Mission Produce Inc (NASDAQ:AVO). surprised investors with robust fourth-quarter earnings, posting an adjusted earnings per share (EPS) of $0.28, far exceeding the forecasted loss of $0.01. The company's revenue also soared, reaching $354.4 million against an expected $215.4 million. Following the announcement, the stock surged 7.55% in after-hours trading, reflecting investor enthusiasm.
Key Takeaways
- Mission Produce reported a better-than-expected EPS of $0.28, beating forecasts by $0.29.
- Revenue increased by 37% year-over-year to $354.4 million.
- The stock jumped 7.55% in after-hours trading, reversing a 2.22% decline earlier in the day.
- The company is expanding its blueberry operations and received USDA approval for Guatemalan avocado imports.
Company Performance
Mission Produce demonstrated strong performance in the fourth quarter of fiscal 2024, with a notable 37% increase in revenue compared to the previous year. The company's adjusted EBITDA for the quarter rose by 113% to $36.9 million, highlighting efficient cost management and operational improvements. This performance aligns with industry trends of increasing demand for avocados, despite supply constraints.
Financial Highlights
- Revenue: $354.4 million, up 37% year-over-year.
- Earnings per share: $0.28, significantly higher than the forecasted loss of $0.01.
- Gross profit: $55.8 million, an increase of $28 million from the previous year.
- Adjusted net income: $19.6 million.
Earnings vs. Forecast
Mission Produce's actual EPS of $0.28 surpassed the forecast by $0.29, marking a significant earnings beat. This surprise is substantial compared to previous quarters, where earnings were closer to expectations. The revenue beat was also notable, exceeding forecasts by $139 million.
Market Reaction
The company's stock experienced a notable rise in after-hours trading, climbing 7.55% to $13.25. This increase follows a 2.22% decline during regular trading hours, suggesting that the earnings announcement positively shifted investor sentiment. The stock's performance stands out against its 52-week range, with the current price approaching its high.
Company Outlook
Looking forward, Mission Produce plans to continue expanding its blueberry operations, with additional plantings expected to come into production in late 2025. The company projects a capital expenditure budget of $50-55 million for fiscal 2025 and aims to generate meaningful free cash flow while focusing on debt reduction.
Executive Commentary
"Our global sourcing network continues to be a key differentiator," said CEO Steve Barnard, emphasizing the company's strategic advantages. CFO Brian Giles noted, "We've demonstrated our industry leadership in a turbulent environment," highlighting the resilience and adaptability of Mission Produce.
Q&A
During the earnings call, analysts inquired about potential US-Mexico tariffs and their impact on operations. Executives also addressed the company's blueberry expansion strategy and confirmed plans for future cash allocation.
Risks and Challenges
- Potential US-Mexico tariffs could affect cross-border trade and operations.
- The winding down of facilities in Toronto and Calgary may impact distribution.
- Blueberry pricing is expected to decline due to increased industry volumes.
- Supply chain disruptions could pose challenges amid global sourcing efforts.
- Macroeconomic pressures may affect consumer spending and demand.
Full transcript - Mission Produce Inc (AVO) Q4 2024:
Conference Operator: Good afternoon, and welcome to the Mission Produced 4th Quarter 2024 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 Sonnich, Investor Relations at ICR.
Thank you. You may begin.
Jeff Sonnich, Investor Relations at ICR, Mission Produce: Thank you and good afternoon. Today's presentation will be hosted by Steve Barnard, Chief Executive Officer and Brian 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 and 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?
Steve Barnard, Chief Executive Officer, Mission Produce: Thank you for joining us today. Our strong execution in the Q4 rounded out an exceptional fiscal 2024, where we delivered $1,200,000,000 in revenue and generated $107,800,000 in adjusted EBITDA, demonstrating the strength of our business model and industry leading position. Throughout the year, we effectively leveraged Mission's differentiated global sourcing network to capitalize on favorable market conditions, which culminated in another quarter of solid financial performance. The strength of our integrated business was particularly evident this quarter through the collective efforts of our sales, sourcing and operations teams. When others might have seen challenges, given the smaller production out of Peru this year, which resulted in supply constraints for the industry, we capitalized opportunities to leverage our unique capabilities and global sourcing network.
