Mission Produce reports fiscal Q2 net income of US$2.4M, down from year-ago earnings of US$7.4M, on revenue up 18% to US$278.1M; average avocado selling price up 44% year-over-year, partially offset by 19% decrease in volumes sold

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OXNARD, California , June 9, 2022 (press release) –

Mission Produce, Inc. (Nasdaq: AVO) (“Mission” or the “Company”), a world leader in sourcing, producing, and distributing fresh avocados, today reported its financial results for the fiscal second quarter ended April 30, 2022.

Fiscal Second Quarter 2022 Highlights:

  • Total revenue of $278.1 million, an 18% increase compared to the same period last year, impacted by average selling price increases of 44%, partially offset by a 19% decrease in avocado volume sold, compared to the same period last year
  • Net income of $2.4 million, or $0.03 per diluted share, compared to $7.4 million, or $0.10 per diluted share, for the same period last year
  • Adjusted net income of $2.6 million, or $0.04 per diluted share, compared to $8.7 million, or $0.12 per diluted share, for the same period last year
  • Adjusted EBITDA of $9.2 million compared to $16.3 million for the same period last year

CEO Message

“I’m pleased with our ability to get the business back on track quickly following the temporary operational challenges associated with our ERP implementation in the first quarter. Our per-box margins have recovered and returned to the high-end of normal historical ranges,” commented Steve Barnard, Founder and CEO, Mission Produce. “The fresh avocado market realized record-high per unit sales pricing during fiscal second quarter which is the result of a smaller Mexican harvest and lower industry volumes. Consumer demand remains strong. The volume constraints the industry faces are due to lack of supply which Mission is uniquely able to address through our strategy to invest in vertical integration. Specifically, our owned Peruvian production gives us reliable access to fruit to meet customer needs on a scale and at volumes that only Mission can deliver. We are well positioned to leverage these capabilities in the second half of our fiscal year when our owned Peruvian production comes online and typically contributes to a significant step-up in adjusted EBITDA generation. In addition, we continue to invest in owned farms in Guatemala and Columbia which we expect to further bolster Mission’s ability to supply year-round fruit to our customers over the long term.”

Fiscal Second Quarter 2022 Consolidated Financial Review

Total revenue for the second quarter of fiscal 2022 increased 18% to $278.1 million, as compared to $234.7 million for the same period last year. Growth was driven by a 44% increase in average per-unit avocado sales prices due to lower industry supply out of Mexico, as well as inflationary pressures. Partially offsetting price gains was a decrease in avocado volume sold of 19%, which was primarily driven by lower supply. Domestic volumes declined at a lower relative rate for the period, demonstrating the resiliency of demand for avocados amid higher price points in the U.S. market.

Gross profit for the second quarter decreased $7.3 million or 27%, to $19.8 million, and gross profit percentage decreased 440 basis points to 7.1% of revenue. The decreases were primarily driven by the impact of lower avocado volume sold in our Marketing & Distribution segment, and its related impact on fixed cost absorption. In addition, we experienced gross profit decreases in the International Farming segment due to the timing of cost incurred and impact of pricing at early-stage mango farms. The lower gross profit percentage was driven by higher per-unit sales prices. Margin is primarily managed on a per-unit basis in our Marketing & Distribution segment, which can lead to significant movement in gross profit percentage when sales prices fluctuate.

Selling, general and administrative expense (“SG&A”) for the second quarter increased $2.4 million to $18.7 million, primarily due to non-capitalizable costs associated with the implementation of our new ERP system in our Marketing & Distribution segment, higher employee-related costs driven by increased headcount and labor inflation and higher travel expenses as COVID-related travel restrictions have eased.

Net income for the second quarter of fiscal 2022 was $2.4 million, or $0.03 per diluted share, compared to $7.4 million, or $0.10 per diluted share, for the same period last year.

Adjusted net income for the second quarter of fiscal 2022 was $2.6 million, or $0.04 per diluted share, compared to adjusted net income of $8.7 million, or $0.12 per diluted share, for the same period last year.

Adjusted EBITDA was $9.2 million for the second quarter of fiscal 2022, compared to $16.3 million for the same period last year, driven by lower avocado volume sold and higher SG&A costs as described above.

Fiscal Second Quarter Business Segment Performance

Marketing & Distribution

Net sales in the Marketing & Distribution segment increased 18% to $273.7 million for the quarter, due to the same drivers impacting consolidated revenue.

Segment adjusted EBITDA decreased $4.5 million or 28% to $11.7 million, due to the same drivers impacting consolidated adjusted EBITDA.

International Farming

Substantially all sales of fruit from the International Farming segment are to the Marketing and Distribution segment, with the remainder of revenue largely derived from services provided to third parties. Affiliated sales are concentrated in the second half of the fiscal year in alignment with the Peruvian avocado harvest season, which typically runs from April through August of each year. As a result, adjusted EBITDA for International Farming is generally concentrated in the third and fourth quarters of the fiscal year in alignment with sales. The Company operates approximately 300 hectares of mangos in Peru that are largely in an early-stage of production. The timing of the mango harvest is concentrated in the fiscal second quarter and, as a result, mangos have a more pronounced impact on segment financial performance during this timeframe.

