Q2 2025 Mission Produce Inc Earnings Call

Operator: Good afternoon and welcome to the Mission Prdc's fiscal second quarter 2025 conference call. All participants will be in a listen-only mode.

Good afternoon, and welcome to the mission produce fiscal second quarter 2025 conference call all participants will be in a listen only mode.

Operator: After today's presentation, there will be an opportunity to ask Please also note, today's event is being recorded.

After today's presentation there'll be an opportunity to ask questions. Please also note today's event is being recorded.

Jeff Sonnek: At this time, I'd like to turn the conference call over to Jeff Sonnek, Investor Relations at ICO. Thank you and good afternoon.

Speaker Change: At this time I'd like to turn the conference call over to Jeff Sonic Investor Relations at ICR. Sir. Please go ahead.

Jeff Sonnek: Today's presentation will be hosted by Steve Barnard, Chief Executive Officer and Bryan Giles, Chief Financial Officer.

Jeff Sonic: And good afternoon.

Steve Barnhart: Today's presentation will be hosted by Steve Barnhart, Chief Executive Officer, and Brian Giles Chief Financial Officer, the company's President and Chief operating Officer, John Pawlowski.

Jeff Sonnek: The company's President and Chief Operating Officer, John Pawlowski, is also on today's call for participation during the Q&A session.

Speaker Change: Also on today's call for participation during the Q&A session.

Jeff Sonnek: 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. 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.

Speaker Change: 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 1095.

Speaker Change: All statements other than statements of historical facts are considered forward looking statements.

Speaker Change: These 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.

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 Dot mission produce dot com for reconciliations of non <unk>.

Jeff Sonnek: 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.missionprdc.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures.

Speaker Change: GAAP financial measures to their most directly comparable GAAP measures and with that I'd now like to turn the call over to Steve Barnard CEO. Steve. Please go ahead.

Stephen Barnard: And with that, I'd now like to turn the call over to Steve Barnard, CEO. Steve, please go ahead. Thank you for joining us today. We delivered record second quarter revenue of $380.3 million, an increase of 28% versus the prior year period, and generated stronger than expected adjusted EBITDA, demonstrating the continued execution of our global commercial strategy to expand market access and the categories that we serve. Our marketing and distribution segment delivered solid results in Q2, building on the strong foundation established in Q1, reflecting the effectiveness of our commercial teams to leverage the strategic value of our global sourcing network.

Steve Barnard: Thank you for joining US today, we delivered record second quarter revenue of $383 million, an increase of 28% versus the prior year period and generated stronger than expected adjusted EBITDA demonstrating the continued execution of our global commercial strategy to expand market access and the.

Steve Barnard: <unk> that we serve.

Steve Barnard: Our marketing and distribution segment delivered solid results in Q2 building on the strong foundation established in Q1, reflecting the effectiveness of our commercial teams to leverage the strategic value of our global sourcing network.

Stephen Barnard: We continued to successfully navigate typical seasonal dynamics in Mexico while maintaining strong customer relationships and service levels. Our deep growth relationships in Mexico, along with our global sourcing network, allowed us to be nimble, providing the flexibility to leverage other countries of origin, as market conditions warranted. This is truly a core competency here at Mission. It's what we do every day and represent more than 40 years of building the right capabilities in the right markets. The pricing environment remained favorable throughout the quarter, in fact, more so than we anticipated. The retail market's ability to sustain volumes amid extended periods of higher pricing reflects a favorable dynamic that reinforces the durability of consumer demand in the United States.

Speaker Change: We continued to successfully navigate typical seasonal dynamics in Mexico, while maintaining strong customer relationships and service levels are.

Speaker Change: Our deep relationships in Mexico, along with our global sourcing network allowed us to be nimble and providing the flexibility to leverage other countries of origin as market conditions warranted.

Speaker Change: This is truly a core competency here at mission, it's what we do everyday and represent more than 40 years and building the right capabilities and the right markets.

Speaker Change: The pricing environment remained favorable throughout the quarter in fact, more so than we anticipated.

Speaker Change: Retail market, so the ability to sustain volumes amid extended periods of higher pricing reflects a favorable dynamic that reinforces the durability of consumer demand in the United States. This is the outcome of our relentless work to provide consistency in terms of supply size and quality to the retail channel, which is supported by our unmatched network.

Stephen Barnard: This is the outcome of our relentless work to provide consistency, both in terms of supply, size, and quality to the retail channel, which is supported by our unmatched network of sourcing, distribution, and ripening infrastructure.

Speaker Change: Sourcing distribution and ripening infrastructure.

Stephen Barnard: As we look forward to the future, we are applying the same playbook to the other markets and categories to enhance our competitive position globally. For instance, we opened a forward distribution center in the UK two years ago with the vision of accelerating our reach in the broader European market by bringing ripening capabilities to the underserved regions. Our commercial teams have been working hard to ramp up our presence and have delivered strong results through expanded customer penetration with larger accounts. This customer success is directly translating into higher volumes and significant gains in facility utilization, validating our strategic investment in the region.

Speaker Change: As we look forward to the future we are applying the same playbook to the other markets and categories to enhance our competitive position globally.

Speaker Change: For instance, we opened a former distribution center in the U K two years ago with the vision of accelerating our reach in the broader European market.

Speaker Change: By bringing ripening capabilities to the underserved region.

Speaker Change: Our commercial teams have been working hard to ramp up our presence and have delivered strong results through expanded customer penetration with larger accounts.

Speaker Change: This customer success is directly translating into higher volumes and significant gains in facility utilization validating our strategic investment in the region.

