Good afternoon, and welcome to the Mission Produce Fiscal Third Quarter 2025 Conference Call. [Operator Instructions] Please also note, 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. Jeff Son

Thank you. Today's presentation will be hosted by Steve Barnard, Chief Executive Officer; John Pawlowski, President and Chief Operating 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. And with that, I'd now like to turn the call over to Steve Barnard, CEO. Steve?

Thank you, Jeff. I'd like to start with pointing out that our third quarter results really demonstrate what we've been building here at Mission, specifically the ability to consistently deliver strong performance no matter what the market throws at us. We delivered record third quarter revenue of $357 million, up 10% with strong execution across our business, showcasing the value of our vertical integration to drive category consistency globally and ultimately support growth of our per capita consumption. What stands out to me this quarter is our commercial team's exceptional execution in moving fruit globally, being in the right place at the right time with the right price for our customers. The international positioning and capabilities we've built over the past few decades, combined with strategic investments we've made more recently, enabled us to deliver what we think were great results for this quarter. With that context, I'll turn it over to John Pawlowski, our President and COO, to walk you through the operational and commercial highlights of the quarter. John?

Thanks, Steve. Before I dive into the operational highlights, I wanted to briefly share my perspective as someone who joined Mission in April of last year after spending over 25 years in the international food industry. Having led global operations at companies like J.M. Smucker and Lipari Foods, I came in with high expectations. But what I've experienced over the past 1.5 years here has been genuinely impressive. The level of operational sophistication and international reach here at Mission is remarkable, and this quarter really showcased why that matters. Now let me walk you through what made this quarter successful from an operational and commercial perspective. Our Marketing & Distribution segment delivered outstanding results, generating $344.1 million in sales and demonstrates the power of our global sourcing and commercial execution capabilities when coupled with our vertically integrated International Farming business. We achieved a 10% increase in avocado volumes sold, while average per unit prices decreased only 5%, demonstrating our ability to maintain pricing discipline even as we moved significantly more volume through our system. And we were pleased that our per unit margins were solidly within our historical averages as we comped against last year's exceptional performance where our per unit margins exceeded norms. I believe what really sets Mission apart is our ability to execute on a truly global stage. I'd emphasize Steve's comment around being in the right place at the right time with the right price and product for our customers. That's not by accident. It's the result of decades of strategic investments in building year-round avocado sourcing capabilities, establishing strong commercial teams and utilizing differentiated category management tools to elevate our customers' programs. In the third quarter, this global sourcing strategy was on full display. With strong Peruvian production and improved Mexican supply this year, which contrasts with the industry conditions we experienced last year, we were able to optimize our sourcing mix across multiple countries of origin, which is a core competency that differentiates Mission in the marketplace and creates a recipe for greater financial consistency as well. Further, our visibility to more normal levels of Peruvian production enabled our teams to execute the most proactive programming we've ever undertaken. We made investments, reallocated resources and completed more advanced contracting than we have over the past few years, securing favorable positioning with retail customers who are excited about the consistency that we are uniquely able to provide with our own production and deliver the value and service they've come to expect from Mission. Higher levels of production also affords us opportunities to target strategic growth markets and support investments we've made internationally in areas such as Europe and Asia with greater impact. European sales increased 37% in the third quarter versus prior year, reflecting our improved ability to serve the broader European markets as our U.K. facility gains momentum through enhanced customer penetration and improved facility utilization. In Asia, we've been able to broaden our reach with new customers following some select investments we made to service demand in the region that we are uniquely able to address through the access to our Peruvian fruit. Looking ahead to the fiscal fourth quarter, we remain focused on balancing the completion of our Peruvian season with the onset of the Mexican season. In preparation for the transition to Mexico-centric sourcing and in response to the operational disruption we experienced during last year's harvest season, we've made some enhancements to one of our Mexican packhouses that we expect to improve our capacity during peak season. This will allow us to not only pack more of our own product but create system efficiencies through our distribution network as a result of more streamlined handling en route to the end customer. We expect these enhancements to be in place during this upcoming Mexican harvest and is an example of the things our team looks at on a recurring basis to both help drive margin and service improvements over the long term. Beyond avocados, our diversification strategy continues to deliver results. We're utilizing the same playbook and capabilities that we've developed in avocados to continue building market share in adjacent categories such as mangoes. We are in a great position to help further establish the category here in North America with retail customers through strategic pricing commitments, greater supply consistency and different packaging configurations that we believe are necessary for long-term category growth. We are establishing Mission as a reliable year-round program provider with operational capabilities that others in this space simply cannot match. In blueberries, we continue to see benefits from our expanded acreage, which is expected to eclipse 700 hectares of production, along with the yield improvements that will follow. As we enter the peak of our blueberry harvest in the fourth and first quarters, we expect meaningful volume increases as we move through the season. In summary, we are thrilled with the performance of our entire team. The combination of our Marketing & Distribution commercial execution, along with the recovery of volume from our International Farming and on top of that, the growth stemming from our diversification initiatives demonstrates the strength, durability and opportunity provided by our global platform. With that, I'll turn it over to Bryan for the financial details.

