Good afternoon, and welcome to the Mission Coders Fiscal First Quarter 2026 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 reported. At this time, I'd like to turn the conference over to Jeff Fonick, Investor Relations at ICR. Please go ahead.

Thank you. Today's presentation will be hosted by Steve Barnard, Chief Executive Officer, John Pawlowski, President and Chief Operating Officer, and Brian 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. Last quarter, we shared the news about our leadership transition, and next month at our annual meeting, that transition becomes official. John steps into the CEO role, and I move to executive chairman. So this is my last earnings call in this seat, and I want to take a moment to say how grateful I am. 40-plus years building this company alongside an incredible team of people. There's nothing else like it. I'm proud of what we've accomplished together. With that said, I'm even more excited about what's ahead. Between the momentum we're carrying, the pending Colabo acquisition we announced in January, and the team we have in place, mission has never been positioned better. John has brought a level of strategic rigor and global perspective that has elevated this organization, and I have complete confidence in his abilities and vision. I'll still be very much involved as Executive Chairman. This company is in my DNA, and that's not going to change. But the future belongs to John and this team, and I can't wait to watch it unfold. With that context, I'll turn it over to John to walk you through the operational and commercial highlights of the quarter. John?

Thanks, Steve. and on behalf of the entire mission team, thank you. What you've built over four decades speaks for itself, and it's a privilege to carry it forward. I want to use my time today to walk through our first quarter results and the operational progress we're making across the business, but I also want to spend some time talking about the future of mission because we have a lot to be excited about. We're off to a strong start in fiscal 2026, and the first quarter is a good illustration of how we are able to manage this business in a shifting supply and price environment. We are a volume-centric business. Volume and per-unit margins are the metrics we manage to. In a quarter in which industry pricing normalized significantly from the elevated levels we experienced over the past year, our team delivered on both of those fronts, and I want to recognize their collaboration, which helped drive our results. We grew avocado volume is 14 percent. We expanded gross margin and we grew adjusted EBITDA versus the prior year period. The headline revenue number reflects pricing dynamics that are outside of our control, but the underlying execution was strong, and that's what drives our results. Our marketing and distribution segment is where this story really comes through. Despite the lower pricing backdrop, segment adjusted EBITDA increased 33 percent. Our commercial teams drove volume growth, improved per-unit margins, and continued to deepen the customer relationships that underpin our business. That's the combination we're always working towards. As expected, Mexican supply was abundant this quarter with higher yields in the current harvest season versus last year, and our teams programmed that fruit well across our customer base. We're expanding our reach, strengthening existing partnerships, and leveraging our category management tools to add value for our retail and food service customers, precisely what our platform was built to do. The broader demand environment continues to trend in our favor as well, and the structural tailwinds for avocado consumption are real. Domestic GLP-1 penetration continues to accelerate, and the recent inclusion of avocados in the USDA's updated dietary guidelines for Americans was a meaningful development, reinforcing what consumers are already telling us day in and day out with their purchasing behavior that avocados are simply a staple in America's diet. In fact, we are seeing these dynamics play out in syndicated data as well, which showed that household penetration of avocados reached a high watermark of approximately 72% in the fiscal fourth quarter this year. Per capita consumption has nearly tripled over the past two decades, and with the health and wellness trend continuing to accelerate, we see a long runway for category growth that our platform is uniquely positioned to serve. Our international farming segment plays an important role in driving year-round consumption here in North America and is also helping accelerate the category and emergency growth markets internationally. We have been working hard to maximize returns from our international asset base. For instance, we are focused on driving improved packhouse utilization in Peru by running our own blueberry volume and additional third-party fruit through our facilities to generate better overhead absorption all year round. Recently, we also modified a pack line in that same facility to support mangoes as well. These efforts, filling in the seasonal calendar and maximizing the productivity of our Peruvian assets, have been instrumental