Stephen Barnard: Our team's ability to adapt to local merchandising approaches and respond quickly with solutions is central to our increasing share, while establishing Mission as a reliable partner for major UK customers. We look forward to building on our success there in the quarters ahead.

Speaker Change: Our team's ability to adapt to local merchandising approaches and respond quickly with solutions is central to our increasing share while establishing mission as a reliable partner for a major U K customers. We look forward to building on our success there in the quarters ahead.

Stephen Barnard: Our mango business is another example of the team's strong execution. Mangoes contributed strongly to our results this quarter, where we achieved record volumes and significant market share gains that established Mission as a leading U.S. distributor.

Speaker Change: Our mango business is another example of the team's strong execution.

Speaker Change: Mango has contributed strongly to our results this quarter, where we achieved record volumes and significant market share gains that establish mission is a leading U S distributor.

Stephen Barnard: This success stems from three deliberate competitive advantage we've built. First, our cross-selling approach of leveraging new and existing customer relationships to build our mango business. Second, our differentiated positioning as a long-term program provider, with year-round source and quality consistency that others simply cannot match. And third, is our national ripening, packing, and distribution footprint that provides operational capabilities and flexibility others in the space don't possess. Importantly, what we're seeing in mangoes mirrors the early success we achieved with avocados, bringing greater consistency and quality to consumers in an underserved market, which drives increased consumption over time and ultimately provides our retailer customers with new growth vectors for their businesses.

Speaker Change: This success stems from three deliberate competitive advantage we built.

Speaker Change: First our cross selling approach of leveraging new and existing customer relationships to build our mango business.

Speaker Change: Second our differentiated positioning as a long term program provider with year round source and quality consistency that others simply cannot match.

Speaker Change: And third is our national ripening packing and distribution footprint that provides operational capabilities and flexibility others in this space don't possess.

Speaker Change: Importantly, what we're seeing in mangoes mirrors. The early success, we achieved with avocados, bringing greater consistency and quality to consumers in an underserved market, which drives increased consumption over time and ultimately provides a retailer customers were they new growth vectors for their businesses.

Stephen Barnard: Our early success in mangoes, combined with increased blueberry volumes and efficiency improvements we actioned last year, directly benefited our international farming segment, which although small this time of year, turning what has historically been a period of seasonal headwind into a positive contributor. Our diversification strategy is delivering exactly what we designed it to do, optimize facility utilization year-round while positioning us for an even stronger performance when our core company-owned avocado harvest season in South America ramps up in the second half. Our blueberry segment continued to contribute to our results. The over 100 hectares of new plantings that came online early last year grew our total footprint to over 550 hectares.

Speaker Change: Our early success in mangoes combined with increased blueberry volume's any efficiency improvements we actions last year directly benefited our international farming segment, which although small this time of year deliberate a significant EBITDA improvement turning what has historically been a period of seasonal headwind into a positive contributor.

Speaker Change: Our diversification strategy is delivering exactly what we designed it to do optimize facility utilization year round, well positioning us for an even stronger performance when our core company owned avocado harvest season in South America ramps up in the second half.

Speaker Change: Our blueberry segment continue to contribute to our results.

Speaker Change: The over 100 hectares of new plantings that came online early last year grew our total footprint to over 550 hectares.

Stephen Barnard: This additional volume supported our Q2 performance and positions us well in a category that continues to see growing consumer demand similar to avocados and mangoes. We continue to see tremendous long-term potential in blueberries as consumer preferences shift toward healthy, convenient snacking options. We're strategically positioning ourselves to capitalize on this trend through a multi-year expansion of acreage that is expected to add more than 200 hectares for the next year's season of premium varietals that deliver superior flavor profiles and extended shelf life. While the yields will take some time to ramp up, the higher volumes will help us support growth in the years ahead.

Speaker Change: This additional volume supported our Q2 performance and positions us well in a category that continues to see growing consumer demand similar to avocado isn't mangoes weakened.

Speaker Change: We continue to see tremendous long term potential in blueberries as consumer preferences shift toward healthy convenient snacking options.

Speaker Change: We're strategically positioning ourselves to capitalize on this trend through a multiyear expansion of acreage that is expected to add more than 200 acres for next year's season of premium varietals that deliver superior flavor profiles and extended shelf life.

Speaker Change: Well the yields will take some time to ramp up to higher volumes will help us support growth in the years ahead.

Stephen Barnard: Looking ahead to the second half, we are well positioned to generate our customary step-up in cash flow, but with the added benefit of what we expect to be a more normal Peruvian crop on our ranches this year. If you recall, last year's harvest was significantly impacted by weather events, which decreased volume by approximately 60%. Our orchards have recovered and are in great shape. As a result, we expect our production to be up approximately 150% this season, putting us in a position to meet consistent global consumption. Given our strong performance last year in a solid first half of fiscal 2025, we are continuing to improve our balance sheet leverage, which provided us with an opportunity to execute $5.2 million of share repurchases during the second quarter, reflecting our belief that the share price is undervalued relative to our business strength.

Speaker Change: [noise] ahead to the second half, we are well positioned to generate our customary step up in cash flow.

Speaker Change: But with the added benefit of what we expect to be a more normal Peruvian crop on our ranch's. This year. If you recall last year's harvest was significantly impacted by weather events, which decreased volumes by approximately 60%.

Speaker Change: Our orchards have recovered and are in great shape. As a result, we expect our production to be up approximately 150%. This season, putting us in a position to meet consistent global consumption.

Speaker Change: Given our strong performance last year and a solid first half of fiscal 2025, we are continuing to improve our balance sheet leverage.

Speaker Change: Which provided us with an opportunity to execute 5.2 million of share repurchases during the second quarter, reflecting our belief that the share price is undervalued relative to our business strength.