Thank you, John, and good afternoon to everyone on the call. Total revenue for the third quarter of fiscal 2025 increased 10% to $357.7 million. The revenue growth was primarily driven by a 10% increase in avocado volumes sold, which was only partially offset by a 5% decrease in average per unit sales prices. The volume and price movements resulted from improved supply conditions that were led by higher Peruvian avocado production during the current harvest season as a result of more favorable weather conditions in the current year and greater availability of Mexican avocados after experiencing harvest disruptions in the prior year. Gross profit increased $8.1 million or 22% to $45.1 million in the third quarter, and gross profit percentage increased 120 basis points to 12.6% of revenue. The increase was driven by our International Farming segment, where avocado production was significantly higher due to increased yields at our own farms in Peru. SG&A expense increased $3.9 million or 19% compared to the same period last year, primarily due to higher employee-related costs, including incentive and performance-based stock compensation expense as well as higher statutory profit sharing expense in our International Farming segment associated with improved performance. Adjusted net income for the quarter was $18.2 million or $0.26 per diluted share compared to $16.7 million or $0.23 per diluted share last year. Growth of adjusted net income was driven by an increase in operating income as well as a $0.8 million reduction in interest expense on lower rates and outstanding borrowings and a $0.3 million increase in equity method income that is primarily comprised of earnings from our investments in Henry Avocado Corporation. Adjusted EBITDA increased 3% to $32.6 million compared to $31.5 million last year, driven primarily by increased avocado production in the International Farming segment. Turning now to the segments. Our Marketing & Distribution segment net sales increased 7% to $344.1 million for the quarter, primarily due to the avocado volume and pricing dynamics described previously. Segment adjusted EBITDA was $20 million compared to $26.8 million in the same period last year, which primarily reflects the normalization of per unit avocado gross margin in the current year period versus that of the prior year period, where per unit margin significantly exceeded our historical averages. Our International Farming segment delivered exceptional results. Gross sales increased 79% to $49 million, and segment adjusted EBITDA increased $7.5 million or 163% to $12.1 million compared to the same period last year. This strong year-over-year improvement was driven by the significant recovery in our Peruvian avocado production following last year's weather-related impacts. The segment results also benefited from increases in avocado packing and cooling services provided to third-party growers during the quarter. Net sales in the Blueberries segment increased to $4.5 million from $1.6 million in the prior year period, and adjusted EBITDA increased to $0.5 million (sic) [ $0.4 million ], primarily due to higher volumes from growth in acreage and yield as well as higher average per unit sales prices. Keep in mind that while sales in our Blueberries segment have traditionally been concentrated in the fourth and first quarters of our fiscal year in alignment with the Peruvian blueberry harvest season, our strategy within blueberries is to extend production over a larger portion of the year via pruning strategies and maturation of new genetic varieties. Shifting to our financial position. Cash and cash equivalents were $43.7 million as of July 31, 2025. Cash provided by operating activities was $21.4 million for