in helping us deliver more sustainable, positive, adjusted EBITDA in our international farming segment during what was historically a seasonally softer quarter. The blueberry segment itself continues to grow. Revenue was up 12% and the quarter on higher volumes and modestly higher pricing. Per acre yields on some of our newer acreage impacted profitability, but that's part of the natural maturation process, and we expect yields to improve as those farms reach full productivity. The volumes are building, and we like where this business model is headed, both as a standalone category and for what it contributes to our broader platform. It is this sort of thinking that exemplifies our broader strategy and informs our strategic designs for the future of this company, an area that I am especially excited about. When we announced the Calavo acquisition in January, we described it as a unique opportunity to acquire a strategic and synergistic asset, one that strengthens our core avocado business while adding capabilities and prepared foods through an established brand. Two months after announcing that transaction, I'm even more confident in this view. To be direct, we believe scaled assets in our space that contain this level of strategic fit are scarce. Calava was a unique opportunity, and we believe Mission is the best-positioned company to unlock value through this combination. This was an absolutely offensive move, an opportunity to accelerate our growth strategy from a position of strength, backed by two straight years of demonstrated execution, robust cash flow generation, and a very strong balance sheet. Integration planning is underway, and deal progress is moving forward. In fact, we recently filed our preliminary proxy for the transaction, which is now under SCC review, and we are advancing the regulatory approval process in both the United States and Mexico. This is all coming together as planned, and we believe the transaction is on track to close during our fiscal third quarter, subject to satisfaction of the closing conditions. On the strategic merits, we continue to believe the combined company will have greatly enhanced supply reliability for all of our customers. Calavo will also bring tomatoes and papayas into our distribution network, which we believe will further enhance the year-round facility utilization goal that I spoke to earlier, while helping reduce the seasonal troughs that have historically been a feature of the produce industry. But it's the prepared foods opportunity that I'm particularly excited about. Colavo's guacamole and ready-to-eat product lines sit within a large and growing market, and it's a natural adjacency to our core avocado business. Having spent 20 years in the branded food industry, I have a deep appreciation for leveraging the power of strong execution and category leadership into adjacent business line expansions, and we have a perfect opportunity with an established consumer brand and the operational scale to support its continued growth. We see significant runway to build up this new capability, and one that is genuinely value additive to what Mission does today. On synergies, our conviction has only grown as we've started our integration planning. We continue to see at least $25 million of annualized cost synergies achievable within 18 months of close, and we believe, as we have stated earlier, that there is meaningful upside potential to that number as we bring these two platforms together. And importantly, we also believe that this transaction will help create a clear path to delever back to normalized levels within approximately two years of our close, which is a priority for us as we consider our go-forward capital allocation strategy. Stepping back for a moment, on a standalone basis, Michigan has a significant runway in front of us, both domestically and internationally. The demand tailwinds I described earlier are durable, and our platform is built to lead category growth along with our customers. Layer on the Colavo acquisition with the expanded North American footprint. the diversified produce portfolio, entry into prepared foods, and cost synergies, and the combined company has the potential to be something truly differentiated in the fresh produce industry. We are building a platform that we believe can drive meaningful EBITDA growth over the next several years through a combination of organic execution and the value we unlock through this combination. Importantly, as we scale this platform and accelerate free cash flow, returning capital to shareholders is part of the equation that we are envisioning. We are actively developing a long-term capital allocation strategy that balances reinvestment in the business with meaningful return to our shareholders. And we look forward to laying that out alongside our detailed strategic plan at an investor day we are planning to hold following the closure of the Calavo acquisition this fall. But I want to be clear. The ambition here is significant. And I believe the foundation we have, combined with the capabilities Calavo brings, gives us a clear and credible path to get there. With that, I'll turn over to Brian for the financial details.