Stephen Barnard: With approximately $14 million remaining on our board authorization, we will continue to opportunistically repurchase shares when we believe there is a discount to the intrinsic value of mission shares in the market.

Speaker Change: With approximately $14 million remaining on our board authorization, we will continue to opportunistically repurchase shares when we believe there's a discount to the intrinsic value of mission shares in the market.

Stephen Barnard: In closing, our Q2 results demonstrate the strategic value of our diversified global platform and the successful execution of our long-term vision. We built the capabilities to consistently deliver results across varying market conditions, and this quarter's performance validates that strategic approach.

Speaker Change: In closing our Q2 results demonstrate the strategic value of our diversified global platform and the successful execution of our long term vision we.

Speaker Change: We built the capabilities to consistently deliver results across varying market conditions and this quarter's performance validates that strategic approach.

Bryan Giles: With that, I'll pass the call over to our CFO, Bryan Giles, for his financial commentary. Thank you, Stephen. Good afternoon to everyone on the call. Total revenue for the second quarter of fiscal 2025 increased 28% to $380.3 million, largely due to a 26% increase in per-unit avocado selling prices that was driven by continued strength in consumer demand. Gross profit was $28.4 million in the second quarter compared to $31 million in the prior year period, primarily due to lower avocado per unit margins, which were a result of challenges in obtaining necessary Mexican fruit supply in the early part of the quarter to meet our customer commitments.

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

Brian Giles: Thank you, Steve and good afternoon to everyone on the call total revenue for the second quarter of fiscal 2025 increased 28% to $383 million largely due to a 26% increase in per unit avocado selling prices that was driven by continued strength in consumer demand.

Brian Giles: Gross profit was $28.4 million in the second quarter compared to $31 million in the prior year period, primarily due to lower avocado per unit margins, which were a result of challenges in obtaining necessary Mexican fruit supply in the early part of the quarter to meet our customer commitments.

Bryan Giles: Per unit margin trended favorably as we transitioned through the quarter, driven largely by availability of fruit from competing origins such as California and Peru. In addition, we incurred $2.6 million of cost of sales that we consider to be unique and worth mentioning as you compare to results to the prior year period. We sustained $1.5 million of costs associated with the closure of our Canadian distribution facilities and $1.1 million in tariffs levied on USMCA-compliant goods imported from Mexico for the three days they were in effect during March 2025. Net of these costs, avocado per unit margins tracked in line with historical average.

Brian Giles: Per unit margin trended favorably as we transition through the quarter driven largely by availability of fruit from competing origin, such as California in Peru.

Brian Giles: In addition, we incurred $2 $6 million of cost of sales that we consider to be unique and worth mentioning as you compare to results to the prior year period.

Brian Giles: We sustained $1.5 million of costs associated with the closure of our Canadian distribution facilities and $1 $1 million in tariffs levied on U S. M. C. A complaint goods imported from Mexico for the three days they weren't a factor in March 2025.

Brian Giles: Net of these costs avocado per unit margins tracked in line with historical averages.

Bryan Giles: Separate from these items, we experienced improved gross profit in our international farming segment during the quarter, where we benefited from increases in both yield and pricing from our owned mango orchards, as well as higher packing and cooling service activity that correlated with higher blueberry production volume. While gross profit margin decreased 290 basis points to 7.5% of revenue, we want to note that gross profit percentage fluctuates based upon per-unit sales price levels in relation to per-unit costs, as profitability is primarily managed on a per-unit basis. Significant increases in per unit avocado pricing during the quarter had a negative impact on gross profit percentage.

Brian Giles: Separate from these items, we experienced improved gross profit in our international farming segment during the quarter, where we benefited from increases in both yield and pricing from our owned mango orchards as well as higher packing and cooling service activity correlated with higher blueberry production volumes.

Brian Giles: While gross profit margin decreased 290 basis points to seven 5% of revenue. We wanted to note that gross profit percentage fluctuates based upon per unit sales price levels in relation to per unit costs as profitability is primarily managed on a per unit basis.

Brian Giles: <unk> increases in per unit avocado pricing during the quarter had a negative impact on gross profit percentage.

Bryan Giles: SG&A expense increased $2.8 million or 15% compared to the same period last year, primarily due to higher employee-related costs, inclusive of performance-based stock compensation expense, as well as higher professional fees, inclusive of fees for external legal counsel associated with outstanding legal proceedings. Adjusted net income for the quarter was $8.7 million, or $0.12 per diluted share, compared to $9.8 million, or $0.14 per diluted share last year. Adjusted EBITDA was $19.1 million compared to $20.2 million last year, driven primarily by lower per-unit gross margins on avocados sold. Turning now to the segments, our marketing distribution segment net sales increased 26% to $362.5 million for the quarter, primarily due to the favorable avocado pricing dynamics I previously described.

Brian Giles: SG&A expense increased $2 $8 million or 15% compared to the same period last year, primarily due to higher employee related costs inclusive of performance based stock compensation expense as well as higher professional fees inclusive of fees for external legal counsel associated with outstanding legal proceedings.

Brian Giles: Adjusted net income for the quarter was $8 $7 million or 12 cents per diluted share compared to $9 $8 million or 14 cents per diluted share last year.

Brian Giles: Adjusted EBITDA was $19 $1 million compared to $22 million last year, driven primarily by lower per unit gross margins on avocados sold.

Brian Giles: Turning now to the segments, our marketing and distribution segment net sales increased 26% to $362 $5 million for the quarter, primarily due to the favorable avocado pricing dynamics I previously described.

