our growing crops inventory in our international farming segment during the first half of the year for ultimate harvest and sale that will occur during the second half of the year. Net cash provided by Operating Activities was $9.5 million for the three months ended January 31st, 2000, compared to cash used in operating activities of $1.3 million for the same period last year.

Prudent in per unit margins shifting to our financial position cash and cash equivalents were $39 $9 million as of January 31, 2024, compared to $42 $9 million at October 31, 2023.

Operating cash flows are seasonal in nature, we typically see increases in working capital during the first half of our fiscal year as our supply is predominantly sourced from Mexico under payment terms that are shorter than terms established for other source markets.

In addition, we are building our growing crops inventory in our international farming segment. During the first half of the year for ultimate harvest and sale that will occur during the second half of the fiscal year.

Net cash provided by operating activities was $9 $5 million for the three months ended January 31, 2024 compared to cash used in operating activities of $1 $3 million for the same period last year.

The $10 8 million increase was driven by improved operating performance, partially offset by working capital growth.

During the current period, our working capital position was negatively impacted by the higher avocado pricing environment, which had an unfavorable effect on both accounts receivable and inventory balances.

Inventory growth in the current year period was also driven by higher blueberry growing crop inventory and Peru due to the extension of the harvest season compared to prior year.

Bryan E. Giles: The $10.8 million increase was driven by improved, partially upset by work; During the current period, our working capital position was negatively impacted by the higher avocado pricing environment, which had an unfavorable effect on both accounts receivable and inventory. Inventory growth in the current year period was also driven by higher blueberry growing crop in Peru due to the extension of the harvest season compared to prior years. Capital expenditures were $9.9 million for the first quarter ended January 31, 2021, compared to $17.6 million last year.

Yeah.

Capital expenditures were $9 $9 million for the first quarter ended January 31, 2024, compared to $17 6 million last year.

Capital expenditures were balanced across each of our three operating segments and were comprised of avocado Orchard development preproduction orchard maintenance and land improvements improved Guatemala.

Early stage blueberry plant cultivation in Peru, and construction costs associated with our U K distribution facility.

As we mentioned on our last call the year over year reduction in capital spending reflects the tapering off of our recent heavy investment cycle in avocados and is that a level, we feel comfortable with over the near term to support our ongoing farm expansion and facility improvement projects are.

Bryan E. Giles: Capital expenditures were balanced across each of our three operating companies and were comprised of Avocado Orchard Development, Pre-Production Orchard Maintenance, and Land Improvements in Peru and Guatemala. Early Stage Blueberry Plant Cultivation in Peru and construction costs associated with our U.K. As we mentioned on our last call, the year-over-year reduction in capital spending reflects the tapering off of our recent heavy investment cycle in avocados and is at a level we feel comfortable with over the near term to support our ongoing farming expansion and facility improvement projects. Our projected CapEx budget for fiscal 2024 remains unchanged at $30 to $35 million.

Our projected capex budget for fiscal 'twenty 'twenty, four remains unchanged at $30 million to $35 million.

Net we believe the business is well positioned to generate positive free cash flow in fiscal 'twenty 'twenty four and beyond.

I want to reiterate that our core capital allocation priority is maintaining a healthy capital structure that minimizes leverage debt pay down remains our near term priority and given our forecast for improved operating cash flow for the full year fiscal 'twenty 'twenty four we expect to be in position to strengthen our balance sheet by the end of this fiscal year.

In terms of our near term outlook on the fundamental drivers of our operations, we are providing some context around our expectations for industry conditions to help inform your modeling assumptions beginning with avocados industry volumes are expected to be relatively flat in the fiscal 2024 second quarter versus the prior year period.

Bryan E. Giles: Net, we believe the business is well positioned to generate positive free cash flow in fiscal 2024. I want to reiterate that our core capital allocation priority is maintaining a healthy capital structure that minimizes leverage. Debt paydown remains our near-term priority.

