Mission(AVO) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2024 increased 35% to $298 million, driven by strong consumer demand for avocados and an 8% increase in avocado volumes sold [5][14] - Adjusted EBITDA increased 166% to$ 20.2 million, with net income for the quarter at $7 million, compared to a net loss of$ 4.6 million in the same period last year [6][16] - Gross profit increased by $12.9 million to$ 31 million, with gross profit margin rising 220 basis points to 10.4% of revenue [15] Business Line Data and Key Metrics Changes - Marketing and Distribution segment net sales increased 33% to $287.1 million, primarily due to favorable avocado dynamics [17] - International Farming segment sales were$ 1.4 million, down from $6 million in the same period last year, with adjusted EBITDA at negative$ 2.2 million [18] - Blueberry segment net sales increased to $10 million compared to$ 1.7 million in the prior year, with adjusted EBITDA rising to $0.7 million [19] Market Data and Key Metrics Changes - The stable industry environment in the first half of the year aided in volume growth and operational efficiency [5] - The Peruvian avocado crop is expected to be significantly impacted by El Nino, with exportable volumes from owned farms projected to decrease by more than 50% [23][24] Company Strategy and Development Direction - The company is focusing on diversification across crop types and geographies, with strategic investments in the rapidly growing Blueberry business and plans to lead in the Mango category [10][12] - Cost optimization initiatives are being implemented in International Farming operations to drive down operating costs [9] Management's Comments on Operating Environment and Future Outlook - Management noted that while El Nino conditions have eased, they still affect the Peruvian avocado crop, leading to reduced production volumes [7][24] - The company remains optimistic about long-term growth despite current challenges, emphasizing the importance of a diversified global asset network [13] Other Important Information - Cash flow from operations improved by$ 39 million year-to-date in fiscal 2024, with capital expenditures reduced to $17.7 million for the six months ended April 30, 2024 [6][21] - The company plans to increase its projected CapEx budget for fiscal 2024 to a range of$ 40 million to $45 million, reflecting accelerated investments in blueberries [22] Q&A Session Summary Question: What is driving the robust demand and prices for avocados? - Management indicated that consumption continues to grow, with higher prices not negatively affecting demand, and consistent supply from Mexico is a contributing factor [26][27] Question: Can you break down the drivers of gross margin performance? - Management noted that stable supply, an earlier California harvest season, and fee increases contributed to improved gross margins, but pinpointing exact drivers is challenging due to the dynamic environment [30][34] Question: What is the outlook for the International Farming segment given the reduced Peruvian crop? - Management expects adjusted EBITDA for the International Farming segment to be more in line with last year's results due to lower volumes, despite some pricing increases [39][40] Question: What is the status of the Blueberry initiative and its capital expenditures? - Management confirmed that the target of 2,600 acres remains unchanged, but the timeline for development has been accelerated due to positive cash flow from the segment [45][46] Question: Will the cost reductions in the International Farming operation be sustainable? - Management indicated that the cost savings initiatives are not solely dependent on current crop sizes and are expected to carry forward into future periods [53][54]