Bryan Giles: Segment adjusted EBITDA was $16.8 million compared to $21.7 million in the same period last year as a result of lower gross profit driven primarily by lower per unit gross margins on fruits sold, which was largely in line with our expectations. Total segment sales in our international farming segment increased $6.7 million to $8.1 million and segment adjusted EBITDA increased $3.7 million to a positive $1.5 million compared to the same period last year. The significant year-over-year improvement was primarily due to higher yield and pricing from owned manga orchards, as well as higher volume of blueberry packing and cooling services.

Brian Giles: Segment, adjusted EBITDA was $16 $8 million compared to $21 $7 million in the same period last year as a result of lower gross profit driven primarily by lower per unit gross margins on fruit sold which was largely in line with our expectations.

Brian Giles: Total segment sales in our international farming segment increased $6 $7 million to $8 $1 million and segment adjusted EBIT increased $3 $7 million to a positive $1.5 million compared to the same period last year.

Brian Giles: This significant year over year improvement was primarily due to higher yield and pricing from owned Banca orchards as well as higher volume of blueberry packing and cooling services.

Bryan Giles: As Steve discussed in his remarks, we are pleased to see a sustained improvement in operating leverage during what has traditionally been a more challenging quarter for the segment. Net sales in the blueberry segment increased 57% to $15.7 million compared to $10 million in the prior year period, driven by higher volumes of fruit from our own farms via increased acreage and higher yield. Segment adjusted E, but it was flat compared to the prior year period, as lower per unit gross margins offset the volume growth we experienced in the quarter.

Steve Barnard: As Steve discussed in his remarks, we are pleased to see a sustained improvement in operating leverage during what has traditionally been a more challenging quarter for the segment.

Brian Giles: Net sales in the blueberry segment increased 57% to $15 $7 million compared to $10 million in the prior year period, driven by higher volumes of fruit from our own farms via increased acreage and higher yields.

Brian Giles: Segment, adjusted EBITDA was flat compared to the prior year period as lower per unit gross margins offset the volume growth we experienced in the quarter.

Bryan Giles: Shifting to our financial position, cash and cash equivalents were $36.7 million as of April 30, 2025. Cash used in operating activities was $13 million, where the year-to-date period ended April 30, 2025, compared to cash provided by operating activities of $12.9 million for the same period last year. This shift was driven by working capital growth from two primary factors. First, higher accounts receivable balance is correlated with the higher avocado pricing environment that is negating the impact of lower day sales outstanding metrics. And second, increased acreage and normal seasonal inventory build in our international farming segment as we prepare for the second half harvest.

Brian Giles: Shifting to our financial position cash and cash equivalents were $36 $7 million as of April 30 of 2025.

Brian Giles: Cash used in operating activities was $13 million for the year to date period ended April 32025, compared to cash provided by operating activities of $12 $9 million for the same period last year.

Brian Giles: This shift was driven by working capital growth from two primary factors.

Brian Giles: First higher accounts receivable balances correlated with the higher avocado pricing environment that is negating the impact of lower days sales outstanding metrics and second increased acreage in normal seasonal inventory build in our international farming segment as we prepare for the second half harvest season.

Bryan Giles: As we've discussed previously, our working capital typically peaks during the first half of our fiscal year as we build growing crops inventory for harvest and sale in the second half, while also managing varying payment terms across different source regions. The sustained higher-price environment this year amplified these normal seasonal dynamics, but we continue to expect a meaningful step-up in cash generation in the second half as this reverses. Capital expenditures were $28 million for the fiscal year-to-date period, which were primarily attributed to avocado and blueberry farming-related investments in Latin America and construction costs for our new packhouse in Guatemala.

Brian Giles: As we've discussed previously our working capital typically peaks during the first half of our fiscal year as we build growing crops inventory for harvest and sale in the second half while also managing varying payment terms across different source regions.

Brian Giles: The sustained higher price environment. This year amplified these normal seasonal dynamics, but we continue to expect a meaningful step up in cash generation in the second half as this reverses.

Brian Giles: Capital expenditures were $28 million for the fiscal year to date period, which were primarily attributed to avocado and blueberry farming related investments in Latin America, and construction costs for our new pack house in Guatemala.

Bryan Giles: Our full year fiscal 2025 CAPEX guidance remains in the range of $50 to $55 million, which includes approximately $10 million of projects that rolled over from fiscal 2024. Our trajectory of moderating capital spending remains on track as we complete these investments through FY2026, positioning us to generate meaningful free cash flow in future periods.

Brian Giles: Our full year fiscal 2000, and twenty-five capex guidance remains in the range of $50 million to $55 million, which includes approximately $10 million of projects that rolled over from fiscal 2024.

Brian Giles: Our trajectory of moderating capital spending remains on track as we complete these investments through fiscal 2026 positioning us to generate meaningful free cash flow in future periods.

Bryan Giles: Although debt reduction continues as our near-term priority, we remain nimble in our capital allocation strategy, as evidenced by over $5 million in opportunistic share repurchases this quarter when market conditions presented compelling value.

Brian Giles: Although debt reduction continues as our near term priority, we remain nimble in our capital allocation strategy as evidenced by over $5 million in opportunistic share repurchases this quarter when market conditions presented compelling value.

Bryan Giles: In regards to our near-term outlook on the fundamental drivers of our operations, we are providing some context around our expectations for industry conditions. These projections take into consideration the current tariff environment with the countries from which fruit is imported to the United States, but we note that ongoing tariff negotiations are fluid. As such, please consider this as a base case scenario to help inform your modeling assumptions. Industry volumes are expected to be approximately 10 to 15% higher in the fiscal 2025 third quarter versus the prior year period, primarily due to a strong Peruvian harvest outlook.

Brian Giles: In regards to our near term outlook on the fundamental drivers of our operations, we are providing some context around our expectations for industry conditions.