the 9 months ended July 31, 2025, compared to $55.4 million for the same period last year. The year-over-year difference was primarily driven by higher working capital requirements in the current year due to significantly higher avocado production and harvest timing in the International Farming segment, which has translated to higher inventory balances. At the same time, we had lower short-term grower payable balances as a result of reduced reliance on third-party growers during the period. Importantly, we began to realize the seasonal unlock of our working capital in the third quarter, stemming from sales of our International Farming segment inventory. We generated $34 million of operating cash flow during the third quarter and expect to build upon this in the fourth quarter as we work through the balance of our Peruvian crop. Capital expenditures were $39.8 million for the fiscal year-to-date period, which were primarily attributed to avocado and blueberry farming-related investments in Latin America and construction costs for our new packhouse in Guatemala. Our full year fiscal 2025 CapEx guidance remains in the range of $50 million to $55 million, which includes approximately $10 million of projects that rolled over from fiscal 2024. Our trajectory of moderating capital spending remains on track as we complete these investments through fiscal 2026, positioning us to generate meaningful free cash flow in future periods. During the quarter, we continued to focus on debt reduction as our near-term priority. Our balance sheet remains strong with a net debt to adjusted EBITDA leverage ratio of approximately 1x, which allows us the flexibility for opportunistic capital allocation as appropriate opportunities arise. Before I provide some context around our expectations for near-term industry conditions, I want to take an opportunity to address tariffs from a financial perspective. While we expect to incur approximately $10 million of direct tariff impact on avocado and mango imports to the U.S. on an annualized basis, given the latest visibility we have from the administration, this is less than 1% of our total cost of goods, which we think is the right context when considering our exposure. Of that $10 million, approximately half is attributed to our South American production. Despite these headwinds, which we view as modest, our competitive position was not impacted, and we are pleased to deliver what we think is a great quarter in the face of these fluid dynamics. As for the near-term outlook, industry volumes are expected to be approximately 15% higher in the fourth quarter compared to the prior year period due to a combination of ample Peruvian product in the supply chain as the harvest season nears completion and the transition to the new Mexican crop, which is expected to be larger than prior year due to favorable weather conditions. Exported avocado production from Mission's owned farms in Peru is expected to range between 105 million to 110 million pounds, of which approximately 48 million pounds were sold through as of the end of the fiscal third quarter. Pricing is expected to be lower on a year-over-year basis by approximately 20% to 25% as compared to the $1.90 per pound average we experienced in the fourth quarter of fiscal 2024. The decrease in pricing is directly correlated with expectations of higher volumes available in U.S. and international markets. The blueberries harvest season in Peru will begin to ramp up during the fourth quarter. We expect to see meaningful volume increases from owned farms, but the impact on revenue will likely be partially offset by lower average sales prices. That concludes our prepared remarks. Operator, now over to you. Please open the call to Q&A.