Strong consumer demand and retail support of the category, coupled with the supply constraint environment, helped support elevated pricing dynamics that extended into the 4th quarter. Our ability to seamlessly shift between growing regions and maintain consistent supply for our customers translated into robust per unit margins that exceeded our targeted range. This performance underscores the breadth of our sourcing network, which we believe is the most comprehensive in the industry, enabling us to provide reliable supply to our customers even during periods of disruption to key industry supply sources, while at the same time maximizing our margin performance. We are particularly pleased with our cash flow generation for the full year of fiscal 2024, in which we delivered a $64,200,000 increase in operating cash flow versus 2023. Our strong operational performance throughout the year combined with the planned tapering of our heavy CapEx cycle over the past several years has resulted in strong free cash flow that has strengthened our capital structure through reduced leverage further enhancing our flexibility.
While some capital projects, including our packing house construction in Guatemala and certain Blueberry investments, will shift into early fiscal 2025 due to timing of vendor payments and Blueberry plant development. Our overall trajectory of moderating capital spending remains intact as we complete these remaining projects and focus on optimizing returns from our existing asset base. While our Marketing and Distribution segment performance was the highlight of the quarter, our International Farming segment faced a more challenging set of circumstances related to the El Nino weather cycle and its associated impact on our owned volume. We've taken proactive steps to ensure the long term health and productivity of our orchards and are encouraged by early signs of improvement we are seeing. Combined with the cost optimization efforts we implemented, we expect to translate these into improved operational improved operational efficiencies as growing conditions normalize in fiscal 2025.
Turning now to our blueberries segment. The harvest season ramped up during the Q4 and we benefited from pricing that proved to be more resilient than we expected at the higher levels of volume. While pricing has since moderated, we remain committed to growing this segment of our business as we see significant opportunities ahead. The blueberry business continues to complement our existing offerings and aligns perfectly with the strategy of delivering high quality differentiated products across multiple growing regions. We look forward to advancing our planned projects in this category as we move through fiscal 2025 and beyond with the support of our strategic joint venture partner.
While still in its infancy, I am also pleased to report that our strategic investment in Guatemala continues to progress. In November, the USDA approved Guatemalan avocado imports into the United States, a significant milestone that validates our expansion strategy in the region. Similar to our approach with other sourced regions, the goal with Guatemala is to fill voids in the calendar to reliably supply customers year round. We look forward to the additional flexibility that the USDA approval affords us, which we expect to further strengthen our competitive position in the years to come. Further on the topic of our facility work, we took actions in the Q4 to optimize our distribution footprint and enhance our efficiency.
As part of this effort, we will be winding down our Toronto and Calgary facilities through the Q1 of fiscal 2025. We will be able to maintain the same high level of customer service and while eliminating redundant costs in our system. This decision reflects the flexibility and efficiency that we build into our North American distribution network over the years. In closing, I want to thank our team for their outstanding execution throughout fiscal 2024. Their hard work and dedication enabled us to successfully navigate dynamic market conditions while driving meaningful growth and operational improvements.
As we look ahead to fiscal 2025, we're confident in our competitive positioning. Our global sourcing network continues to be a key differentiator, providing us with the flexibility to meet customer demand regardless of regional supply dynamics. Combined with our strong balance sheet and disciplined approach to capital allocation, we believe we're well positioned to continue creating value for our shareholders. With that, I'll pass the call over to our CFO, Brian Giles for his financial commentary.
Brian Giles, Chief Financial Officer, Mission Produce: Thank you, Steve, and good afternoon to everyone on the call. I'll start with a review of our fiscal Q4 financial performance, touching on some of the key drivers within our 3 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 (EPA:TTEF) revenue for the Q4 of fiscal 2024 increased 37 percent to $354,400,000 driven primarily by a 36% increase in avocado sales prices. Higher prices resulted from constrained avocado supply during the quarter driven by weather impacts on fruit development and production in Peru combined with stronger consumer demand.