Sourcing from Mexico should taper off in the latter part of the quarter as we near completion of the current harvest season, while California harvest volumes should begin to build toward the middle of the quarter as weather permits Peruvian volumes are unlikely to have a meaningful impact on the market during the quarter avocado pricing is expected to be slightly higher on a sequential basis and approximately.

Bryan E. Giles: And given our forecast for improved operating cash flow for the full year fiscal 2024, we expect to be in a position to strengthen our balance sheet by the end of the year. In terms of our near-term outlook on the fundamental drivers of our operation, We are providing some context around our expectations for the industry to help inform your modeling. Beginning with avocados, industry volumes are expected to be relatively flat in the fiscal 2024 second quarter versus the prior year; sourcing from Mexico should taper off in the latter part of the quarter as we near completion of the current harvest. While California harvest volumes should begin to build toward the middle of the quarter, as weather... Peruvian volumes are unlikely to have a meaningful impact on the market during this period. Avocado pricing is expected to be slightly higher on a sequential basis and approximately 10-15% higher than the $1.30 per pound average experienced in the second quarter of fiscal 2020.

10% to 15% higher than the dollar 30 cent per pound average experienced in second quarter of fiscal 2023, assuming that volume aligns with our expectations turning to blueberries harvest timing shifts relative to last year have extended our Peruvian blueberry season.

As a result, we expect that approximately 20% of the harvest will be sold through in the fiscal second quarter, whereas the season was substantially complete in the prior year period sales pricing is expected to decline sequentially in the fiscal second quarter in response to increased industry volume, resulting from the expectation for other source regions to began seasonal hard.

On a normal cadence.

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

Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Operator: Assuming that volume aligns with our expectations. Turning to blueberries, harvest timing shifts relative to last year have extended our Peruvian blueberry season. As a result, we expect that approximately 20% of the harvest will be sold through in the fiscal second quarter, whereas the season was substantially complete in the prior year. Sales pricing is expected to decline sequentially in the fiscal second quarter in response to increased industry volume resulting from the expectation that other source regions will begin seasonal harvests on a normal basis.

If I start to move your question from the queue for participants using speaker equipment and they'd be necessary to pick up your handset before pressing I'm sorry, one.

One moment, please while I call for a question.

Our first question is from band band been in with Stephens. Please proceed with your question.

Hey, good afternoon.

Hi, Ben Hi, Ben.

Yeah.

So I wanted to ask in the marketing business. This balance between them you know taking market share on the volume side, but managing margins on the per box side, how do you feel like Youre doing it looks like you gained at least relative to the industry data a little bit of market share on the volume front.

Operator: That concludes our prepared remarks. Operator, now over to you. Please open the call to Q&A. Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone. Confirmation Town 1 to K, your line is in the following position. You may press star 2 if you'd like to remove your question.

And and margins are recovering nicely, so maybe talk us through.

Some of the things that you're doing your own expectations as you move forward to perhaps continue to deliver results along the same lines.

Well I think we're looking at are.

Some of our longer term commitments and making sure we have the right supply demand balance going forward some of the times in the past, we would commit to pricing in the <unk>.

Benjamin Shelton Bienvenu: If you are using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we call for questions. Our first question is from Ben Bienvenu with Stephens. Please proceed with your question. Hey, good afternoon.

Supply would fluctuate.

Surprisingly to us in many cases so.

We're trying to tighten that up.

Yeah.

You know as we as we go forward, we've got that Peruvian deal coming on on our own so that kind of eliminates that high risk there too. So I think it's mainly just running.

Stephen J. Barnard: Hi Ben. So I want to ask you in the marketing business this balance between, you know, taking market share on the volume side but managing margins on the per box side. How do you feel like you're doing? It looks like you gained, at least relative to industry data, a little bit of market share on the volume front. And margins are recovering nicely. So maybe talk us through some of the things that you're doing and expectations as you move forward to perhaps continue to deliver results along the same lines. Well, I think we're looking at some of our longer-term commitments and making sure we have the right supply and demand balance going forward. Some of the times in the past, we would commit to pricing, and supply would fluctuate, surprisingly to us in many cases. We're trying to tighten that up. You know, as we go forward, we've got that Peruvian deal coming on our own. So that kind of eliminates the high risk there, too.