[Operator Instructions] And our first question comes from the line of Ben Klieve with Lake Street Capital Markets.

Congratulations on a nice quarter here. First, a couple of questions on everybody's favorite topic of tariffs. Bryan, apologies if I'm going to make you repeat this, but you mentioned $10 million impact here within this fiscal year. Did you guys note the impact that has been seen either in the third quarter or through the first 9 months of the year?

We didn't note it, but we've spent a little over $5 million on tariff-related expenses through the 9 months ended. That's inclusive of the Mexico costs that we incurred back in Q2. So yes, we expect that what we see in Q4 will be largely in line with what we saw in Q3. Again, we'll see more volume coming out of Peru into the U.S. market, but at slightly lower selling prices than what we were seeing during the quarter that just finished.

Okay. That's helpful. And then just kind of a higher level kind of philosophical question on this topic is, I'm curious how this environment has impacted just kind of the order of trade. I mean, are you guys shipping more product out of Peru into Europe and into Asia? Are you seeing pricing in other international markets maybe come down as supply is shifting from the U.S. to those international markets? I mean is there anything to call out kind of from those perspectives?

Ben, this is John Pawlowski. Good to hear you. Really, unfortunately, there's not a silver bullet answer here that something has changed a lot because it really hasn't. I think from a supply and demand perspective, things have remained pretty stable. I think when you think back to January, February, March when things were first announced, there were definitely some concerns about potential shifts in that environment. But as the overall environment has stabilized, what I mean by that is the tariff situation has become much more broad. You have a lot more different categories impacted, et cetera, that you're seeing a lot more stabilization, particularly around our category, we did not do any significant or really any immaterial shifting of where we placed product this year because of those things. We actually went to where the demand was, and we made sure we got product to where it needed to be in order to support that demand.

Got it. That's helpful. And one more for me, and I'll get back in queue. I mean you noted, especially in blueberry, some acreage increases this year. As we start looking to '26, can you talk a bit about your expectations for acreage expansion from '25 to '26 and perhaps beyond?

Let's just start with the blueberries. We're -- we have a target of about 600 or 1,000 hectares net. We only have, I think, 42 hectares left to go on our original plan. What we do and how we do that, we develop half of it and put in double plants. And then while they're maturing, we develop the balance of the irrigation in the fields and move them on. But I think by the end of this year, we'll be pretty well done with what we have budgeted to date on blueberries. We have a little bit left to do in Guatemala, but it's not really substantial on avocados. We have some extra land there. But it's starting to slow down, at least on the development of ranches.

Yes. Ben, I'll just clarify, too. In the last harvest season with blueberries, we had somewhere between 500 and 550 hectares that were in a productive state. This year, we'll be a little over 700 hectares. So that's a 25%-ish increase in harvest acreage. I think as Steve alluded to, when we finish, we're going to be close to 1,000 hectares and that will layer in over fiscal the '26, '27 and probably the last part into the '27, '28 harvest season. So kind of where we're at today is we still see a few more years of meaningful ramps in production from where we've been. And then things should start to level off a bit as we kind of evaluate what, if any, are our next steps through that joint venture.

Very good. And I guess -- sorry, a follow-up. I mean, other -- intended for that to be kind of a bigger picture question around acreage expansion across all of your categories, any other thoughts on kind of how we should look at harvest expansion in mangoes and avocados here over the next couple of years?

As far as planting, we don't have any big grand plan, maybe filling in some corners on ranches we have and maybe some replants here and there, but nothing like we've had in the past.

Yes. I think -- this is John. I think that when you think about the 3 different categories we're in, from an avocado perspective, there is no real need and/or desire on our side to invest further. I think the CapEx comments that Bryan made earlier are -- hold true to what our strategy is around leveraging those as they continue to mature because we'll see some productivity gains in those fields, but no plan to further expand those. On the blueberry side, we've committed to that acreage in our joint venture. We are -- we've put the money in place to make sure that, that happens appropriately, and we're glide pathing towards that. On the mango side, we've been really happy with the productivity out of the farms that we have in place. But there's quite a few quality mango farmers around the world that are already doing a good job, and we plan on tapping into more of those partnerships to execute against our mango growth strategy. So as we think about the next 3 to 5 years, there's no plans to increase any kind of capital investments around acreage beyond what we've already shared.

And our next question comes from the line of Gerry Sweeney with ROTH Capital Partners.

Would you be able to talk a little bit more about the international side? Obviously, you highlighted a little bit more in this quarter, and it's becoming, I think, a little bit more prevalent in some of the commentary as we've moved through this year and -- from last year into this year. Just maybe some of the opportunities, maybe even investments on that side. Obviously, you also highlight the U.K. facility gaining steam. Is there an opportunity to expand further in Europe or in Asia using that playbook? And I also know layering on top of this long-winded question is pricing, opportunity of pricing regimens with supermarkets and retailers in Europe and all that. Maybe just how should we look at the international side?