Despite lower Peruvian volumes, we were able to leverage our diverse sourcing network across California, Colombia and Mexico to drive a 9% increase in North American avocado sales volumes compared to the prior year. Amidst the supply challenges we faced, we made a strategic decision to prioritize the North American market where strong consumer demand supported by retail promotional activity translated to higher per unit price points. Gross profit increased by $28,000,000 to $55,800,000 in the 4th quarter and gross profit margin increased 490 basis points to 15.7 percent of revenue. These increases were primarily driven by stronger per unit margins on avocados sold during the period. We can further attribute these increases to the combination of favorable mix of source fruit and internal initiatives that Steve spoke to earlier.
Our blueberry segment also contributed to the increase with higher volumes, while per unit margins remained generally consistent with the prior year. SG and A expense increased 6 point the same period last year, primarily due to higher employee related costs, including performance based incentive compensation and stock based compensation expense as a result of our improved operating performance relative to the prior year period. Adjusted net income for the quarter was $19,600,000 or $0.28 per diluted share compared to an adjusted net income of $7,500,000 or $0.11 per diluted share last year. Adjusted EBITDA increased $19,600,000 or 113 percent to $36,900,000 as compared to $17,300,000 last year. This improvement was driven primarily by the stronger gross profit performance from our Marketing and Distribution and Blueberry segments.
Turning now to our segments. Our Marketing and Distribution segment net sales increased 35% to $319,600,000 for the quarter, primarily driven by the avocado pricing increases I described previously. Segment adjusted EBITDA increased $14,800,000 to $25,600,000 as a result of the higher per unit gross margins we discussed. Total segment sales and adjusted EBITDA in our International Farming segment were $30,300,000 $2,700,000 respectively, compared to $40,300,000 $1,100,000 in the same period last year. While we experienced a decrease in segment sales due to the previously disclosed reduction in volume from our own farms as a result of the unfavorable El Nino weather conditions during the harvest set in Peru, we were pleased to generate positive adjusted EBITDA that was higher than the prior year period.
The improved profitability correlated to the strong pricing environment within which we worked diligently to maximize sales returns with our U. S. Market focus and the cost containment efforts we implemented near the end of the prior harvest season. In our blueberry segment, activity is typically concentrated in the 1st and 4th quarters of our fiscal year in alignment with the Peruvian blueberry harvest season. Net sales in the blueberry segment totaled $31,600,000 compared to $19,500,000 in the prior year period and adjusted EBITDA increased to $8,600,000 from $5,400,000 in the prior year period.
The increases in both sales and adjusted EBITDA were driven by higher blueberry volumes sold during the quarter that resulted from both new plantings coming into production as well as yield improvements on existing plantings following the challenging weather conditions experienced in the prior year. Shifting to our financial position, cash and cash equivalents were $58,000,000 as of October 31, 2024 compared to $42,900,000 at October 31, 2023. We are very pleased with our operating cash flow performance in fiscal 2024, which increased $64,200,000 versus the prior year and $93,400,000 for the fiscal year ended October 31. The growth in operating cash flow was primarily driven by improved operating performance during fiscal 2024. Further supporting the improvement in operating cash flow was favorable working capital management.
While higher avocado pricing drove increases in inventory and accounts receivable, these increases were more than offset by higher grower payable balances driven primarily by those same high prices and higher accounts payable and accrued expenses, the latter of which was significantly impacted by incentive compensation and statutory profit sharing accruals in the current year. In addition, higher accounts payable and accrued expenses were attributed to the impact of higher volume and increased acreage within our blueberries segment. Capital expenditures were $32,200,000 for the 12 months ended October 31, 2024 compared to $49,800,000 last year and were attributed to avocado and blueberry farming related investments in Latin America well as construction costs associated with expanding capacity at our U. K. Distribution facility.
During the fiscal year, the International Farming segment also began construction of a pack house in Guatemala. Of note, our CapEx spending in fiscal 2024 was approximately $10,000,000 less than we contemplated in our outlook due to timing of vendor payments and blueberry plant development that will push this spending into fiscal 2025. As a result of this timing shift, our projected CapEx budget for fiscal 2025 is expected in the range of $50,000,000 to $55,000,000 allocated largely to the International Farming and Blueberry segments. However, our overall trajectory of moderating capital spending remains intact as we complete these remaining projects through fiscal 2026 and focus on optimizing returns from our existing asset base. To that end, we remain committed to driving free cash flow as a means toward maintaining a healthy capital structure.
