Mission Produce Q2 Revenue Hits Record

Mission Produce (AVO) reported record Q2 fiscal 2025 revenue of $380.3 million, a 28% increase year-over-year, driven by a 26% rise in avocado selling prices, though adjusted EBITDA was lower at $19.1 million due to cost headwinds. The company highlighted its expanding mango business, now at nearly 10% market share, and anticipates a 50% volume recovery in Peruvian avocado production, expecting prices to decline 10-15% in the second half due to increased supply, while reaffirming capital expenditure guidance and share repurchase authorization.

Analysis

Mission Produce (AVO) reported a mixed second quarter for fiscal 2025, achieving record revenue of $380.3 million, a 28% year-over-year increase primarily driven by a 26% rise in per-unit avocado selling prices amid strong consumer demand. However, this top-line strength was offset by lower adjusted EBITDA of $19.1 million and a $2.6 million decline in gross profit to $28.4 million, with gross margin contracting by 290 basis points to 7.5%. This margin compression was attributed to challenges in securing Mexican fruit supply early in the quarter and nonrecurring costs, including Canadian facility closures and temporary Mexican import tariffs, although per-unit margins reportedly improved as the quarter progressed. The company's mango business continues its expansion, generating approximately $70 million in trailing twelve-month revenue and nearly doubling its market share to almost 10%, leveraging existing infrastructure. A significant positive catalyst is the anticipated 50% volume recovery in its Peruvian avocado production, projected at 100-110 million pounds for the current season, following a weather-impacted 2024 harvest. Management expects this increased supply, alongside rising industry volumes (10-15% YoY), to lead to a 10-15% decrease in avocado prices in the second half compared to the prior year's $1.84 per pound average. Capital expenditures are reaffirmed at $50-$55 million for the full year, with expectations for moderating CapEx and a step-up in cash generation in the second half, driven by inventory monetization and the Peruvian harvest ramp-up.

Key Decisions for Investors

• Investors should closely monitor the impact of anticipated lower avocado prices in the second half of fiscal 2025 on Mission Produce's gross margins, despite the projected significant volume recovery from its Peruvian operations.
• The progress of the mango segment's expansion and its contribution to revenue diversification and profitability warrants attention, as it represents a key growth avenue leveraging existing infrastructure.
• Evaluate the company's ability to translate the expected second-half volume recovery and inventory monetization into improved free cash flow and its deployment towards strategic investments or share repurchases.
• Consider the balance between the positive long-term supply recovery and growth in mangoes against the near-term margin pressures from lower avocado pricing and operational cost factors.