Yes. Gerry, this is John. I think that we are strategically oriented to really optimize and support the U.S. market from a fulfillment standpoint based on the way we've set up our global sourcing strategy, all the investments we made over the years. When we do have or what the playbook has been in the past is when we have available fruit and excess fruit or we know there's going to be seasons with excess fruit, then we have kind of pivoted and invested in and Steve and team were -- had the foresight a couple of years ago to say, hey, there's a lot of fruit coming into the marketplace over the next 10 to 15 years, and there's an opportunity from a consumption standpoint with per capita consumption starting to creep up and grow in Europe that let's put a facility in play there and plant a flag. And I would say over the last 2 years, I think we've done an excellent job of working with that team and our team in Europe and executing against what our customers need most at the right times of the year based on what's coming in from a supply perspective. We -- our facility in the U.K. to highlight that, has done an excellent job, and our sales team in the U.K. has done an excellent job of building value in that marketplace with those retailers. Some of the things that we're really known for and good at here in the U.S., optimizing global sourcing, programming all year round, helping with promotional planning and strategy and pricing, et cetera, we've brought to some key retailers in the U.K. and have seen some nice increases in their volumes as well as some nice shifts from a profitability standpoint in their categories. So we've been happy about that. And quite frankly, I see that continuing to grow. The challenge there, Gerry, is there's not -- it's not a big enough market to say, hey, this is going to be a really big deal for us in the long run, but it's a nice anchor head for us. In Europe, we haven't kind of put in place a distribution facility. We have a partner there that we work through. And overall -- over the long term in Europe, a play from an inorganic standpoint may be something that makes some sense for us. We haven't really thought about that or evaluated it all that much over the last couple of years. But we've definitely looked at the customer landscape. And based on some learnings over the last few years, we've pivoted our focus to focus more on customers that need longer-term strategic programming with their fruit. And we've kind of hitched our saddle to the 3 or 4 top customers that move volume, and that kind of proved to be very successful this year. In Asia...

Direct retail...

Which is the large direct retail firms, correct, that some of which also have a significant footprint here in the U.S. So we've got nice global partnerships with them. Shifting gears to Asia. We've got some great partners in Asia as well as develop some new partnerships in Asia. It's a market that we've -- I would say, has been fluid for us over the years, but we've also invested over the last 12 months on upgrading our team and talent there, so we can drive that business forward into the future and have some work to do strategically on what the long term means [ for our strategy ].

Got it. Are the international markets more dependent on the size of the harvest coming out of Peru and Mexico? Is that what opens up more opportunity for you on the margin? Or how should we think about that?

Yes. No, that's a great way to think of it. The way we're set up right now, that's exactly the way it works.

Got it. Okay. And then maybe a quick question for Bryan. I know SG&A was up, but you called out everything, performance and incentives, et cetera. And I'm not sure if that was due to the quarter or what would be maybe SG&A run rate on a go-forward basis, all things being equal?

Certainly, we do have a variable component to our SG&A, Gerry, the profit sharing component in particular out of the Farming segment. So when the results of the Farming segment tend to peak in Q3, Q4, it tends to have an impact on that SG&A figure. So I would say that probably north of 50% of the increase we saw was attributed to variable costs that we saw increase this Q3 versus Q3 last year. So that one, it just makes it hard to like peg a specific run rate because it isn't fixed in nature. But yes, just to give you a sense as to what the drivers were this year of what drove it up.

Yes. No, and obviously, a record quarter, and that makes sense. That's helpful. So record quarter is going to mean higher SG&A. Got it. Congrats on a really great quarter.

And ladies and gentlemen, at this time, I'm showing no further questions. I would like to end the question-and-answer session and turn the conference call back over to management for any closing remarks.

Well, thank you for your interest in Mission Produce, and we look forward to speaking with you again at the next quarter.

Thank you. Ladies and gentlemen, this does conclude today's conference call. We thank you for your attending. You may now disconnect your lines, and have a wonderful day.