Mission(AVO) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $221.1 million, a 20% decrease compared to the same period last year, primarily due to lower per unit avocado sales pricing [10][12] - Adjusted EBITDA was $7.6 million, down from $9.2 million in the same period last year, attributed to lower gross profit from reduced per unit margins [12] - Average per unit sales pricing decreased by 36% during the quarter, while avocado volumes sold increased by 19% [10][12] Business Line Data and Key Metrics Changes - Marketing and Distribution segment net sales decreased by 21% to $215.3 million, with adjusted EBITDA down 26% to $8.6 million [13] - International Farming segment revenues were $6 million, a 14% decrease compared to the same period last year, while adjusted EBITDA improved to negative $1.1 million [15] - Blueberry segment results were negligible with net sales of $1.7 million and adjusted EBITDA of $0.1 million for the quarter [15] Market Data and Key Metrics Changes - The company experienced increased market stability in Q2 2023, contrasting with the previous year’s significant price volatility due to low industry volumes [5][6] - The industry is expected to see volumes approximately 20% higher in Q3 2023 compared to the prior year, driven by a strong Peruvian harvest outlook and a larger Mexican harvest [19] Company Strategy and Development Direction - The company is focused on driving global consumption growth by enhancing year-round diversified sourcing capabilities and penetrating new growth markets [7] - The opening of a new distribution center in the UK is expected to optimize product distribution to the European customer base [8] - The company aims to leverage its vertical integration in farming operations in Peru to support growth in international markets [8] Management's Comments on Operating Environment and Future Outlook - Management noted that while the current stable pricing environment does not allow for high per unit margins, it is beneficial for long-term consumption growth [6] - The company anticipates a seasonal step-up in adjusted EBITDA in the second half of the fiscal year, supported by easing inflationary pressures and higher distribution volumes from its own production [8][20] - Management expressed optimism about the growth opportunities in Europe and Asia, particularly with the recent opening of the UK distribution center [45] Other Important Information - Cash and cash equivalents were $20.9 million as of April 30, 2023, down from $52.8 million at the end of October 2022, reflecting seasonal operating cash flow dynamics [16] - Capital expenditures for the first half of fiscal 2023 were $34.9 million, including costs associated with the new UK distribution facility [18] Q&A Session Summary Question: Volume growth and industry performance - Management indicated that they have been building market share in the U.S. and are pleased with their growth rates relative to the industry [24][25] Question: Margins and cost absorption - Management noted improvements in fixed cost absorption due to a 20% increase in North American volumes, with transportation costs returning to more normalized levels [29] Question: Own production and future development - Management discussed expectations for a 10% increase in production year-over-year from Peru, with improvements in fruit size and quality [31][32] Question: EBITDA outlook and pricing environment - Management stated it is premature to lock in specific EBITDA numbers, citing lower pricing as a significant factor but also noting improved fruit quality and lower input costs [35][36] Question: Harvest timing and sell-through - Management explained that the harvest is expected to be more balanced this year, with sell-through likely remaining consistent with historical patterns [39][40] Question: Consumption trends and retailer actions - Management observed increased retail displays and marketing efforts, contributing to improved consumption, particularly in Europe and China [45][46]