Running a tighter.

Shorter leash on the pricing and making sure we know what the supply is at the relevant time I I would just add to that Ben I think that there's a natural tendency within mission for the team to push share hard I mean, we've grown the business to what it is today by taking share from competitors year after year.

So the natural tendency is to continue to push push push I think you know.

We work together as a team to try to figure out how much risk we want to take on as part of that volume growth and moderate it I think certainly we know margin has some <unk>.

Our ability to it from period to period, we benefited from from a I think a market that enabled us to get it by beverage margins during the quarter, while achieving that growth at the same time I feel like it was a good quarter. We achieved what we wanted to not every quarter will look like Q1 did but I think that's kind of.

Stephen J. Barnard: So I think it's mainly just running a tighter, shorter leash on the pricing and making sure we know what the supply is at the relevant time. I would just add to that, Ben. I think that there's a natural tendency within Mission for the team to push share hard. I mean, we've grown the business to what it is today by taking share from competitors year after year. So the natural tendency is to continue to push, push, push. But I think, you know, we work together as a team to try to figure out how much risk we want to take on as part of that volume growth and moderate it. I think certainly we know margin has some variability to it from period to period. But we benefited from, I think, a market that enabled us to get above average margins during the quarter while achieving that growth at the same time. I feel like it was a good quarter.

A picture of what we want to achieve is build share while at the same time, while maybe not getting the highest margin that's out there getting a reasonable one that doesn't impede us from continuing to grow.

I think another thing Ben is the mango business.

Continues to grow at a fairly rapid pace.

There really isn't any leadership in that space and.

One of the benefits mission has we utilize our distribution network. So.

All of the facilities are showing higher profit levels are.

More volume through the facilities are the transportation is picking up the benefit there because there's a lot of times, it's going to the same customer on the same trucks. So theres a lot of synergies going on to apart from the the pricing.

Stephen J. Barnard: We achieved what we wanted to. Not every quarter will look like Q1 did, but I think that's kind of a picture of what we want to achieve: build share while, at the same time, maybe not getting the highest margin that's out there, but getting a reasonable one that doesn't impede us from continuing to grow. I think another thing, Ben, is the mango business continues to grow at a fairly rapid pace. But there really isn't any leadership in that space.

Okay, that's great.

As we start to think about the back half of this fiscal year and the contribution of the Peru operations.

What are your thoughts with respect to the crop how its looking and how this year's performance from the international farming segment might look relative to last year.

Stephen J. Barnard: One of the benefits Mission has is that we utilize our distribution network, so all of the facilities are showing higher profit levels. More volume through the facilities, the transportation is picking up a benefit there because a lot of times it's going to the same customer on the same truck. So there's a lot of synergies going on too, apart from the pricing. Okay, that's great.

Well last year, we were hit pretty hard, especially at the end with El Nino a lot of the crop shed on the ground. After we estimated it.

And then towards the end of the season, we were ending up with the fruit not ripening I know for a fact, we lost several for several loads due to.

Stephen J. Barnard: As we start to think about the back half of this fiscal year and the contribution of the Pru operations, what are your thoughts with respect to the crop, how it's looking, and how this year's performance from the international farming segment might look relative to last year? Well, last year we were hit pretty hard, especially at the end with El Nino. A lot of the crop shed on the ground after we estimated it, and then towards the end of the season, we were ending up with fruit not ripening. I know for a fact we lost several loads due to, www.mission-prdc.com, Perfect at the time from what we think of mid-sizes, 40s, 48s, and 60s.

So it just wasn't right, but no matter, how long you left and the right right for them. So.