We are proud to have generated approximately $60,000,000 of free cash flow in fiscal 2024. Looking ahead, we believe the business is well positioned to continue generating meaningful free cash flow in the years ahead. Debt paydown remains our near term priority and we expect to continue to strengthen our balance sheet next year. In regards to our near term outlook on the fundamental drivers of our operations, we are providing some context around our expectations for industry conditions to help inform your modeling assumptions. Beginning with avocados, with the conclusion of the California and Peru harvest seasons, we have transitioned to a Mexico centric source model.
We expect industry volumes in our fiscal 2025 Q1 to be consistent with the prior year period. While supply from Mexico has been constrained during the early part of the quarter due to fruit maturity and sizing, we expect industry volumes to ramp up when we move to the latter portion of the quarter as we expect a larger Mexican harvest season. Pricing is expected to be higher on a year over year basis by approximately 20% compared to the $1.40 per pound average experienced in the Q1 of fiscal 2024, indicative of continued strength in demand. Pricing assumptions are closely tied to the volume estimates previously mentioned. As the industry transitions to Mexico being the primary country of origin for supply and supply becomes more readily available, we are expecting that per unit margins on purchased avocados will revert to our historical targeted ranges from the elevated levels that we experienced during our fiscal 2024 3rd 4th quarters.
Our blueberry harvest season improve will peak during the Q1. We expect to see meaningful volume increases from owned farms resulting from yield improvements and new acreage and production, but the impact on revenue is expected to be offset by lower average sales prices due to higher overall industry volumes from Peru. Pricing is expected to be approximately 30% lower on a year over year basis, which will negatively impact segment adjusted EBITDA during the quarter as compared to the previous year when weather related supply constraints led to abnormally high sales prices. In closing, we're incredibly proud of the progress we've made this year. We've demonstrated our industry leadership in a turbulent environment while delivering some of the strongest financial performances in our history as a public company, further underscored by robust free cash flow generation.
These achievements have laid a very strong foundation for Mission's future and we're excited to continue executing on our growth strategy. That concludes our prepared remarks. Operator, now over to you. Please open the call to Q and A.
Conference Operator: Great. Thank you. At this time, we will be conducting a question and answer session. First question here is from Ben Colave from Lake Street Capital Markets. Please go ahead.
Analyst: All right. Thanks for taking
Ben Colave, Analyst, Lake Street Capital Markets: my questions and congratulations. Great end to a great year here. My first question is the result in the quarter relative to the to the pre release information, your both revenue and EBITDA comfortably exceeded what you had laid out on the pre release 5 or 6 weeks ago. I'm just wondering kind of what the delta was in the actual results versus what you saw in the pre release?
Brian Giles, Chief Financial Officer, Mission Produce: Yes. Sure thing, Ben. We certainly wanted to get out in front of it. We knew that some of the data that was out on the street was well below where we expected the quarter to track to. We certainly didn't have all of our information closed out at the point in time when we put this release together.
I would say we were bullish on our marketing distribution segment and where pricing and per unit margins were, even though we did not yet have everything finalized. And that is certainly where why we kind of set a floor and we knew that there was some room to be a little bit better than those figures. I think the biggest delta that we saw though was really in our farming and blueberry segments. We really had not pulled the closing information together from either of those areas yet. It does take us a little bit longer to extract that data from our systems.
So I'd say the biggest delta where the volume sold through on blueberries, not harvested, but actually sold through were a little higher than we expected. And the average selling prices that we realized held up better than we'd originally thought they would. We knew as we were transitioning towards Q1 that blueberry prices were beginning to decline. So we factored in some conservatism into what we thought pricing was going to look like. But in reality, through the end of October, that pricing held up better than we'd expected.
Analyst: Got it.
Ben Colave, Analyst, Lake Street Capital Markets: Got it. Okay. That's very helpful. A couple of others for me. So first of all, Steve, you noted winding down a couple of facilities here in this current fiscal quarter.
I'm wondering if you can comment at all on any costs associated with this, both cash or non cash costs?