Thank you, John, and good afternoon to everyone on the call. Fiscal 2026 first quarter revenue totaled $278.6 million, which was down 17% from prior year and driven by a 30% decrease in pricing given higher industry supply, driven by greater availability of Mexican fruit, resulting from higher yields in the current harvest season. However, we are pleased to see strong 14% volume growth in the quarter, which, as John mentioned, is the primary focus of our operating strategy. Despite lower revenue, gross profit was consistent with the prior year at $31.6 million in the first quarter, enabling our gross margin to increase 190 basis points to 11.3% compared to the same period last year. As a reminder, profitability in our marketing distribution segment is managed primarily on a per-unit basis, which can lead to volatility and margin percentage when sales prices fluctuate. The increase in margin percentage was primarily driven by improved performance in our marketing and distribution segment, reflecting higher avocado volumes and improved per-unit margins compared to the prior year period. This performance was partially offset by lower gross profit in our blueberry segment due to lower per-acre yield resulting in higher per-unit fruit production costs. SG&A expense increased $6.9 million, or 31%, compared to the same period last year. The increase was driven entirely by $7 million of transaction advisory costs associated with the pending acquisition of Colavo growers. Excluding transaction advisory costs, SG&A was essentially flat with the prior year period. Adjusted net income for the quarter was $7.3 million, or $0.10 per diluted share, consistent with prior year results. Beyond the operating performance, we continued to benefit from a reduction in interest expense, down $0.5 million or approximately 23% versus prior year, reflecting our continued focus on maintaining a healthy balance sheet and the lower rates we incur on outstanding borrowings. We also realized a significant increase in equity method income to $1.5 million compared to $0.8 million in the prior year period, driven by strong performance from our joint venture investment in Henry Avocado Corporation. Adjusted EBITDA increased 5% to $18.5 million compared to $17.7 million last year, driven by higher avocado volume sold and year-over-year improvement in per-unit margins in our marketing distribution segment, partially offset by higher per-unit fruit production costs in our blueberry segment. Turning now to the segments, Our marketing distribution segment net sales decreased 21% to $234.8 million, driven by the avocado pricing dynamics previously described. As we've mentioned, we managed this business primarily to volume and per-unit margins, and on that basis, the segment performed well. Segment-adjusted EBITDA increased 33% to $12.9 million, reflecting higher avocado volume sold in solid per-unit margins. in the first quarter our international farming results are typically focused on the provision of packing and processing services for our blueberry segment and for third-party blueberry producers though this will evolve over time as our operations develop in other areas such as Guatemala with this seasonality in mind our international farming segment total sales increased 15 percent to ten point six million dollars segment adjusted EBIT increased point five million dollars or twenty eight percent to two point three million dollars compared to the prior year period due to improved pack house utilization versus the prior year as John discussed in his remarks we're pleased to see the results of improved operating leverage in what has traditionally been a smaller quarter for that segment in blueberries total sales increased twelve percent to forty point eight million dollars due to increases in average per unit sales price and volume sold of nine percent and three percent respectively segment adjusted EBITDA decreased to $3.3 million compared to $6.2 million last year. While our volumes were higher, overall yield per hectare was lower than the prior year, which drove up our per unit production costs. As we've discussed previously, this is part of the natural maturation process for newer acreage, and we expect yields in per unit costs to improve over time as these farms mature. Shifting now to our balance sheet and cash flow, cash and cash equivalents were $44.8 million as of January 31st, 2026, compared to $64.8 million as of October 31st, 2025. Now, cash used by operating activities was $3 million for the quarter, compared to $1.2 million in the prior year period. The slight increase in cash usage was driven by higher working capital requirements. As a reminder, the first quarter is typically our weakest period for cash generation given the seasonality of our business, and we expect a customary improvement in operating cash flow as we move toward the latter half of our fiscal year. Capital expenditures were $11.9 million for the quarter compared to $14.8 million for the same period last year, consistent with the anticipated step-down we communicated previously. For full fiscal 2026, we continue to expect total capital expenditures of approximately $40 million. This setup positions us for accelerated free cash flow generation going forward. Now, let me provide some context on our near-term outlook. Second quarter of fiscal 2026, avocado industry volumes are expected to increase by approximately 10 to 15 percent versus the prior year period, driven by a larger Mexican crop in the current harvest season. Pricing is expected to be lower on a year-over-year basis by approximately 30 to 35 percent compared to the $2 per pound average experienced in the second quarter of fiscal 2025. While we expect higher volumes, we anticipate contraction in our per-unit margins for the second quarter due to the lower pricing environment, particularly in a setting where we are sourcing primarily from a single origin. The lower-priced environment is leading to a delayed start of the California harvest season, which is expected to be about a month behind the prior year, as growers wait for improved market conditions. This delay reduces our ability to leverage our sourcing capabilities across regions and lowers asset utilization at our California packing facility in Q2 as we await volumes to ramp up. This is expected to result in lower levels of Q2 profitability in our marketing distribution segment versus the prior year. For blueberries, harvest timing for the 2025-26 Peruvian blueberry harvest season is accelerated in relation to the prior year, leaving 10% to 15% of the harvest to be sold through in the fiscal second quarter. We expect to see volume reductions from owned farms resulting from earlier pruning and unfavorable weather conditions in the current year, which should translate to lower revenue despite expectations for higher sales prices, as well as create headwind for our international farming segment as a result of lower packhouse utilization. Blueberry's profitability will continue to be impacted by higher costs resulting from lower projected yields per hectare as we close out the current harvest season in the second quarter. Taking this all together, we anticipate our consolidated adjusted EBIT performance to be below the prior year level. Looking ahead, we remain focused on the fundamentals that drive long-term value creation, supporting consumption growth through building volume, strengthening customer partnerships, and maximizing the productivity of our global asset base. The structural tailwinds supporting avocado consumption are accelerating, and our platform is uniquely positioned to capitalize on this sustained category growth. While we'll navigate some near-term supply dynamics in Q2, we have great conviction in the underlying strength of our business model and our team that is driving it forward. Combined with the opportunities afforded by the pending Colabo acquisition, Mission is building a differentiated platform with significant runway for EBITDA growth and value creation in the years to come. That concludes our prepared remarks. With that, I will pass it back to the operator to take us to Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your lines in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Your first question comes from Korn Sharma with Stephen. Please go ahead.

