Good afternoon, and welcome to the Mission Produce’s Fourth 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 today's event is being recorded. At this time, I'd like to turn the conference over to Jeff Sonnek, Investor Relations at ICR. Thank you. You may begin.

Thank you and good afternoon. Today's presentation will be hosted by Steve Barnard, Chief Executive Officer and Bryan Giles, Chief Financial Officer. The company's President and Chief Operating Officer, John Pawlowski, is also on today's call for participation during the Q&A session. 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. And with that, I'd now like to turn the call over to Steve Barnard, CEO. Steve?

Thank you for joining us today. Our strong execution in the fourth quarter rounded out an exceptional fiscal 2024 where we delivered $1.2 billion in revenue and generated $107.8 million in adjusted EBITDA demonstrating the strength of our business model and industry leading position. Throughout the year, we effectively leveraged Mission's differentiated global sourcing network to capitalize on favorable market conditions, which culminated in another quarter of solid financial performance. The strength of our integrated business was particularly evident this quarter through the collective efforts of our sales, sourcing and operations teams. When others might have seen challenges given the smaller production out of Peru this year, which resulted in supply constraints for the industry, we capitalized opportunities to leverage our unique capabilities and global sourcing network. Strong consumer demand and retail support of the category coupled with the supply constraint environment helped support elevated pricing dynamics that extended into the fourth quarter. Our ability to seamlessly shift between growing regions and maintain consistent supply for our customers translated into robust per unit margins that exceeded our targeted range. This performance underscores the breadth of our sourcing network which we believe is the most comprehensive in the industry enabling us to provide reliable supply to our customers even during periods of disruption to key industry supply sources while at the same time maximizing our margin performance. We are particularly pleased with our cash flow generation for the full year of fiscal 2024 in which we delivered a $64.2 million increase in operating cash flow versus 2023. Our strong operational performance throughout the year combined with the planned tapering of our heavy CapEx cycle over the past several years has resulted in strong free cash flow that has strengthens our capital structure through reduced leverage further enhancing our flexibility. While some…

Thank you, Steve, and good afternoon to everyone on the call. I'll start with a review of our fiscal fourth 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 market conditions that we are seeing. Total revenue for the fourth quarter of fiscal 2024 increased 37% to $354.4 million driven primarily by a 36% increase in avocado sales prices. Higher prices resulted from constrained avocado supply during the quarter driven by weather impacts on fruit development and production in Peru combined with stronger consumer demand. Despite lower Peruvian volumes, we were able to leverage our diverse sourcing network across California, Colombia and Mexico to drive a 9% increase in North American avocado sales volumes compared to the prior year. Amidst the supply challenges we faced, we made a strategic decision to prioritize the North American market where strong consumer demand supported by retail promotional activity translated to higher per-unit price points. Gross profit increased by $28 million to $55.8 million in the fourth quarter and gross profit margin increased 490 basis points to 15.7% of revenue. These increases were primarily driven by stronger per-unit margins on avocados sold during the period. We can further attribute these increases to the combination of favorable mix of source fruit and internal initiatives that Steve spoke to earlier. Our blueberry segment also contributed to the increase with higher volumes, while per-unit margins remained generally consistent with the prior year. SG&A expense increased $6.6 million or 32% compared to the same period last year, primarily due to higher employee-related costs including performance-based incentive compensation and stock-based compensation expense as a result of our improved operating performance relative to the prior year period.…

Great. Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. Thank you. The first question here is from Ben Klieve from Lake Street Capital Markets. Please go ahead.

Hi. Thanks for taking my questions and congratulations. Great end to a great year here. My first question is the result in the quarter relative to the pre-release information. Your both revenue and EBITDA comfortably exceeded what you had laid out on the pre-release five or six weeks ago. I'm just wondering what the delta was in the actual results versus what you saw in the pre-release.

Yes. Sure thing, Ben. We certainly wanted to get out in front of it. We knew that some of the data that was out on the Street was well below where we expected the quarter to track to. We certainly didn't have all of our information closed out at the point in time when we put this release together. I would say, we were bullish on our Marketing Distribution segment and where pricing and per-unit margins were, even though we did not yet have everything finalized. And that is certainly where why we set a floor and we knew that there was some room to be a little bit better than those figures. I think the biggest delta that we saw though was really in our farming and blueberry segments. We really had not pulled the closing information together from either of those areas yet. It does take us a little bit longer to extract that data from our systems. So, I'd say the biggest delta where the volume sold through on blueberries, not harvested, but actually sold through were a little higher than we expected. And the average selling prices that we realized held up better than we'd originally thought they would. We knew as we were transitioned towards Q1 that blueberry prices were beginning to decline. So, we factored in some conservatism into what we thought pricing was going to look like. But in reality, through the end of October, that pricing held up better than we'd expected.

Got it. Okay. That's very helpful. A couple of others for me. So first of all, Steve, you noted winding down a couple of facilities here in this current fiscal quarter. I'm wondering if you can comment at all on any costs associated with this, both cash or non-cash costs?