Steve Barnard, Chief Executive Officer, Mission Produce: Well, those two facilities I mentioned were not running at a profit and there's ways to provide the same service level that we were providing with a lot less cost by just going direct from other facilities either at the border or somewhere out throughout the United States into Canada. So it we put those in there several years ago for a specific customer and they started buying more and more direct, a lot of it from us. Mean, we didn't lose the customer, but they were wanting to go direct from the border, not have it ripen. They were going to ripen themselves. So it just it kind of outgrew its purpose.
Brian Giles, Chief Financial Officer, Mission Produce: Yes. In terms of the cost spend, I would just say that certainly we have some assets there in those facilities that aren't fully amortized or depreciated yet. But most of our leases these leases were due to expire in the next 1 to 2 years. So they were close to their end date. So there's a tail on some fixed assets.
There's a tail on some lease payments that we have left to go. Then there's also potentially some asset retirement related obligations, a minimal amount of severance when all said and done. The facilities weren't staffed. We had maybe 12 people within those facilities. So they weren't they shouldn't we're not expecting this to have a significant impact when all said
Steve Barnard, Chief Executive Officer, Mission Produce: and
Brian Giles, Chief Financial Officer, Mission Produce: done. But we do think that longer term, it will generate some meaningful cost savings for us. To Steve's point, the facilities there was not enough volume moving through those facilities to enable them to operate efficiently. The Canadian market simply has changed over the last decade. It's not what it was when we first opened our facilities in Toronto back in the first 2,007, 2008 timeframe.
And certainly, we've had to it's taken us time to adapt to the changing market conditions up there. We think long term, this is the right choice for us.
Ben Colave, Analyst, Lake Street Capital Markets: Okay. All right. Yes, that definitely makes sense. Both your comments on the International Farming segment seemed pretty encouraging. I'm wondering if you can just kind of big picture talk about kind of the especially the EBITDA expectations coming out of that segment here.
If you anticipate kind of a directional the directional improvement that you saw in 2024 to continue in 2025, given kind of stabilizing weather conditions and the operational efficiency that you guys have made down there?
Steve Barnard, Chief Executive Officer, Mission Produce: I'll refer to Brian on the numbers.
Brian Giles, Chief Financial Officer, Mission Produce: Yes. I think at a high level, Ben, things are moving in the right direction. I think we did some things in 2024 related to the cost structures within the farms that will continue to pay dividends going forward. I think it will we expect the market conditions to be different next year than they were in 2024. With the weather changes down in Peru, the El Nino effect kind of dissipated in May of this year.
So with weather conditions changing, we're expecting a larger crop as we move into next year, which likely translates and not only from Peru, but in general, we're expecting larger crops across many of the source regions that we work in. So expecting a year of higher volumes and a year where pricing is likely going to come down off the highs we saw this year, particularly as we reengage to a greater extent with some of the international markets that we work in. I'd say, in general, we're bullish about the direction of farming. If we look back, we've come off a couple of difficult years. I mean, 2023, 2024 EBITDA has not been where we would have expected it to be.
We go back to 2022, our EBITDA was in the $23,000,000 range. In 2021, it was north of $30,000,000 We absolutely believe that the farming segment can move back to those types of levels in the near future. As volume picks up and we continue to kind of reopen markets for that fruit.
Analyst: Got it.
Steve Barnard, Chief Executive Officer, Mission Produce: We've gone through an El Nino series a year or 2 ago, which kind of damage those trees for a year or so. And the crop suffered size wise, quality rise, it got hot, it got wet. We've outgrown that and I think we're on the that happens about every 10 years. So hopefully we won't see it for another 10.
John Pawlowski, President and Chief Operating Officer, Mission Produce: Very good. All right. Well, fingers crossed up here.
Ben Colave, Analyst, Lake Street Capital Markets: So one more for me and then I'll get back in queue. Just kind of a big picture macro question. Given the how much you are involved in the import export world, how you're thinking about kind of the future of agricultural exports into the U. S, particularly from Mexico in the context of potential tariffs? Is there so this is a dynamic that's changing at all how you think about operating your supply chain Or are you really just kind of sitting back and waiting to see kind of how it all shakes out?