Good afternoon, and thanks for the question. And congrats on putting up those results in kind of this lower pricing environment. I did want to start off by asking about the Palavo acquisition. You've said a lot here in the past few months about it, But in your prepared comments, you said you feel more confident as you've had more time to maybe digest information about the deal. Does that mean that there could be even more upside to your previous comment about having further upside to the $25 million? And then just as a follow-on, could you give us a sense as to what buckets you're tackling? What do you see as lower-hanging fruit and higher-hanging fruit in terms of synergy realization?

Hi, Paran. This is John. Thanks for the question. Hope you're doing well. In regards to the synergy question, And, you know, I'm going to stick with my comments that I've been making over the last couple of months. You know, we feel, as we've been having conversations with the Calavo team and we're working towards, you know, consummating the relationship here and all the different elements that have to happen structurally, we feel really good about the estimate assumptions that we made around that $25 million. dollars. The estimates around that 25 were really built around some core cost structure items and the buckets that we've been always talking about have been around the operating footprint and how synergistic that operating footprint is around some duplicative costs in the overall structure and feel really good about our ability to execute against cost-related synergies in a very expedited, timely manner. As we think about the buckets for the future, there's a lot of opportunity around how we think about growing together, how we think about engaging with our customers in regards to what we can do around the selling cycle and adding value in regards to how we think about the opportunities, particularly in adjacent spaces to where we're at today. I'm not going to give any more color in regards to where I think those go, except for to stress that I feel really confident in the word meaningful, as I've been, quite frankly, pretty consistent in saying around where we go beyond that 25.

