Executive Summary / Key Takeaways

• Mission Produce delivered record fiscal second quarter 2025 revenue of $380.3 million, a 28% increase year-over-year, primarily driven by strong avocado pricing and volume in its Marketing & Distribution segment.
• The company's strategic diversification into complementary categories like mangoes and blueberries, coupled with its global sourcing and distribution network, is enhancing operational efficiency and providing resilience against regional supply constraints and seasonal headwinds.
• Despite near-term pressures on per-unit margins due to Mexican supply challenges and one-time costs, the International Farming segment showed improved performance, and the company anticipates a significant step-up in cash generation in the second half of fiscal 2025 driven by a projected recovery in its Peruvian avocado crop.
• Mission Produce is moderating its capital expenditure trajectory after a period of significant investment, focusing on optimizing returns from existing assets and prioritizing debt reduction, while also opportunistically repurchasing shares.
• Key risks include potential impacts from fluid trade policies and tariffs, inherent farming risks like weather events, and supply chain volatility, though the company's global platform is designed to mitigate these factors.

Setting the Scene: A Global Leader's Strategic Evolution

Mission Produce, Inc. stands as a prominent global player in the fresh produce industry, specializing in the sourcing, production, packaging, marketing, and distribution of Hass avocados. With a history spanning more than forty years, the company has cultivated a deep understanding of the complex dynamics governing the global avocado market. Its core operations are centered around procuring fruit principally from key growing regions including California, Mexico, and Peru, and distributing it through an extensive global network to food retailers, distributors, and produce wholesalers worldwide. Beyond fresh fruit, Mission Produce provides essential value-added services such as ripening, bagging, and custom packaging, enhancing its offering to customers.

Over its history, Mission Produce has strategically evolved its business model, recognizing the inherent volatility tied to relying heavily on a single commodity and specific growing regions. This evolution has centered on two primary pillars: expanding its global sourcing footprint and diversifying into complementary fruit categories. The expansion includes developing operations in geographies like Peru, Colombia, and Guatemala, aiming to build a reliable, year-round supply chain less susceptible to localized disruptions. Simultaneously, the company has ventured into mangoes and blueberries, leveraging its existing infrastructure and customer relationships to drive efficiencies and open new avenues for growth. This multidimensional approach is fundamental to Mission Produce's strategy, designed to provide greater financial consistency across seasonal transitions and ensure dependable supply for its diverse customer base.

The Operational and Infrastructure Moat

Mission Produce's competitive advantage is significantly underpinned by its sophisticated operational infrastructure and integrated supply chain, which function akin to a technological moat in the fresh produce industry. This isn't about silicon chips or software algorithms in the traditional sense, but rather the strategic deployment and optimization of physical assets and logistical capabilities that enable superior performance compared to less integrated or geographically constrained competitors.

Key components of this operational "technology" include a global network of distribution and ripening centers, advanced packing facilities, and owned farming operations. The company's ripening capabilities, for instance, are a critical differentiator, allowing it to deliver ready-to-eat fruit to markets, enhancing customer value and capturing higher margins. The national ripening and packing footprint, particularly highlighted in the context of the growing mango business, provides operational flexibility that management notes others in the space may not possess. Quantifiable benefits, while not always presented as explicit percentage improvements, are evident in outcomes such as the UK facility achieving profitability and seeing "significant gains in facility utilization" through expanded customer penetration, or the International Farming segment demonstrating "improved operating leverage" by utilizing its Peru packing facility for blueberry volume during the avocado off-season. The inauguration of the state-of-the-art packhouse in Guatemala further expands this network, designed to support year-round supply capabilities.

This integrated operational model allows Mission Produce to seamlessly shift between growing regions, maintain consistent supply even during periods of disruption, and maximize per-unit margins by optimizing the mix of sourced fruit and leveraging internal efficiencies. The ability to quickly identify opportunities, such as capitalizing on a larger California harvest, and execute through its established network provides a tangible competitive advantage in meeting customer needs and gaining market share, as demonstrated by achieving a record share of the California sourced market. This operational and infrastructure technology, built over decades, is a core competency that directly contributes to the company's resilience, efficiency, and ability to execute its growth strategy.

