Good afternoon, and welcome to the Mission Produce 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 that today's event is being recorded. At this time, I'd like to turn the conference call over to Jeff Sonnek, Investor Relations at ICR. Sir, please go ahead.

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 provisions of the Private Securities Litigation Reform Act of 1995. 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 discussed in the forward-looking statements. 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.missionproduce.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. 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'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 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 Blueberries 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 segment. Blueberries are notable this quarter and that the strategy is becoming visible in the 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 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 pricing. Together, these businesses contributed meaningfully to our overall adjusted EBITDA generation in the first quarter and demonstrate Mission's unique ability to drive value through its leading global…

Thank you, Steve, and good afternoon to everyone on the call. I'll start with a review of our fiscal first quarter financial performance, touching 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 are seeing. Total revenue for the first quarter of fiscal 2024 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. 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 a 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 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…

[Operator Instructions] Our first question is from Ben Bienvenu with Stephens.

I want to ask in the marketing business, this balance between taking market share on the volume side, but managing margins on the per box side, how do you feel like doing it looks like you gained at least relative to the 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-demand balance going forward. Some of the times in the past, we would commit to pricing and the supply would fluctuate surprisingly to us in many cases. So we're trying to tighten that up. As we go forward, we've got that Peruvian deal coming on our own. So that kind of eliminates the high risk there too. 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. I think 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. 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, we achieved what we wanted to. Not every quarter will look like first quarter did, but I think that's kind of 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 or more volume through the facilities. Transportation is picking up a benefit there because it's 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.

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 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 fruit just wouldn't ripen no matter how long you left it in the ripe room. So I think it was dumped in many cases. So that appears to be behind us as far as the weather, the sizing on the crop 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-sizes 40s, 48s and 60s. 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, we'll be good, I think.

Our next question is from Gerry Sweeney with ROTH MKM.

I had a couple of questions on margins as well. I apologize if any of it is repetitive, I was writing stuff down. So as you were speaking on the last go round, but just wanted to talk about maybe get a little bit more detail on some of the cost enhancements you're making, which I also would include maybe some of the price increases. Maybe describe some of the moves you're making, how much is left? And then is there ability, are you caught up on price in regard to the value you're adding to the fruit? So, I think there's a little bit to unpack there. I can repeat some of it if you need to.

Yes. 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 and 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 based budget on labor and said, okay, what do we need to do get this job done in an efficient, correct manner. And that's really what we did. We had too many people doing one person's job in many cases. Because we were developing it and there was a lots going on and whatnot. But now we're at the point where we're a little more mature down there as far as our developments and now it's more of a direct operational team rather than a operational and growth team at the same time.

And I would reiterate, Gerry. Down in Peru, I think the -- what we saw the impact in the first quarter was some of the cuts we made in SG&A, as well as some of the reductions we made in the packing house 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. 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 and Peru 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. We should see strong 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 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 we've seen in 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 I don't necessarily think that there is further increases on the horizon with the value added services. I think we 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, obviously, there's an absorption, it sounds like they're absorbing some of the fixed costs on distribution, packing, et cetera. How big can you grow these two business lines?

Consumption keeps growing on both of them, Gerry. As you know, we're partners with Driscoll on the blueberries and 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, as we continue to add hectares on 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 product. So we're using our Laredo facility in the summertime with mangoes when the avocados are at their low 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. So it's a great benefit in that nature, in that respect.

And I just build on that, Gerry, that I think touch on mangoes first, Steve is spot on. And the marketing side of the business, the ability to leverage our distribution infrastructure. 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 on that is still pretty long. So I think it's a nice complement to our avocado business, 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 but because it's so early in the process, but we do believe that there is real potential. We think that the growth rates in mango revenue will likely outpace the growth rates in our avocado revenues in the near future. I think with blueberry to Steve's point, we've got about 450 in the ground today that we're producing fruit. So as we near the end of our -- 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 -- or in our Qs and in previous calls, we are expanding up in the northern part of Peru. There is an additional 600 hectares that we're targeting to plant over the next three to four years. Those will start layering in production in the near-term. We should have some acreage that's coming online from those plantings in this next harvest season. And 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, 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 price point, the net returns to the farms are going to 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 impact of our avocado production that really spiked pricing this year.

And one thing on the mango business on top of the benefit with volume, Gerry, is that we picked up avocado business at some of these retailers that we did not have their avocado business because we have the mango. So there's a lot of benefits there.

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. And thank you for your interest in Mission Produce. We look forward to speaking to you again.

This concludes our conference. You may now disconnect.