Good afternoon, and welcome to the Mission Produce Fiscal First Quarter 2025 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, Jeff. 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, please go ahead.

Thank you for joining us today. We're pleased to deliver a strong start to fiscal 2025, achieving record first quarter revenue of $334.2 million, a 29% increase compared to the same period last year. This performance demonstrates our ability to successfully navigate a dynamic operating environment, where we experienced industry supply challenges in Mexico during a period of strong consumption. With the Mexican avocado season ramping up, our marketing and distribution segment is back in focus during the fiscal first quarter. We realized segment growth of 32% versus the prior year, reflecting a 5% increase in avocado volumes sold and a 25% increase in per unit avocado selling prices relative to the prior year period. The combination of volume, growth during a period of heightened pricing clearly indicates the resiliency of consumer demand for the category, despite the broader impacts from the inflation that consumers continue to absorb. Our Blueberry segment also contributed nicely to our strong line performance with a 12% increase in revenue to $36.4 million. Blueberries are an exciting area for us and one that we continue to invest in. In fact, over 100 hectares of new plannings came online early last year, growing the total footprint of over 550 hectares, which positions us well in a category that continues to see growing consumer demand similar to avocados and mangoes. We see tremendous long-term growth in Blueberries as consumer preferences shift towards healthy, convenient snacking options and we're strategically positioning ourselves to capitalize on this trend by expanding our acreage and investing in premium varietals that deliver superior flavor profiles and extended shelf life. While our Mango program is still in its early stages, we're seeing encouraging progress as we expand our footprint and grow our share in this high growth category that is significantly underrepresented in…

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 market conditions that we are seeing. Total revenue for the first quarter of fiscal 2025 increased 29% to $334.2 million, largely driven by growth in our Marketing & Distribution segment, where average per unit avocado selling prices increased 25% on a 5% increase in avocado volumes sold. Gross profit increased by $2.8 million to $31.5 million in the first quarter, driven by our International Farming segment, which benefited from increased packing and cooling service activity that correlated with higher blueberry production volumes. These favorable results were partially offset by lower gross profit in our Marketing & Distribution segment, caused by lower per unit margins on fruit sold and costs associated with our Canadian facility closures during the quarter. Gross profit margin decreased 170 basis points to 9.4% of revenue. As a reminder, gross profit percentage fluctuates based upon per unit sales price levels in relation to per unit cost as profitability is primarily managed on a per unit basis. SG&A expense increased $1.5 million or 7% compared to the same period last year, primarily due to higher employee related costs, including statutory profit sharing and stock based compensation expense. Adjusted net income for the quarter was $7.1 million or $0.10 per diluted share compared to an adjusted net income of $6.7 million or $0.09 per diluted share last year. Year-over-year growth was driven by improved non-operating results, including reduced interest expense attributed to a combination of lower interest rates and lower borrowings and increased equity income related to…

Great, thank you. We will now be conducting a question-and-answer session. [Operator Instructions] First question here is from Ben Klieve from Lake Street Capital Markets. Please go ahead.

All right. Thanks for taking my questions. First, in the quarter itself, I'm wondering if you can help us a bit and elaborate on this dynamic where you had sourced from co-packers? Can you quantify kind of the degree to which you had to do this in the current quarter relative to normalized levels? And then have conditions approved quarter-to-date such that, that you're able to secure inventory more directly or has the condition kind of sustained so far over the last six weeks?

They've sustained over the last several weeks. The crop overall is down slightly in Mexico. And as Bryan said in his statements, the demand is up and volume is up a little bit also compared to the year ago. But we're going to have to live through this for probably another month or so until we get other sources of supply like California and Peru on deck, which is right around the corner.

Hey, Ben. And I would also comment that, we kind of -- as we transitioned into December, kind of early parts of the Mexico harvest season, I think everyone was expecting a bump in the overall industry crop this year. So I think, we were planning for volume increases as we move through the holidays and into January. I think what we've come to realize subsequent to that is that the overall industry harvest out of Mexico is unlikely to be as large as we'd initially expected. I think some of the behavior in terms of some of the commitments we've made to customers was driven around the need to move more volume. And then once we've made those commitments, we needed to go out and fulfill them. I think as we've moved forward beyond that, I think we have a better expectation now of what the overall Mexico harvest is going to look like. And I think that is likely to enable us to avoid buying as much fruit kind of in the spot market and through co-packers as we did during that window. So I will say it's not uncommon for us to use co-packers to fill specific needs on specific sizes of fruits or certain grades. So we do buy from them on a regular basis. I think the percentage of fruit though that we acquired via those means was much higher during the first quarter than what we would typically like to see.

The other thing that affects it is the size of the fruit that was affected by El Nino or some weather phenomena a year ago. So the size, the average size is much smaller compared to history, which affects the overall tonnage.

Okay. Very good. I appreciate that from both of you. Regarding the working capital build, Bryan, you talked about the reasons for this in the first quarter. And I'm wondering the degree to which you have visibility of this unwinding in the second quarter or beyond and taking cash off the balance sheet given the buildup in the first quarter?

Yeah. Ben, this is normal, somewhat normal seasonality for our business. We generally have strains on working capital during the first half of our fiscal year and they generally unwind themselves during the second half of our fiscal year. I think maybe we didn't see it quite as much last year, as we typically do where we actually had positive operating cash during the first quarter, but this is a very normal occurrence for us to see. I think it's accentuated this year by the higher priced environment that we're in. We do tend to have to pay our suppliers a little bit faster than we're able to turn inventory in AR. So it certainly does have a bit of a negative impact. But as we move to the second half of the year, we would expect at a minimum as we move into harvesting our own fruit, selling fruit from our own farms down in Peru, that inventory balance is going to come down. If price points stay at the levels that they're at, it will likely continue to put some pressure on working capital from the standpoint of the prices that we pay for the fruit in Mexico. But I think just as we transition away from the Mexico harvest and into other countries of origin, that will have a favorable impact.

Okay, very good. And one more for me and then I'll get back in queue around tariffs. I mean, obviously nobody knows. I'm not asking you guys to make any predictions here. What I'm curious about is the degree to which you've observed kind of supplier behavior changing at all, as this has become a variable, particularly kind of in the weeks leading up to the February 1st deadline, when the initial 25% tariffs were theoretically going to be implemented. Did you see any kind of changing behavior in late January before that date or in late February here before the early March threat re-emerged?

No. Ben, this is John. Really, there was a little bit more shakeup and movement at the March announcement than the February announcement. February, no one was sure if anything would go through or not. And so it was really business as usual. The March conversation became a little bit more choppy in regards to suppliers having more conversations with us and then vice versa, us having more conversation with our customers on what the impact would be. We had the whole industry experienced three days of the tariff being in place. And there were some, I would say, challenges or bumps at the Board in regards to things crossing and things not crossing, et cetera. But overall, we felt pretty good about supply being consistent and us being able to deliver against the requirements that we had with our customers. So we didn't see any challenge in regards to either: A, getting fruit. B, moving fruit across or C, delivering that fruit to our customers.

Got it. Very good. Well, best of luck to everybody navigating this environment. Thanks for taking my questions, and I'll get back in queue.

Thank you, Ben.

[Operator Instructions] And if there are no further comments, 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 speaking with you again next quarter.

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