Competitive Positioning in the Global Produce Market

Mission Produce operates within a competitive landscape populated by both large, diversified fresh produce companies and more specialized players. Key publicly traded competitors include Calavo Growers, Inc. (CVGW), Fresh Del Monte Produce Inc. (FDP), and Dole plc (DOLE).

Compared to these rivals, Mission Produce's strategic emphasis on vertical integration within the avocado sector and targeted diversification into mangoes and blueberries provides distinct advantages. Its global sourcing network and owned farming operations contribute to lower operating costs per unit and greater supply reliability than competitors who may rely more heavily on third-party sourcing. This was particularly evident during periods of supply constraint, where Mission's network allowed it to maintain supply and capture favorable pricing, leading to higher revenue growth rates (e.g., 28% in Q2 2025) compared to some peers. The company's operational infrastructure, including its ripening centers and packing facilities, also provides efficiency benefits, such as faster processing speeds and better facility utilization, contributing to stronger returns on invested capital.

However, Mission Produce faces challenges in areas where competitors have established strengths. Companies like CVGW have a significant presence in higher-margin prepared food products (e.g., guacamole), a segment where Mission Produce currently has limited focus. While Mission's per-unit margins in fresh produce can be strong, the lack of a substantial value-added processing segment means it may miss out on certain profitability streams available to diversified competitors. Additionally, while Mission is building its brand, larger players like FDP and DOLE benefit from extensive global brand recognition built over longer histories and across broader product portfolios.

Despite these areas for development, Mission Produce's focused strategy on becoming the premier global avocado expert, complemented by strategic growth in mangoes and blueberries, positions it well. Its agility in adapting to market conditions, leveraging its infrastructure, and capitalizing on opportunities like the growing mango market (achieving significant market share gains) demonstrates effective execution against larger, more generalist competitors. The company's financial health, characterized by improving cash flow and a focus on debt reduction, also provides a solid foundation for continued investment and competition.

Recent Financial Performance: Strength Amidst Headwinds

Mission Produce delivered a robust top-line performance in the fiscal second quarter ended April 30, 2025, with record revenue of $380.3 million, a 28% increase from the prior year period. This growth was primarily fueled by the Marketing & Distribution segment, where average per-unit avocado sales prices increased by 26% (25% for the six months ended April 30, 2025) year-over-year, while volumes sold remained flat. This dynamic reflected strong consumer demand outpacing supply, particularly due to constraints on Mexican fruit availability early in the quarter.

Despite the strong revenue growth, gross profit decreased by 8% to $28.4 million in Q2 2025, resulting in a lower gross profit percentage of 7.5% compared to 10.4% in the prior year. This was attributed to lower per-unit margins on avocados sold, stemming from challenges in securing necessary Mexican supply and incurring costs from alternative procurement methods. Additionally, the segment absorbed approximately $1.5 million in costs related to the closure of Canadian distribution facilities and $1.1 million in tariffs on Mexican imports during a brief period in March 2025. For the six months ended April 30, 2025, gross profit was flat at $59.9 million, with the gross profit percentage decreasing to 8.4%.

Selling, general and administrative expenses increased by 15% in Q2 2025 and 11% year-to-date, driven by higher employee-related costs (including performance-based stock compensation) and increased professional fees. However, interest expense saw a significant decrease of 26% in Q2 and 30% year-to-date, benefiting from lower average revolving credit balances and reduced interest rates. Equity method income also saw substantial increases, primarily from improved performance at the Mr. Avocado joint venture in China.

Overall, net income attributable to Mission Produce was $3.1 million ($0.04 per diluted share) in Q2 2025, down from $7.0 million ($0.10 per diluted share) in the prior year quarter. For the six months, net income attributable to Mission Produce was flat at $7.0 million ($0.10 per diluted share). Adjusted EBITDA for Q2 2025 was $19.1 million, down from $20.2 million, primarily reflecting the lower per-unit gross margins in the Marketing & Distribution segment. Year-to-date adjusted EBITDA was $36.8 million, down from $39.4 million.

The International Farming segment, while typically smaller in the first half, demonstrated improved performance, with adjusted EBITDA increasing significantly in Q2 2025 and year-to-date, benefiting from higher yield and pricing from owned mango orchards and increased blueberry packing/cooling services. The Blueberry segment also contributed to revenue growth, driven by higher volumes from increased acreage and yields, though lower per-unit selling prices impacted profitability compared to the prior year's abnormally high levels.