Net sales in our International Farming segment increased $2.1 million or 91% in the three months ended April 30, 2022, due to higher third-party service revenue and higher mango harvest volumes compared to the same period last year.

Segment adjusted EBITDA was $(2.5) million primarily due to the timing of cost incurred and impact of pricing at early-stage mango farms.

Balance Sheet and Cash Flow

Cash and cash equivalents were $21.4 million as of April 30, 2022 compared to $84.5 million as of October 31, 2021.

The Company’s operating cash flows are seasonal in nature and can be temporarily influenced by working capital shifts resulting from varying payment terms to growers in different source regions. In addition, the Company is building its growing crops inventory in its International Farming segment during the first half of the year for ultimate harvest and sale that will occur during the second half of the fiscal year. While these increases in working capital can cause operating cash flows to be unfavorable in individual quarters, it is not indicative of operating cash performance that management expects to realize for the full year.

Net cash used in operating activities was higher by $16.8 million for the six months ended April 30, 2022 compared to the respective period last year, reflecting the net loss in fiscal 2022, partially offset by favorable net change in working capital. Within working capital, favorable changes in grower payables were partially offset by unfavorable changes in inventory. Changes in grower payables were due to higher fruit prices compared to prior year. Changes in inventory were due to increased per-box value of fruit on hand in North America and higher growing crop inventory in Peru, driven by inflationary pressures on farming costs and additional productive acreage, compared to last year.

Capital expenditures were $29.1 million for the six months ended April 30, 2022, compared to $46.8 million in the same period last year. Current year expenditures were concentrated in the purchase of farmland in Peru as well as land improvements and orchard development in Peru and Guatemala.

Outlook

For the fiscal third quarter of fiscal year 2022, the Company is providing the following industry update to inform modeling assumptions:

The industry is expecting third quarter volumes to increase sequentially, but remain lower by approximately 10-15% versus the prior year period, primarily due to ongoing supply constraints in Mexico that are not expected to alleviate until the fiscal fourth quarter. Third quarter supply pressure will be partially offset by higher supply from Peru and California.
Based on the expectation for sequentially improving volumes, the Company believes that the pricing environment should begin to rationalize during fiscal third quarter.
Conference Call and Webcast

As previously announced, the Company will host a conference call to discuss its second quarter of fiscal 2022 financial results today at 5:00 p.m. ET. The conference call can be accessed live over the phone by dialing (877) 407-9039 or for international callers by dialing (201) 689-8470. A replay of the call will be available through June 22, 2022 by dialing (844) 512-2921 or for international callers by dialing (412) 317-6671; the passcode is 13729867.

The live audio webcast of the conference call will be accessible in the News & Events section on the Company's Investor Relations website at https://investors.missionproduce.com. An archived replay of the webcast will also be available shortly after the live event has concluded.

Non-GAAP Financial Measures

This press release contains the non-GAAP financial measures “adjusted net income” and “adjusted EBITDA.” Management believes these measures provide useful information for analyzing the underlying business results. These measures are not in accordance with, nor are they a substitute for or superior to, the comparable financial measures by generally accepted accounting principles.

Adjusted net income (loss) refers to net income (loss), before stock-based compensation expense, unrealized gain (loss) on derivative financial instruments, foreign currency gain (loss), farming costs for nonproductive orchards (which represents land lease costs), noncapitalizable ERP implementation costs, transaction costs, material legal settlements, further adjusted by any special, non-recurring, or one-time items such as impairment or discrete tax charges that are distortive to results, and tax effects of these items, if any.

Adjusted EBITDA refers to net income (loss), before interest expense, income taxes, depreciation and amortization expense, stock-based compensation expense, other income (expense), and income (loss) from equity method investees, further adjusted by asset impairment and disposals, net of insurance recoveries, farming costs for nonproductive orchards (which represents land lease costs), noncapitalizable ERP implementation costs, transaction costs, material legal settlements, and any special, non-recurring, or one-time items such as impairments that are excluded from the results the CEO reviews uses to assess segment performance and results.

Reconciliations of these non-GAAP financial measures to the most comparable GAAP measure are provided in the table at the end of this press release.

About Mission Produce, Inc.

Mission Produce is a global leader in the worldwide avocado business. Since 1983, Mission Produce has been sourcing, producing and distributing fresh Hass avocados, and as of 2021, fresh mangos, to retail, wholesale and foodservice customers in over 25 countries. The vertically integrated Company owns and operates four state-of-the-art packing facilities in key growing locations globally, including California, Mexico and Peru and has additional sourcing capabilities in Chile, Colombia, the Dominican Republic, Guatemala, Brazil, Ecuador, South Africa and more, which allow the company to provide a year-round supply of premium fruit. Mission’s global distribution network includes 12 forward distribution centers that are strategically positioned in key markets throughout North America, China and Europe, offering value-added services such as ripening, bagging, custom packing and logistical management. For more information, please visit www.missionproduce.com.

 

Industry Intelligence editor's note: To view the full release including tables on the company's website, click https://investors.missionproduce.com/news-releases/news-release-details/mission-produce-announces-fiscal-2022-second-quarter-financial">here.

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