Dumped in many cases, so that appears to be behind us as far as the weather the sizing on the crop.

It looks to be normal I was there at the end of January and it looked to be.

Perfect at the time from what we think of mid size is $4 48 in the sixties, the crop is down a little bit pricing should be better.

Just due to supply and demand so we're pretty optimistic about it assuming el Nino stays offshore will be good I think.

Okay.

Okay, great. Thanks, so much and congratulations on a solid quarter.

Stephen J. Barnard: The crop is down a little bit, but pricing should be better, just due to supply and demand. So we're pretty optimistic about it. Assuming El Nino stays offshore, we'll be good, I think. Okay, great.

Thanks Ben.

Our next question is from Gerry Sweeney with Roth M. Cat. Please proceed with your question.

Good afternoon, Steve Brian Thanks for taking my call.

Benjamin Shelton Bienvenu: Thanks so much and congratulations on a solid quarter. Thanks, Ben. Our next question is from Gerard Sweeney with Roth MKN. Please proceed with your question. Ah, good afternoon.

Hey, Jerry a sure thing Jerry.

I had a couple of questions on margins as well I apologize.

And if it is repetitive I was writing stuff down. So as you were speaking on the last on the last go around but just wanted to talk about maybe get a little bit more detail on some of the.

Gerard J. Sweeney: Thank you, Jerry. I had a couple questions on the margins as well.

Gerard J. Sweeney: I just wanted to talk about, maybe get a little bit more... www.mission-prdc.com www.mission-prdc.com. There's a little bit to unpack. Yeah, let's just start on the cost. Most of that came out of the Pru operation. We had been in a growth mode for several years, and they kind of had that growth mentality and had a lot of people doing lots of things. They unofficially went back to a zero-based budget on labor and said, "Okay, what do we need to get this job done in an efficient, correct manner?" And that's really what we did. You know, we had too many people doing one person's job in many cases because we were developing it, and there was a lot going on and, and whatnot.

Cost enhancements youre, making.

Which I also would include maybe some of the price increases maybe describe some.

Some of the moves you're making how much is left and then is there ability are you caught up on price.

In regards to the value you're adding to the frame.

I think theres, a little bit to unpack there I can repeat some of it if you need to.

Yeah, well, let's just start on the cost.

Most of that came out of the Peru operation.

We had been in a growth mode for.

Several years, they kind of had that growth mentality and had a lot of people doing lots of things and.

We just.

Unofficially went back to a zero base budget on labor and said, Okay. What do we need to get this job done in a efficient.

Correct manner.

And that's really what we did.

No we had too many people doing one one person's job in many cases, because we were developing it and there was a lots going on in and whatnot, but now we're to the point, where we're a little more mature down there as far as our developments and.

Stephen J. Barnard: But now we're at the point where we're a little more mature down there as far as our developments are concerned, and now it's more of a direct operational team rather than an operational and growth team at the same time. Yeah, and I would reiterate Jerry, down in Peru, I think what we saw the impact of in the first quarter were some of the cuts we made in SG&A, as well as some of the reductions we made in the packinghouse itself. I think the benefits from the farming side, because all those costs are being capitalized into inventory over the course of the year, that's the piece that we'll see later. But we're certainly trending in line with what our internal expectations were.

It's more of a direct operational team rather than our operational and growth team at the same time.

Yeah, and I would reiterate Jerry on down in Peru, I think.

What we saw the impact of in the first quarter was some of the cuts we made in SG&A as well as some of the reductions we've made in the packinghouse itself I think that benefits the benefits from the farming side, because all those costs are being capitalized into inventory over the course of the year. That's the piece that we'll see later, but we're.

There were certainly trending in line with what our internal expectations were so I think we feel good about the cost reduction initiatives, we can see that the balances in our inventory related to growing crop inventory improve or lower meaningfully lower this year than they were last year at the same point in time. So again I think as we go to the second half.