Steve Barnard, Chief Executive Officer, Mission Produce: Well, I think on Trump's behalf, I think that's a ploy to get them to the table to negotiate help with the immigrant problem. Whether he pulls a trigger on the tariff or not, I don't know. I hope not. But obviously, it'll raise costs, probably slow consumption down a little bit. Who knows?
I mean, consumption keeps growing. And if you look at the overall category, volume goes up and pricing has gone up. So even if it leveled off, we'd be in pretty good shape. So I'm not too worried about it really.
John Pawlowski, President and Chief Operating Officer, Mission Produce: This is John Pawlowski. I would add to Steve's comments that when you look at the historical capabilities of the team here at Mission, Disruptions, price changes, price inflation, challenges getting product from one country or another has always been part of the game. And this team has proven and really proven over the last 12 months how well they can execute when things get choppy. So if there's things that come down the path that create some choppiness, this team is absolutely ready for that. And then the second piece of it is also what Steve just mentioned and that's the consumer resilience.
We have really seen the consumer be resilient through both an inflationary period as well as price, not just the price side, but also from a supply challenge perspective. And the consumer is really taking away more and at a higher price than they ever have. So both of those two things combined, I see Mission positioned in a great spot kind of regardless of what happens on the tariff side of things.
Steve Barnard, Chief Executive Officer, Mission Produce: I think that's directly focused at Mexico too. I don't think he's going to put a tariff on Peru or Colombia or Guatemala, I hope.
Ben Colave, Analyst, Lake Street Capital Markets: Got you. Very good.
Analyst: All right.
Ben Colave, Analyst, Lake Street Capital Markets: Well, I appreciate that context from you both. Congratulations again on a really great quarter, really great year and I'll get back in queue.
Steve Barnard, Chief Executive Officer, Mission Produce: Thanks, Ben. Appreciate it. Okay. Thanks, Ben.
Conference Operator: Next (LON:NXT) question is from Gerry Sweeney from ROTH Capital Partners (WA:CPAP). Please go ahead. Hey, good afternoon, guys. Thanks for taking my call.
Brian Giles, Chief Financial Officer, Mission Produce: Sure. Thanks Jerry.
Analyst: Just to follow-up on Ben's question and then the answer. But it seems like consumers have maybe, lack of a better phrase busted through the price barrier and seem more consistent at higher prices than maybe a couple of years ago. Is that fair to say especially with this past year's results?
John Pawlowski, President and Chief Operating Officer, Mission Produce: Yes. We're seeing 2 macro trends that are driving that. Jerry, this is John. The first one I think you'll hear consistently across anyone in the grocery sector and that is exactly what you just said. There's been inflationary pressure over the last 18 months and you're starting to reach points where the consumer has adapted to that.
The second piece, more specific to our kind of slice of the pie in regards to the produce section is we're seeing a lot of younger consumers enter the marketplace. You've got people that are 18 to 30 that are picking up more avocado consumption and those consumers as they enter the marketplace, they're making up a much bigger portion of our shopper base. They are much more resilient than the traditional baby boomers have proven to be in the past.
Conference Operator: Got it.
Analyst: Does this mean moving forward that retail can keep prices elevated, make more money and maybe help and does that sort of trickle through to the missions of the world?
John Pawlowski, President and Chief Operating Officer, Mission Produce: Well, I guess the prices the make more money piece is always the tricky question, right? Because the price versus our cost always plays a role in that. I think you'll see more consistency compared to from a margin perspective, from a retail side of things, where they were in 24%. Yes. I mean, Jerry, I
Brian Giles, Chief Financial Officer, Mission Produce: think it's all in relative terms where pricing is going to sit. There's going to be a supply of volume available and prices need to it will need to ultimately be set at a level that enables the market to consume that supply. Do I think at comparable levels, I think the price points will settle in higher than where they were in the past 2, 3, 4 years ago. But I think as we look to this coming year, if volumes were to increase 10%, 15% across all countries of origin, I would think that that is going to bring pricing down somewhat with that much of a volume increase. But again, it'll be a more resilient price than it would have been 2, 3, 4 years ago.
