Mission Produce Inc (AVO) Q1 2025 Earnings Call Highlights: Record Revenue and Strategic Growth ...

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Revenue: $334.2 million, a 29% increase compared to the same period last year.
Marketing and Distribution Segment Growth: 32% increase, driven by a 5% increase in avocado volume sold and a 25% increase in per unit avocado selling prices.
Blueberry Segment Revenue: $36.4 million, a 12% increase.
Gross Profit: Increased by $2.8 million to $31.5 million.
Gross Profit Margin: Decreased 170 basis points to 9.4% of revenue.
SG&A Expense: Increased $1.5 million or 7% compared to the same period last year.
Adjusted Net Income: $7.1 million or $0.10 per diluted share, compared to $6.7 million or $0.09 per diluted share last year.
Adjusted EBITDA: $17.7 million, compared to $19.2 million last year.
International Farming Segment Sales: Increased 59% to $9.2 million.
Blueberry Volume Sold: Increased 70%, partially offset by a 33% decrease in average per unit selling prices.
Cash and Cash Equivalents: $40.1 million as of January 31, 2025.
Cash Used in Operating Activities: $1.2 million for the first quarter ended January 31, 2025.
Capital Expenditures: $14.8 million for the three months ended January 30, 2025.

Warning! GuruFocus has detected 4 Warning Signs with AVO.

Release Date: March 10, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Mission Produce Inc (NASDAQ:AVO) achieved record first quarter revenue of $334.2 million, marking a 29% increase compared to the same period last year.
The marketing and distribution segment saw a 32% growth, driven by a 5% increase in avocado volume sold and a 25% increase in per unit avocado selling prices.
The blueberry segment contributed positively with a 12% increase in revenue to $36.4 million, supported by increased acreage and consumer demand.
The international farming segment improved its adjusted EBITDA by $2.3 million year over year, demonstrating the positive impact of diversification strategies.
Mission Produce Inc (NASDAQ:AVO) is strategically expanding into complementary food categories like blueberries and mangoes, positioning itself for long-term growth.

Negative Points

The company experienced normalization of per unit avocado margins due to unstable industry supply in Mexico, impacting profitability.
Gross profit margin decreased by 170 basis points to 9.4% of revenue, affected by lower per unit margins and costs associated with Canadian facility closures.
SG&A expenses increased by $1.5 million or 7%, primarily due to higher employee-related costs, including statutory profit sharing and stock-based compensation.
Cash used in operating activities was $1.2 million for the first quarter, compared to cash provided by operating activities of $9.5 million in the same period last year.
The company faced challenges in obtaining Mexican supply, necessitating increased procurement through co-packers and spot market purchases.

Q & A Highlights

Q: Can you elaborate on the dynamic where you had to source from copackers in the current quarter relative to normalized levels, and have conditions improved? A: Stephen Barnard, CEO: The conditions have sustained over the last several weeks. The overall crop in Mexico is slightly down, and demand is up. We expect this to continue for another month until other sources like California and Peru come online. Bryan Giles, CFO: Initially, we expected a larger harvest from Mexico, but it turned out smaller than anticipated, leading to increased reliance on copackers. We expect to reduce this reliance as we move forward.

Q: Regarding the working capital build, do you have visibility on this unwinding in the second quarter or beyond? A: Bryan Giles, CFO: This is somewhat normal seasonality for our business, with strains on working capital in the first half of the fiscal year that generally unwind in the second half. The higher-priced environment accentuates this, but as we move into harvesting our own fruit, we expect inventory balances to decrease, improving the situation.

Q: Have you observed any changes in supplier behavior due to the tariff discussions, particularly around the February and March deadlines? A: John Pawlowski, President and COO: There was more movement and conversation around the March announcement than February. The industry experienced three days of tariffs, causing some challenges at the border, but overall, supply remained consistent, and we were able to meet customer requirements.

Q: How did the size of the fruit affect your operations, and what caused this change? A: Stephen Barnard, CEO: The size of the fruit was affected by weather phenomena like El Nino, resulting in smaller average sizes compared to historical norms, which impacts overall tonnage.

Q: What are your expectations for industry conditions in the near term, particularly for avocados and blueberries? A: Bryan Giles, CFO: For avocados, industry volumes in Q2 are expected to be consistent with last year, with Mexico volumes tapering off but offset by faster starts in California and Peru. Pricing is expected to be about 5% higher year-over-year. For blueberries, we expect a 35% to 40% increase in volume sold, with average sales prices consistent with last year's Q2.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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