Liquidity and Capital Allocation

As of April 30, 2025, Mission Produce held $36.7 million in cash and cash equivalents. Net cash used in operating activities was $13.0 million for the six months ended April 30, 2025, a shift from cash provided in the prior year period. This was primarily due to working capital growth, amplified by higher avocado prices impacting receivables and increased inventory in the International Farming segment as the company builds stock for the second-half harvest. Management expects a "meaningful step-up in cash generation" in the second half of fiscal 2025 as working capital normalizes and the Peruvian avocado harvest ramps up.

Capital expenditures for the six months totaled $28.0 million, focused on avocado orchard development, packhouse construction in Guatemala, and blueberry cultivation in Peru. The full-year fiscal 2025 CapEx guidance remains in the range of $50.0 million to $55.0 million, including approximately $10.0 million rolled over from fiscal 2024. This reflects a continued moderation in capital spending trajectory, positioning the company for increased free cash flow generation in future periods.

Mission Produce maintains a syndicated credit facility with a total borrowing capacity of $250.0 million, with $147.5 million outstanding as of April 30, 2025. The company was in compliance with all financial covenants. Debt reduction remains a near-term priority to strengthen the balance sheet.

Demonstrating confidence in its value, the company executed $5.2 million in share repurchases during Q2 2025, with approximately $14.0 million remaining under the current authorization, indicating a willingness to opportunistically return capital to shareholders.

Outlook and Key Risks

Looking ahead to the fiscal third quarter of 2025, Mission Produce anticipates industry avocado volumes to be approximately 10% to 15% higher year-over-year, driven by a strong Peruvian harvest outlook. Exportable avocado production from the company's owned farms in Peru is expected to range between 100 million to 110 million pounds, a significant increase from the 43 million pounds harvested in the weather-impacted 2024 season. Sales of this owned production are expected to be weighted towards the fiscal fourth quarter. Pricing is expected to be lower year-over-year by approximately 10% to 15% compared to the elevated levels seen in Q3 2024, correlated with the higher expected volumes.

While the outlook is positive for volume recovery in Peru and continued growth in diversified segments, several risks warrant investor attention. Fluctuations in the market price of fruit, driven by supply and demand imbalances, remain a primary factor impacting profitability. Supply constraints, whether from weather events (like the prior year's El Nino impact in Peru) or logistical disruptions, can significantly affect operations and margins. Doing business internationally exposes the company to economic, political, and societal conditions in sourcing regions, as well as changes in trade policy and tariffs. The recent brief imposition of tariffs on Mexican imports highlighted this vulnerability, resulting in unrecoverable costs. While USMCA exemptions currently protect Mexican fruit, the fluidity of trade negotiations presents ongoing uncertainty.

Litigation risks, including ongoing class action lawsuits related to labor practices and sustainable sourcing claims, could result in material adverse effects if resolved unfavorably, although the company is vigorously defending these claims. Inherent farming risks, including climate change, pests, and disease, can impact yields and quality. The seasonality of operating results, particularly the concentration of International Farming segment profitability in the second half of the fiscal year aligned with the Peruvian avocado harvest, also contributes to quarterly fluctuations.

Conclusion

Mission Produce's fiscal second quarter 2025 results underscore the strategic value of its diversified global platform. Despite facing near-term pressures from Mexican supply constraints and associated costs, the company achieved record revenue, demonstrating the resilience of consumer demand and its ability to leverage pricing power. The ongoing diversification into mangoes and blueberries, coupled with strategic investments in operational infrastructure like the Guatemala packhouse and the UK facility, is enhancing efficiency and providing alternative growth vectors and sources of operating leverage, particularly evident in the improved performance of the International Farming segment during a traditionally slower period.

With the anticipated recovery of the Peruvian avocado crop in the second half of fiscal 2025, Mission Produce is well-positioned for a significant step-up in cash flow generation. The moderation of capital expenditures and focus on debt reduction signal a commitment to strengthening the balance sheet and generating meaningful free cash flow in the future. While risks related to market price volatility, supply disruptions, and trade policies persist, the company's extensive global network and integrated operational capabilities provide a robust framework for mitigation. Mission Produce's ability to execute its long-term vision, adapt to dynamic market conditions, and capitalize on the strategic advantages of its diversified model supports a compelling investment thesis focused on resilient growth and improving financial health.