Brian Giles: These projections take into consideration the current tariff environment with the countries from which fruit is imported to the United States, but we note that ongoing tariff negotiations are fluid as such.

Brian Giles: Such please consider this as a base case scenario to help inform your modeling assumptions.

Brian Giles: Industry volumes are expected to be approximately 10% to 15% higher than the fiscal 2025 third quarter versus the prior year period, primarily due to a strong Caribbean harvest outlook.

Bryan Giles: Exportable avocado production from Mission's own farms in Peru is expected to range between 100 million to 110 million pounds, as compared to 43 million pounds in the 2024 harvest season that was negatively impacted by weather-related events. We anticipate that sales of our own production will be weighted to our fiscal fourth quarter. Pricing is expected to be lower on a year-over-year basis by approximately 10 to 15 percent as compared to the $1.84 per pound average we experienced in the third quarter of fiscal 2024. The decrease in pricing is directly correlated with expectations of higher volumes available in U.S.

Brian Giles: Exportable avocado production for missions own farms in Peru is expected to range between 100 million to a 110 million pounds as compared to 43 million pounds in the 'twenty 'twenty four harvest season that was negatively impacted by weather related events.

Brian Giles: We anticipate that sales of our own production will be weighted to our fiscal fourth quarter.

Brian Giles: Pricing is expected to be lower on a year over year basis by approximately 10% to 15% as compared to the dollars 84 per pound average we experienced in the third quarter of fiscal 2024.

Brian Giles: The decrease in pricing is directly correlated with expectations of higher volumes available in U S and international markets.

Bryan Giles: and international markets.

Operator: That concludes our prepared remarks. Operator, now over to you.

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

Operator: Please open the call to Q&A. Thank you. We'll now be conducting a question and answer. If you would like to ask a question, please press star 1 on your telephone keyboard. Confirmation time will indicate your line is in the question queue. You may press star 2 to remove your... For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.

Speaker Change: Thank you well now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two to remove your question from the queue for participants using speaker equipment and it would be necessary to pick up your handset before pressing the star keys.

Operator: One moment please while we poll for questions.

Speaker Change: One moment please poll for questions.

Benjamin Klieve: Our first question is from Ben Klieve with Lake Street Capital Market. All right, thanks for taking my questions. Congratulations on a nice quarter here and the encouraging setup for the second half. First question is around that second half outlook, particularly the international farming segment. It's good to see you guys continue to be pretty confident in the outlook out of the Peruvian operations from a volume perspective. I'm wondering if you can elaborate a bit on, at this point, how you view fruit quality and sizing at this point, or if it's too soon to really be able to do that.

Ben: Our first question is from Ben <unk> with Lake Street capital markets.

Brian Giles: Alright. Thank you for taking my questions congratulations on a nice quarter here and the encouraging setup for the second half.

Brian Giles: First question is around the second half hour with particularly the international farming segment. It's.

Brian Giles: It's good to see you guys continue to be pretty constant.

Brian Giles: Confident in the outlook out of the Peruvian operations from a volume perspective, I'm wondering if you can elaborate a bit on.

Brian Giles: At this point, how you view fruit quality and and and sizing at this point or if it's too soon to truly be able to tell.

Stephen Barnard: I think fruit quality is going to be good, Ben, from what we see and hear so far.

Brian Giles: I think fruit quality is going to be good band from what we see in here. So far I can answer that it's a lot better a week from now because that'll be down there [noise] Tuesday.

Stephen Barnard: I can answer this a lot better a week from now, because I'll be down there on Tuesday. but uh... Sizing has been good. There's a couple blocks we've got, I think, that might be a little on the large size, but I don't think that's going to represent a very big percentage of the business. But so far the quality's been excellent, and as you could hear, the production is exceeding expectations. So we expect a good year. We're spreading it out around the world so it doesn't get bunched up in any one continent. So far, so good.

Brian Giles: But.

Brian Giles: [noise] sizing has been good there's a couple of blocks, we've got I think that might be a little on the large size, but.

Brian Giles: I don't think that's going to represent a very big percentage of the business, but so far the quality has been excellent and.

Brian Giles: As you can hear the production is exceeding expectations. So we expect a good year, we're spreading it out around the world. So it doesn't get bunched up in any one continent.

Brian Giles: So far so good.

John Pawlowski: Ben, this is John, I would add just two quick comments to kind of take it a little further than Steve. Number one, the quality continues to get better and better out of Peru as those matris continue to mature. And from a relationship perspective with our customers and our consumers, the Peruvian fruit is becoming much more normalized in the U.S. from a consumption standpoint. So both quality and the expectations of that fruit are starting to match a lot better, which is fantastic.

John: Hey, Ben This is John I would add just two quick comments to kind of take it a little further than Steve number one.

Speaker Change: The the quality continues to get better and better out of Peru, as those maturities continue to mature.

Speaker Change: And from a relationship perspective, with our customers and our consumers at the Peruvian fruit is becoming much more normalized in the U S from a consumption standpoint, so both quality.

Speaker Change: And the expectations of that fruit or starting to match a lot better which is fantastic. The second thing to your sizing question. One of the most important things for US is to make sure that our sizing comes through our teams are understanding from a forecasting perspective, what we're receiving so it can be planned and program the right way.

John Pawlowski: The second thing to your sizing question, one of the most important things for us is to make sure that as sizing comes through, our teams are understanding from a forecasting perspective what we're receiving so it can be planned and programmed the right way. And I think this year we're in a really good position where we've kept in touch very, very consistently with our Peruvian teams. And any small tweaks in sizes like Steve just mentioned, we've already taken into account for in regards to how we program that out. So we feel really good about both the quality that's coming in as well as the size expectations that our teams are moving through.