Well, those two facilities I mentioned were not running at a profit and there's ways to provide the same service level that we were providing with a lot less cost by just going direct from other facilities either at the border or somewhere out throughout the United States into Canada. So, we put those in there several years ago for a specific customer and they started buying more and more direct, a lot of it from us. I mean, we didn't lose the customer, but they were wanting to go direct from the border, not have it ripen. They were going to ripen it themselves. So, it just it kind of outgrew its purpose.

Yeah. In terms of the cost spend, I would just say that certainly we have some assets there in those facilities that aren't fully amortized or depreciated yet. But most of our leases these leases were due to expire in the next one to two years. So, they were close to their end date. So, there's a tail on some fixed assets. There's a tail on some lease payments that we have left to go. Then there's also potentially some asset retirement related obligations, a minimal amount of severance when all said and done. The facilities weren't staffed. We had maybe 12 people within those facilities. So, they weren't it shouldn't we're not expecting this to have a significant impact when all said and done. But we do think that longer term, it will generate some meaningful cost savings for us. To Steve's point, the facilities there was not enough volume moving through those facilities to enable them to operate efficiently. The Canadian market simply has changed over the last decade. It's not what it was when we first opened our facilities in Toronto back in the first, 2007, 2008 timeframe. And certainly, we've had to it's taken us time to adapt to the changing market conditions up there. We think long term this is the right choice for us.

Okay. All right. Yes, that definitely makes sense. Both your comments on the International Farming segment -- excuse me, guys both your comments on the International Farming segment seemed pretty encouraging. I'm wondering if you can just big picture talk about the especially the EBITDA expectations coming out of that segment here, if you anticipate a directional the directional improvement that you saw in 2024 to continue in 2025, given stabilizing weather conditions and the operational efficiency that you guys have made down there?

I'll refer to Bryan on the numbers.

Yeah. I think at a high level, Ben, things are moving in the right direction. I think we did some things in 2024 related to the cost structures within the farms that will continue to pay dividends going forward. I think it'll -- we expect the market conditions to be different next year than they were in 2024. With the weather changes down in Peru, the El Nino effect dissipated in May of this year. So, with weather conditions changing, we're expecting a larger crop as we move into next year, which likely translates and not only from Peru, but in general, we're expecting larger crops across many of the source regions that we work in. So, expecting a year of higher volumes and a year where pricing is likely going to come down off the highs we saw this year, particularly as we reengage to a greater extent with some of the international markets that we work in. I'd say, in general, we're bullish about the direction of farming. If we look back, we've come off a couple of difficult years. I mean, 2023, 2024 EBITDA has not been where we would have expected it to be. We go back to 2022, our EBITDA was in the $23 million range. In 2021, it was north of $30 million. We absolutely believe that the farming segment can move back to those types of levels in the near future. As volume picks up and we continue to reopen markets for that fruit.

Got it.

We've gone through an El Nino series a year or two ago, which kind of damage those trees for a year or so. And the crop suffered size wise, quality rise, it got hot, it got wet. We've outgrown that and I think we're on the -- that happens about every 10 years. So hopefully we won't see it for another 10.

Very good. All right. Well, fingers crossed up here. So, one more for me and then I'll get back in queue. Just a big picture macro question. Given the how much you are involved in the import export world, how you're thinking about kind of the future of agricultural exports into the U.S, particularly from Mexico in the context of potential tariffs? Is there just a dynamic that's changing at all how you think about operating your supply chain, or are you really just sitting back and waiting to see kind of how it all shakes out?

Well, I think on Trump's behalf, I think that's a ploy to get them to the table to negotiate help with the immigrant problem. Whether he pulls a trigger on the tariff or not, I don't know. I hope not. But obviously, it'll raise costs, probably slow consumption down a little bit. Who knows? Who know, consumption keeps growing. And if you look at the overall category, volume goes up and pricing has gone up. So even if it leveled off, we'd be in pretty good shape. So, I'm not too worried about it really.

This is John Pawlowski. I would add to Steve's comments that when you look at the historical capabilities of the team here at Mission, disruptions, price changes, price inflation, challenges getting product from one country to another has always been part of the game. And this team has proven and really proven over the last 12 months how well they can execute when things get choppy. So, if there's things that come down the path that create some choppiness, this team is absolutely ready for that. And then the second piece of it is also what Steve just mentioned, and that's the consumer resilience. We have really seen the consumer be resilient through both an inflationary period, as well as price -- not just the price side, but also from a supply challenge perspective. And the consumer is really taking away more and at a higher price than they ever have. So, both of those two things combined, I see Mission positioned in a great spot, regardless of what happens on the tariff side of things.

I think that's directly focused at Mexico too, not I don't think he's going to put a tariff on Peru or Colombia or Guatemala, I hope.

Got you. Very good. All right. Well, I appreciate that context from you both. Congratulations again on a really great quarter, really great year, and I'll get back in queue.

Okay. Thanks, Ben.

Thanks, Ben.

Next question is from Gerry Sweeney from ROTH Capital Partners. Please go ahead.

Hey, good afternoon, guys. Thanks for taking my call.

Sure, thanks Gerry.