Bryan E. Giles: So I think we feel good about the Cost Direction initiatives. We can see that the balances in our inventory related to growing crop inventory and crew are lower, meaningfully lower this year than they were last year at the same point in time. So again, I think as we go to the second half, we've got a lower cost structure in place, and we should see stronger pricing based upon what we think the overall industry volume conditions are going to look like, both from Peru and from other source markets during that timing window. So the big question mark will be what the overall production out of our farms will look like this year, and getting those estimates accurate in terms of overall volume, timing, and sizing, as Steve alluded to.

We've got a lower cost structure in place, we should see strong pricing based upon historic pricing based upon what we think the overall industry volume conditions are going to look like both from Peru and from other source markets during that timing window.

So the big question, Mark will be what the overall production out of our farms to look like this year getting those estimates accurate in terms of overall volume timing and sizing as Steve alluded to I think up here in the U S. What what we have seen in the marketing side, you know certainly some emphasis on passing along some of the stick.

Bryan E. Giles: I think up here in the U.S., what we see on the marketing side, certainly some emphasis on passing along some of the sticky cost increases that we've seen over the last few years. I think that we, I don't necessarily think that there are further increases on the horizon with value-added services. I think we've moved them up to where they need to be, but it's something we'll continue to evaluate as we move forward, and then just talking about blueberries and mangoes, www.mission-prdc.com. How big... Great question. Consumption keeps growing on both of them, Jerry.

Cost increases that we've seen over the last few years.

I think that we I don't necessarily think that there is further increases on the horizon with a value added services I think we moved them up to where they need to be but it's something we will continue to evaluate as we move forward.

Got it that's helpful. And then just talking about blueberries of mangoes. Obviously, there is an absorption you know it sounds like they're absorbing some of it.

<unk> costs in distribution packaging et cetera.

How big.

Can you grow these too.

These two business lines.

Oh, great question consumption keeps growing on both of them Jerry as you know we're partners with Driscoll on the on the blueberries and we.

Stephen J. Barnard: As you know, we're partners with Driscoll on the blueberries, and we... We don't run that through our distribution network here in the United States, but we do run it through our Peruvian facilities, so we pick up some benefits there. As we continue to add hectares to that, That will continue to improve our numbers at the facilities down there. The mango business is definitely a benefit here in the U.S. as it complements it, it's off-season from... Some of the Mexican products, so we're using our Laredo facility in the summertime with mangoes when the avocados are at their lowest point of the year, and then we're leveraging the rest of the distribution centers across the nation because they're on the same truck going to the same customers, and they're being ripened in the same facility. It's a great benefit in that respect.

We don't run that through our distribution network here in the United States, but we do run it through our Peruvian facilities. So we pick up some benefit there.

And as we continue to.

And hector's on that.

That will continue to improve our numbers is the facilities down there.

Mango business as is.

Definitely a benefit here in the U S is it.

Complemented its off season from.

Some of the Mexican product so we're using our Laredo facility in the summertime with mangoes.

Avocado or at their low point of the year and then we're leveraging the rest of the distribution centers across the nation.

They are on the same truck go into the same customers and Theyre being ripened and the same facilities. So.

It's a it's a great benefit in that nature in that respect.

Bryan E. Giles: I'd just build on that, Jerry, that, you know, I think we should touch on mangoes first. Steve is spot on. And the marketing side of the business is the ability to leverage our distribution infrastructure. You know, mangoes in the U.S. market have been growing at a faster rate than avocados over the last few years, and we believe that the runway for that is still pretty long. So I think it's a nice compliment to our avocado business, which is, you know, which is certainly a little more mature in the U.S. market than mangoes are today. It's tough to put a number on where we'll ultimately land on that because it's so early in the process, but we do believe that there's real potential.

I'd just build on that Gerry that I think touch on mangoes first use Steve is spot on in the marketing side of the business is the ability to leverage our distribution infrastructure.