Speaker Change: And I think this year, we're in a really good position, where we've kept in touch a very very consistently with our Peruvian team's and any small tweaks and sizes like as Steve just mentioned, we've already taken into account for in regards to how we program that out. So we feel really good about both the quality that's coming in as well as the size of <unk>.

Speaker Change: Spectation that our teams are moving through.

Benjamin Klieve: Okay. That's a really helpful follow-up.

Speaker Change: Okay.

Benjamin Klieve: Thank you. And I guess a follow-up to the sizing question around second quarter performance, you know, in the first quarter call, the kind of challenges of securing fruit out of Mexico led to you having a little bit more volume coming through co-packers than you traditionally have had. Can you talk about, you know, relative level of co-packer volume embedded within the second quarter? And then also kind of how that evolves throughout the quarter and if you're at kind of normalized levels at this point, or if it remains.

Speaker Change: Really helpful. A follow up thank you go on and on I guess, a follow up to the sizing question.

Speaker Change: Around second quarter performance on you know in the first quarter call the.

Speaker Change: The challenges is just carrying fruit out of Mexico.

Speaker Change: But do you, having a little bit more volume coming through co Packers than you traditionally have had can you talk about.

Speaker Change: You know relative level of co Packer volume embedded within the second quarter, and then also kind of how that evolved throughout the quarter and if you're at kind of normalized levels at this point or if it remained elevated.

Stephen Barnard: Yeah, that challenge was one that we addressed head on by taking a couple of steps. The first one was we made sure that we were reaching out to and leveraging our other source markets to the best of our ability, especially as those markets came in. Peru came in, early season Peruvian fruit that doesn't come off of our ranches, but we're able to secure through relationships as well as Californian fruit typically comes in during our second quarter. And those two things along with a couple of other relationships in Mexico helped us to get to more normalized levels.

Speaker Change: Yeah.

Speaker Change: That challenge was one that we addressed head on by taking a couple of steps. The first one was we made sure that we were reaching out to and leveraging our other source markets as to the best of our ability, especially as those markets came in Peru came in early season proof of Peruvian fruit that you know.

Speaker Change: Isn't come off of our ranch's, but we're able to secure through relationships as well as California fruit typically comes in during our second quarter and those two things along with a couple of other relationships in Mexico helped us to get to more normalized levels. So short answer yes, we were able to moderate and get to what we consider more normalized levels.

Stephen Barnard: So short answer, yes, we were able to moderate and get to what we consider more normalized levels. And then as we think about that, moving forward, we feel like we're in a really good position with both our capacity in Mexico, as well as our ability to leverage those resources and other sources to stay close to normal moving forward.

Speaker Change: And then as we think about that moving forward.

Speaker Change: We feel like we're in a really good position with both our capacity in Mexico as well as our ability to leverage those resources and other sources to stay close to normal moving forward.

Stephen Barnard: And we're planning ahead for next year, assuming that second shift isn't. brought back, we're trying to mitigate that. What Steve's referencing is we're putting in some additional capacity into some of our own pack houses in Mexico, actually leveraging some equipment from within our network and moving things around. So we're not spending a lot of money on it, but we're adding about 25 to 50 loads to what we're able to do on a weekly basis, which will allow us to, if that situation compresses us in the future, be able to manage it within our own network moving forward.

Speaker Change: And we're planning ahead for next year, assuming that second shift isn't yeah.

Speaker Change: Got back we're trying to mitigate that.

Steve Barnard: Crimp that is put on us what Steve's referencing is where we're putting in some additional capacity into some of our own packed houses in Mexico actually leveraging some equipment from within our network.

Steve Barnard: And moving things around so we're not spending a lot of money on it but we're adding about.

Steve Barnard: <unk> 25 to 50 loads to what we're able to do on a weekly basis, which will allow us to if that situation compresses us in the future be able to manage it within our own network moving forward and then I would just add that you kind of as we move through the quarter I think we still saw some of these conditions and play during the month of February it was really probably earn.

Stephen Barnard: And then I would just add that you kind of, as we move through the quarter, I think we still saw some of these conditions in play during the month of February. It was really probably around the middle, early to mid-March that we started to see improvement where California really started to harvest in meaningful volumes. And yeah, that's, as soon as we get those other sources up and running, the leverage of the Mexico supplier decreases dramatically. So we're able to balance things out much better. We're able to focus on only buying fruit that we can run through our own facilities.

Steve Barnard: Round the middle early to mid March that we started to see improvement, where California really started to harvest in meaningful volumes and yeah. That's as soon as we get those other sources up and running and the leverage of the Mexico supplier decreases dramatically. So we're able to balance things out much better we're able to focus on only buying fruit.

Steve Barnard: We can run through our own facilities, we can balance size curves across different countries of origin in order to avoid having to buy as much specifically sized fruit from individual co Packers and the margin kind of trended along with that during the quarter that it was tighter in the early part and definitely ended kind of it.

Stephen Barnard: We can balance size curves across different countries of origin in order to avoid having to buy as much specifically sized fruit from individual co-packers. And the margin kind of trended along with that during the quarter, that it was tighter in the early part and definitely ended kind of at a peak as we closed out the month of Right, great.

Steve Barnard: At a peak as we closed out the month of April.

Steve Barnard: Yes.

Benjamin Klieve: That's very helpful and glad to hear conditions improved throughout the period.

Steve Barnard: Great great.

Steve Barnard: That's very helpful.

Steve Barnard: Glastonbury conditions improved throughout the period.