Just to follow-up on Ben's question and then the answer. But it seems like consumers have maybe for lack of a better phrase, busted through the price barrier and seem more consistent at higher prices than maybe a couple of years ago. Is that fair to say, especially with this past year's results?

Yeah. We're seeing two macro trends that are driving that, Gerry, this is John. The first one, I think you'll hear consistently across anyone in the grocery sector and that is exactly what you just said. There's been inflationary pressure over the last 18 months and you're starting to reach points where the consumer has adapted to that. The second piece, more specific to our kind of slice of the pie in regards to the produce section is we're seeing a lot of younger consumers enter the marketplace. You've got people that are 18 to 30 that are picking up more avocado consumption. And those consumers, as they enter the marketplace, they're making up a much bigger portion of our shopper base. They are much more resilient than the traditional baby boomers have proven to be in the past.

Got it. Does this mean moving forward that retail can keep prices elevated, make more money and maybe help and does that trickle through to the Missions furthermore?

Well, I guess the prices -- the make more money piece is always the tricky question, right? Because the price versus our cost always plays a role in that. I think you'll see more consistency compared to a margin perspective, from a retail side of things, where they were in 24%.

Yes. I mean, Jerry, I think it's all in relative terms where pricing is going to sit. There's going to be a supply of volume available and prices need to it will need to ultimately be set at a level that enables the market to consume that supply. Do I think at comparable levels, I think the price points will settle in higher than where they were in the past two, three, four years ago? But I think as we look to this coming year, if volumes were to increase 10%, 15% across all countries of origin, I would think that that is going to bring pricing down somewhat with that much of a volume increase. But again, it will be a more resilient price than it would have been two, three, four years ago.

It will still be good. They're pretty high to start with.

Yeah. I got it. Just curious, it feels like prices the last 50 is coming back or something like that.

So, I would say there were definitely times, I mean where that $0.99 per piece barrier was kind of an indicator of when demand would start to taper in. That doesn't seem to be the threshold or the limit any longer. I mean, price points it would be $1.90. $1.25, $1.49, we're not seeing that having a negative impact on pull through any longer. So, yeah, I think inflation, it's taken a few years, I think for maybe the consumer to adapt to paying higher prices, but it feels like it's finally kind of come through our category in this last year.

Got it. Switching gears to blueberries. I mean blueberries are great, but you also noted, I think increased plantings. How many more acres this year than last year and two years ago? And then what is the plan for the blueberries for the next couple of years going forward?

So, in production, you're talking about or planning?

Planning side, yeah, planning side -- I think that's right.

Yeah, blueberries have a pretty quick turn. Like usually within a year, they're in a productive state, unlike an avocado tree where it can take four or five years. But blueberries, I think we rolled out another 100 hectares this year, I think we'll be layering in at least another 100, because we're doing some double density planting, Gerry, in the first year. So, I'm like -- in my head, 100 hectares this year, but maybe a little more than 100 hectares worth of plants. And then we're probably looking at another close to 200 hectares coming into production for the next harvest season, which would roll through Q4 of ‘25 and into Q1 of 2026. And that would be on top of I think prior to this, we had about somewhere close to 500 hectares in production. And another 200 developed, in process. So, when all said and done with our plantings up in the northern almost region, we should roughly double the size of the blueberry plantings that we had in place before we started that project. So overall acreage, certainly a lot of these plantings are of the new more desirable varieties as well, which we believe over the long haul are going to help drive higher average selling prices over some of the generic varieties that are being grown in country. So, I think we're excited about the opportunity that lies ahead. Certainly, focus on trying to stretch harvest season, things of that nature, so we're not overloading markets at certain times of the year. And again, getting fruit of those premium varieties with the right sizing and the right quality to generate those above average returns.

Got it. And then obviously balance sheet is good shape. You kind of touched on cash flow. But next couple of years, good cash flow and debt would be high -- in a very excellent spot. I mean any thoughts on what's after that? Do we go back into maybe increasing some plantings to a degree or just curious from that perspective?

I think our plan, Gerry, and we've been communicating for years and for a couple of years, I don't think we changed too much on it that. Our expectation was that we've gone through a couple -- had gone through a couple of years where our operating cash was depressed. I think the year we saw in 2024 was more in line with what we believe the long-term capabilities of this business are. Capital has continued to step down, probably step down, it looks like it stepped down a little more this year than it really did because of some timing things. But nonetheless, it's well off of the numbers that we've seen over the last three or four years. And we expect that that will continue. So, yes, we're going to generate significant cash flow. I would think next year, as we look to fiscal 2025, our priority will still be on paying debt down. Beyond that, you're right, we will be in a position where we'll have our balance sheet in really good shape. And that will enable us to evaluate other opportunities with that cash, one of which could be returning cash to shareholders in some way shape or form.

Yeah, got it. Okay. Well, congratulations on a great year. I appreciate it.

Hey, thank you, Gerry. Thanks, Gerry.

This concludes the question and answer session. I'd like to turn the floor back to management for any closing comments.

Thank you for your interest in Mission Produce, and we look forward to talking to you again.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.