Mangoes and the U S market have been growing at a faster rate than avocados over the last few years and we believe that there were the runway on that is still pretty long. So I think it's a it's a nice complement to our avocado business, which is maybe ill.

Which is certainly a little more mature in the U S market than mangoes are today, it's tough to put a number on on where we'll ultimately land on that but.

So early in the process, but we do believe that there is real potential and we think that the growth rates and mango revenue will likely outpace the growth rates in our avocado revenues in the near future.

Bryan E. Giles: We think that the growth rates in mango revenue will likely outpace the growth rates in our avocado revenues in the near future. To Steve's point, I think with Blueberry, we've got about 450 hectares in the ground today that we're producing fruit. So as we near the end of our, or kind of reach the end of our current harvest season, that's the volume that contributed or the amount of acreage that contributed. As we've alluded to in our other calls and in our cues and in previous calls, we are expanding in the northern part of Peru. There's an additional 600 hectares that we're targeting to plant over the next three to four years, and those will start layering in production in the near term. We should have some acreage that's coming online from those plantings this next harvest season, and it will likely even start a little bit earlier than what we've seen historically. Just the harvest window we're seeing up in the north tends to come a little bit earlier.

I think with blueberries to six point, we've got about 450 <unk> in the ground today that we're producing fruit. So as we near the end of our kind of reached the end of our current harvest season, that's the volume that contributed or the amount of acreage that contributed as we've alluded to in our other or in our.

Our Qs and in previous calls we are expanding up in the northern part of Peru, There's an additional 600 actors that we're targeting to plant over the next three to four years those will start layering in in production. The near term we should have some acreage that's coming online from those plantings and the snacks.

Harvest season, and a likely even start a little bit earlier than what we've seen historically.

Just the harvest window, we're seeing up in north tends to come a little bit earlier, so again potential for growth from that acreage I don't we don't necessarily have any plans beyond that in the near term, but I think one thing to note is that pricing was certainly at an abnormally high level.

Bryan E. Giles: So again, potential for growth from that acreage. But we don't necessarily have any plans beyond that in the near term. But I think one thing to note is that pricing was certainly at an abnormally high level during the last two quarters, and we don't think that at that price point, the net returns to the farms are gonna be sustainable for the long term. There definitely were industry constraints in Peru this last year as a result of the same El Nino that impacted our avocado production and really spiked prices this year.

In the last two quarters, and we don't think that that.

That price point, the net returns of the farms are going to be sustainable for the long term, they're definitely where industry constraints in Peru. This last year as a result of the same El Nino.

Impacted our avocado production that really spiked pricing this year.

Stephen J. Barnard: And one thing about the mango business, on top of the benefit with VolumeJerry, is that we picked up the avocado business at some of these retailers that we did not have their avocado business because we had the mangoes. So... There's a lot of benefits there. Alright guys, I really appreciate it. Thanks, Gerard. Ladies and gentlemen, at this time there are no further questions. I'd like to end the question and answer session and turn the conference back to management for any closing questions. Great. Ladies and gentlemen, this concludes today's conference call, and thank you for your interest in Mission PRdc. We look forward to speaking to you again. This concludes our conference. You may now disconnect, http://www.mission-prdc.com, Thank you. Thank you.

And one thing on the mango business on top of the benefit with volume Jerry is that we picked up avocado business as some of these retailers that we did not have their avocado business because we have the mangoes. So.

There's a there's a lot of benefits there.

Got it that's super helpful guys I really appreciate it.

Thanks for your time and I'll talk to you soon.

Okay. Thanks, Jerry.

Ladies and gentlemen at this time there are no further questions I'd like to end the question and answer session and turn the conference back to management for any closing remarks.

Great.

Ladies and gentlemen, this concludes today's conference call.

Thank you for your interest in mission Protos, we look forward to speaking to you again.

Yeah.

Yeah.

This concludes our conference you may now disconnect.

Okay.

Yeah.

He did his job too.

Okay.