Stephen Barnard: On the international markets, totally understandable, the 72-hour tariff dynamic that you called out. I'm wondering on a kind of higher level, if you can elaborate on kind of changes in behavior that you observed throughout the period, either from your suppliers or from your customers in the context of all this tariff uncertainty. Did everybody kind of operate as usual, you know, or was there any kind of, you know, any behavior from either side of the supply chain that you think is relevant to call out? God, Ben, I wish I could tell you everything was normal, but the reality is, particularly back in January and February and March as we were going through a lot of the initial announcements and it felt like there was a lot more uncertainty at that point in time, you had moments in time where people were holding fruit back, not letting it cross, just waiting for decisions to occur, sometimes doing things for 24 to 48 hours, which didn't put any quality at risk, but was definitely lodging up trucks at borders and things like that.

Steve Barnard: <unk>.

Steve Barnard: On the international markets.

Steve Barnard: Totally understandable.

Steve Barnard: 72 hour terrify dynamic that you called out.

Speaker Change: I'm wondering on a kind of higher level. If you can elaborate on on kind of changes in behavior that you observed.

Speaker Change: Throughout the period, either from your suppliers or from your customers in the context of all this tariff uncertainty did everybody kind of operate as usual.

Speaker Change: Or was there any kind of you know.

Steve Barnard: Any behavior from either side of the supply chain that you think is relevant to call out.

Steve Barnard: Oh, God I wish I could.

Steve Barnard: Tell you everything was normal.

Steve Barnard: Nothing, but but but the reality is the.

Steve Barnard: It, particularly back in January and February and March as we were going through a lot of the initial announcements and.

Steve Barnard: It felt like there was a lot more uncertainty at that point in time, you had moments in time, where people were holding fruit back not not letting it crossed waiting for decisions to occur sometimes doing things for 24 to 48 hours, which didn't put.

Steve Barnard: Any quality at risk, but it was definitely.

Steve Barnard: Lodging up trucks at borders and things like that.

Bryan Giles: But by the time we got to the April timeframe, especially when the rest of the international tariffs went into place, I think most suppliers had become more comfortable with this was more than likely going to be business as usual and regardless of what occurred, they would be able to handle it, especially at that 10% level. So when the tariffs went into place on April 9th, fruit was on the water, there were no disruptions at any ports or any changes. And really it's been, I hate to knock on wood, it's been smooth sailing since then. There hasn't been a lot of disruption, even with some of the rhetoric in the marketplace about things being negotiated on the left side or the right side or in the Southern Hemisphere or the Northern Hemisphere.

Steve Barnard: But by the time, we got to the April timeframe, especially when the rest of the international tariffs went into place.

Steve Barnard: Most suppliers had become more comfortable with.

Steve Barnard: This was more than likely going to be business as usual and regardless of what occurred they would be able to handle it especially at that 10% level. So when the tariffs went into place on April 9th free.

Steve Barnard: It was on the water there were no disruptions or any ports or any changes and really it's been I hate to knock on wood. It's been smooth sailing since then there hasn't been a lot of disruption even with some of the rhetoric in the marketplace about things being.

Steve Barnard: Negotiate it on the left side of the right side or in the southern hemisphere to the northern hemisphere, but really it was that January February March time period, where people are just acting a little skittish.

Stephen Barnard: But really it was that January, February, March time period where people were just acting a little skittish, but our relationships allowed us to get product when we needed to and how we needed to.

Steve Barnard: But our relationships allowed us to get product when we needed to and how we needed to.

Bryan Giles: And I'll add one on to that. I think when we looked at some of our, certainly Mexico is a big concern as John alluded to with the tariff rates as high as they were and price points peaking in March, the impact was very significant during that window. So when that subsided, I think that the industry as a whole was fairly relieved in terms of making sure that we're going to have adequate supply into the market. Colombia, Peru, some of the other import countries of origin, as we move through the second quarter, still made up a fairly small percentage of the amount of fruit that's consumed in the U.S.

Steve Barnard: And I'll add one bit onto that I think when we looked at some of our certainly Mexico is a big concern as John alluded to with the tariff rates as high as they were in price points, peaking in March.

Steve Barnard: The impact was very significant during that window, so and that subsided I think that the industry as a whole was fairly relieved in terms of making sure that we're gonna have adequate supply into the market.

Steve Barnard: <unk>, Peru some of the other important countries of origin as we move through the second quarter is still made up a fairly small percentage of the amount of freight that's consumed in the U S that percentage is going to increase as we move into Q3 and Q4.

Bryan Giles: That percentage is going to increase as we move into Q3 and Q4. But overall volumes get increased as well, which is going to help. Keep price or moderate price bring it down a little bit from these high levels that it was running at so My feeling is to the consumer the impact of having greater supply available in the market The you know the impact that will have on pricing will likely offset Any impact that comes through in the form of higher tariffs?

Steve Barnard: But overall volumes getting increase as well, which is going to help.

Steve Barnard: Keep price or moderate price bring it down a little bit from these high levels that it was running out. So my feeling is to the consumer the impact of having greater supply available in the market that the.

Steve Barnard: The impact that will have on pricing will likely offset.

Steve Barnard: Any impact that comes through in the form of higher tariffs.

Benjamin Klieve: Got it. That's, that's, that's helpful. And I'm sure it was a dizzying period, but it's good to hear that things have somewhat stabilized.

Steve Barnard: Got it got it that's that's that's helpful and.

Steve Barnard: Sure. It was a dizzying period, but it's good to hear that things have somewhat stabilized.

Benjamin Klieve: One more for me, and then I'll get back in queue is around the mango business. I'm This thing has really just been on a tear for some time. And I'm curious, two things. One, you talk about market share gains. Can you educate us on what your market share is at this point? And then, on a TTM basis, the Mango represents about $70 million of revenue.