Steve Barnard, Chief Executive Officer, Mission Produce: It'll still be good. They're pretty high to start with.
Analyst: Yes. I got it. Just curious, it feels like prices elasticity is coming back or something like that.
Brian Giles, Chief Financial Officer, Mission Produce: I would say there were definitely times, I mean, where that $0.99 per piece barrier was kind of an indicator of when demand would start to taper in. That doesn't seem to be the threshold or the limit any longer. I mean price points It would be $1.95. $1.25 $1.49 we're not seeing that having a negative impact on pull through any longer. So yes, I think inflation, it's taken a few years, I think, for maybe the consumer to adapt to paying higher prices, but it feels like it's finally kind of come through our category in this last year.
Analyst: Got it. Switching gears to blueberries. I mean blueberries are great, but you also noted, I think increased plantings. How many more acres this year than last year and 2 years ago? And then what is the plan for the blueberries for the next couple of years going forward?
Steve Barnard, Chief Executive Officer, Mission Produce: So in production you're talking about or planning?
Analyst: Planning is drive, yes, timing is drive, that's right.
Brian Giles, Chief Financial Officer, Mission Produce: Yes, blueberries have a pretty quick turn like usually within a year they're in a productive state unlike an avocado tree where it can take 4 or 5 years. But blueberries, I think we rolled out another one 100 hectares this year, I think we'll be layering in at least another 100. So because we're doing some double density planting, Jerry, in the 1st year. So I'm like in my head, 100 hectares this year, but maybe a little more than 100 hectares worth of plants. And then we're probably looking at another close to 200 hectares coming into production for the next harvest season, which would roll through Q4 of 2025 and into Q1 of 2026.
And that would be on top of I think prior to this, we had about somewhere close to 500 hectares
Steve Barnard, Chief Executive Officer, Mission Produce: in production. And another 200 in development, I mean in process.
Brian Giles, Chief Financial Officer, Mission Produce: So when all said and done with our plantings up in the northern almost region, we should roughly double the size of the blueberry plantings that we had in place before we started that project. So overall acreage, certainly a lot of these plantings are of the new more desirable varieties as well, which we believe over the long haul are going to help drive higher average selling prices over some of the generic varieties that are being grown in country. So I think we're excited about the opportunity that lies ahead. Certainly focus on trying to stretch harvest season, things of that nature, so we're not overloading markets at certain times of the year. And again, getting fruit of those premium varieties with the right sizing and the right quality to generate those above average returns.
Analyst: Got it. And then obviously balance sheet is good shape. You kind of touched on cash flow, but next couple of years, good cash flow. I mean, debt would be high in a very excellent spot. I mean, any thoughts on what's after that?
Do we go back into maybe increasing some plantings to a degree or just curious from that perspective?
Brian Giles, Chief Financial Officer, Mission Produce: I mean, I think our plan, Jerry, I mean, and we've been communicating for years and for a couple of years, I don't think we changed too much on it that our expectation was that we've gone through a couple had gone through a couple of years where operating cash was depressed. I think the year we saw in 2024 was more in line with what we believe the long term capabilities of this business are. Capital has continued to step down, probably stepped down. It looks like it stepped down a little more this year than it really did because of some timing things. But nonetheless, it's well off of the numbers that we've seen over the last 3 or 4 years.
And we expect that will continue. So yes, we're going to generate significant cash flow. I would think next year, as we look to fiscal 2025, our priority will still be on paying debt down. Beyond that, you're right, we will be in a position where we'll have our balance sheet in really good shape and that will enable us to evaluate other opportunities with that cash, one of which could be returning cash to shareholders in some way, shape or form.
Steve Barnard, Chief Executive Officer, Mission Produce: Yes, got it. Okay.
Analyst: Well, congratulations on a great year. I appreciate it.
Brian Giles, Chief Financial Officer, Mission Produce: Hey, thank you, Jerry.
Analyst: Thanks, Jerry.
Conference Operator: This concludes the question and answer session. I'd like to turn the floor back to management for any closing comments.
Steve Barnard, Chief Executive Officer, Mission Produce: Thank you for your interest in Mission Produce, and we look forward to talking to you again.
Conference Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.
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