Mission(AVO) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for fiscal 2024 reached $1.2 billion, with adjusted EBITDA of$107.8 million, reflecting strong execution and favorable market conditions [7] - Q4 2024 revenue increased by 37% to $354.4 million, driven by a 36$28 million to $55.8 million, with gross profit margin rising 490 basis points to 15.7$19.6 million ($0.28 per diluted share), compared to$7.5 million ($0.11 per diluted share) in the prior year [23] - Operating cash flow for fiscal 2024 increased by$64.2 million to $93.4 million, supported by improved operational performance and working capital management [27] Business Segment Performance Marketing and Distribution - Q4 net sales increased by 35$319.6 million, driven by higher avocado pricing and per-unit gross margins [24] - Adjusted EBITDA for the segment rose by $14.8 million to$25.6 million [24] International Farming - Q4 net sales were $30.3 million, down from$40.3 million in the prior year due to reduced volume from owned farms impacted by El Nino weather conditions [25] - Adjusted EBITDA improved to $2.7 million, up from$1.1 million in the prior year, driven by cost containment efforts and strong pricing [25] Blueberry Segment - Q4 net sales increased to $31.6 million from$19.5 million in the prior year, with adjusted EBITDA rising to $8.6 million from$5.4 million [26] - Higher volumes were driven by new plantings and yield improvements, despite challenging weather conditions in the prior year [26] Market and Geographic Performance - The company leveraged its global sourcing network to navigate supply constraints, particularly in Peru, by shifting to California, Colombia, and Mexico [20] - North American avocado sales volumes increased by 9% despite lower Peruvian volumes [20] - The USDA approved Guatemalan avocado imports into the US, marking a significant milestone for the company’s expansion strategy [13] Strategic Direction and Industry Competition - The company is focusing on optimizing its distribution footprint, including winding down facilities in Toronto and Calgary to eliminate redundant costs [15] - Capital expenditures for fiscal 2024 were $32.2 million, with plans to allocate$50-55 million in fiscal 2025 for avocado and blueberry farming investments [29][30] - The company aims to maintain a strong balance sheet and generate meaningful free cash flow, with a near-term priority on debt paydown [31][32] Management Commentary on Operating Environment and Future Outlook - Management highlighted the resilience of consumer demand and retail support, which helped sustain elevated pricing dynamics [8] - The company expects avocado pricing to remain higher year-over-year in fiscal 2025, with a 20% increase compared to the prior year [33] - Blueberry pricing is expected to decline by approximately 30% year-over-year due to higher industry volumes from Peru [35] - The company remains confident in its competitive positioning, supported by its global sourcing network and strong balance sheet [17] Other Key Information - The company generated approximately 60 million in free cash flow in fiscal 2024, with expectations to continue generating strong cash flow in the coming years [31] - The International Farming segment began construction of a pack house in Guatemala, with CapEx spending expected to moderate after fiscal 2025 [30] Q&A Session Summary Question: Delta between pre-release and actual results - The company exceeded pre-release expectations due to stronger-than-expected performance in the Marketing and Distribution segment, as well as higher blueberry volumes and pricing [41][43] Question: Costs associated with winding down facilities - The facilities in Toronto and Calgary were not profitable, and the company expects minimal costs related to lease payments, asset retirement, and severance [46][48][50] Question: Outlook for International Farming segment - Management expects improved EBITDA in fiscal 2025 due to stabilizing weather conditions and operational efficiencies, with potential to return to historical EBITDA levels of 23-30 million [55][57] Question: Impact of potential tariffs on agricultural exports - Management believes the company is well-positioned to handle potential tariffs, given its historical resilience and strong consumer demand [62][64][66] Question: Consumer resilience to higher prices - The company noted that consumers have adapted to higher prices, particularly younger consumers, which supports sustained demand at elevated price points [75][76] Question: Blueberry planting and future plans - The company added 100 hectares of blueberry plantings in fiscal 2024, with plans to add another 200 hectares by fiscal 2026, focusing on premium varieties to drive higher returns [90][92] Question: Capital allocation and future plans - The company’s near-term priority is debt paydown, with potential future opportunities to return cash to shareholders or invest in additional plantings [97][98]