Steve Barnard:

Steve Barnard: One more from me and then I'll get back in queue is around the mango business.

Steve Barnard: This is the thing has really just been on its hair for some time and I'm curious two things one you talked about market share gains can you educate us on.

Steve Barnard: What your market share is at this point.

Steve Barnard: On a TTM basis the mango.

Steve Barnard: <unk> represents about $70 million of revenue I'm curious how big this opportunity. This crop can get within your current infrastructure before you would need to invest in some kind of expansion initiatives.

Stephen Barnard: I'm curious how big this crop can get within your current infrastructure before you would need to invest in some kind of expansion? Well, let's start with the mango itself. It's the number one consumed fruit in the world, not necessarily here in the U.S., but it's growing, as you can see. We are already the second largest mango distributor in the United States. We have number one turned around looking at us, wondering which way we're going to go. But it's a great complement to our avocado business that utilizes all the facilities including ripe rooms, trucks, and customers.

Steve Barnard: Well, let's start with the mango itself. It's the number one consumer fruit in the world not necessarily here in the U S. But it's growing as you can see.

Steve Barnard: We are already the second largest mango distributor in the United States we've.

Steve Barnard: We have number one turned around looking at recurring which way we're going to go.

Steve Barnard: But.

Steve Barnard: It's a great complement to our avocado business that utilizes all of the facilities, including rape rooms trucks customers and.

Stephen Barnard: It's exceeding expectations, and I think it will continue to going forward, just as a large picture of what's going on. I would add to that, just to answer your question around the market share piece, that about 12 months ago, we were approximately somewhere below 5% market share. And this year, as we sit here today, we're closer to that next 5% threshold of the 10%. So, we're very happy with that. We're very happy with the relationships we have with our customers. All the things Steve mentioned, as we were going through the prepared remarks, are true in regards to our ability to program out year-long.

Steve Barnard: It's exceeding expectations and I think it will continue to do going forward.

Steve Barnard: Large picture of what's going on.

Steve Barnard: I would I would add to that.

Speaker Change: Yes, just to answer your question around the market share piece that.

Speaker Change: About 12 months ago, we were.

Steve Barnard: Approximately somewhere below 5% market share and this year as we sit here today, we're closer to that next 5% threshold of the 10.

Speaker Change: So where we're very happy with that we're very happy with the relationships, we have with our customers all of the things Steve mentioned as we were going through the prepared remarks are true in regards to our ability to program out yearlong now our farms themselves.

Stephen Barnard: Now, our farms themselves add a significant advantage to us in regards to our ability to have that fruit during that time of year. Number one, the quality is outstanding. Number two, we can really lock in good programmatic pricing for our customers. And we can do it all around the country, because we're pulling in fruit to multiple ports and through multiple DCs. It's not just a regional play for us. We're able to help our customers, regardless of where they are, regardless of how big their footprint is.

Steve Barnard: Adding significant advantage to us in regards to our ability to have that fruit during that time of year number one the quality is outstanding number two we can really lock in good programmatic pricing for our customers and we can do it all around the country because we're pulling in fruit to multiple ports and through multiple D. CS it's not just a regional play for us.

Steve Barnard: We're able to help our customers regardless of where they are regardless of how big their footprint is as we think about the future. There is still a lot of room in the.

Stephen Barnard: As we think about the future, there's still a lot of room in the output of that ranch in Peru. Those trees are really just starting to mature, so there's room for them to grow. I think there's probably three to four years of productivity increases that will help us continue to push more volume through our network and hit that next 5% threshold as we think about market share. The other piece is we're continuing to build relationships all over the world. It's not just the Peruvian fruit that's going to make that difference for us. It's building more grower relationships in Mexico and Brazil and Ecuador and other places like that that we've already started to generate great returns from in regards to availability of fruit and only put more effort into that moving forward.

Steve Barnard: The output of those that ranch in Peru.

Steve Barnard: Those trees are really just starting to mature so there's there's room for them to grow I think theres, probably three to four years of.

Speaker Change: Productivity increases that will help us continue to push more volume through our network and hit that next 5% threshold as we think about market share. The other pieces, we're continuing to build relationships all over the world. It's not just the Peruvian fruit, that's going to make that difference for us it's building more grower relationships in Mexico and Brazil.

Speaker Change: Ill in Ecuador, and other places like that that we've already started to.

Speaker Change: Generate great returns from in regards to availability of fruit and only put more effort into that moving forward.

Benjamin Klieve: Very good. Well, that's impressive work over the past couple of years and look forward to watching that continue here going forward.

Speaker Change: Alright, guys well.

Speaker Change: Impressive work over the past couple of years.

Speaker Change: Watson I continue here going forward.

Benjamin Klieve: Congratulations again, nice quarter. Thanks for taking my questions. I'm gonna get back to you. Thank you. Okay. Thanks. Thank you.

Speaker Change: Congratulations again nice quarter. Thanks for taking my question and then I'll get back in queue.

Speaker Change: Thank you guys. Okay. Thanks, Matt.

Speaker Change: Yeah.

Operator: There are no further questions at this time.

Speaker Change: Thank you there are no further questions at this time.

Operator: I'd like to hand the floor back over to management for any closing remarks. Thanks for your interest in Mission Prdc and we look forward to speaking with you again next quarter.

Speaker Change: Like to hand, the floor back over to management for any closing remarks.

Speaker Change: Thanks for your interest in mission produce and we look forward to speaking you again next quarter.

Operator: Ladies and gentlemen, this concludes today's conference call. We thank you for attending. You may now disconnect your

Speaker Change: Ladies and gentlemen. This concludes today's conference call. We thank you for attending you may now disconnect your lines.