That's great. I appreciate the color there, John, and hope you're doing well as well. Just as my follow-up here, wanted to ask about – and this is, I guess, more on Brian's comments around guidance here. Understand that we're going into a lower pricing environment, higher supply environment relative to last year, and that you would expect your per-unit margins to show some compression in this type of environment. But I just wanted to get a sense of you're also getting a lot of volume throughput, and are you able to give us any color, qualitative or quantitative, into how much fixed cost de-leveraging benefit you would get from the increased volumes?

Hey, Poran, this is Brian. Yeah, I mean, the vast majority of the cost, particularly this time of year, and our cost structure are variable in nature when we're buying third-party fruit. That is by far the most significant item in our cost of goods sold. And even at lower price points, it's still the most meaningful item in there. I mean, our goal is we focus on making margin on a per-unit basis so we can be profitable in times when prices are high or when prices are low. There's no doubt, though, when prices are at the lower end that it does compress that a bit. It makes it a little more challenging to really sell customers on the, you know, to get them to pay every dollar for the premium service that we provide. So it creates challenges. It does tighten up a bit. I think when we're in a single source market like we are today with Mexico and there's ample supply, again, it just makes it more difficult to lean into the competitive advantages that we really have. I do think that you know the the lower price environment I made reference to California getting a little bit later start this year last year we were in a pricing environment that was more than 2x where than where we're at today you know in the moment it was meaningfully higher end price to retail so you know when I look at where we're at there's fixed cost overhead that's associated with that facility that we're not able to utilize completely when we're not in the California season. So that year-over-year comp is a little bit difficult. I don't think the general per-unit margins that we're going to generate are going to be dramatically lower than the historical ranges that we've seen. I just think that we've gone through a period of time where we were seeing elevated per-unit margins that were kind of above that normal range. I think that's what we're seeing in Q2 is this kind of continuation of what we saw in Q1, which is a bit of a reversion back to the historical levels on per unit margins.

Yeah, great. Appreciate the call there, Brian.

Next question, Mark Smith with Lake Street Capital Markets. Please listen.

Yeah, hi, guys. You got Alex Turnix on the line for Mark Smith today. Thanks for taking my questions. First one for me, on the blueberry segment, you mentioned the yield pressure is largely tied to newer acreage maturing. Could you talk about the timeline for those farms reaching full productivity and what the normalized margin profile for that business could look like once yields stabilize?

Yeah, this is John. Hi, Alex. Thanks for the question. And I'll start, and maybe Brian would jump in. But to help from a technicality perspective side of things, What we do on those farms is we do what we call double density introduction into the harvest. So what we're doing is we're putting plants, which is a very typical part of the process in blueberries and in many other crops, you're putting plants very, very tightly close together as they're maturing from year one into year one and a half when those plants are becoming much more productive and mature. and then you're spreading them out as they get into the later stages of maturity. And sometimes when you do that and you spread them out, you have a little bit less productivity for those first couple months or first year of the time that that plant is executing against what it's trying to do. And we're kind of in a phase where we just did that in a lot of the portions of our farm. Over the course of the next 12 to 18 months, we should really be reverting back to our traditional margins from both a, well, at least back to a better cost structure, the right cost structure, as those plants become mature. So I would love to tell you it's three months, but it's probably more along the lines of 12 to 18 months until we reach that full, the full zone where we'd like to be. Yeah.

And I would just kind of building off what John said. I mean, there's a couple of metrics we look at. We're certainly looking at cost per hectare planted. We do that for our avocados and our blueberry farms. We're also looking at costs on a per unit basis. So, you know, the triangle here for profitability is overall, like cost incurred, production yield, and sales price. And we work those three together. Certainly, the cost per unit is driven heavily on the overall cost that we incur, as well as that yield number. And to the point that John made, we do expect those yields to improve as they mature. Blueberries do get into a mature production much faster than an avocado tree does. So many of these plantings where we're seeing the reduced yield this year, these are plants that are one to two years old. And we would expect them to ramp their productivity very quickly. Whereas an avocado tree, it can take four years before you even get to break-even production. So it's a meaningful difference. It's a faster ramp. I think that we're planting a fair amount of new acreage in blueberries. We're up over 700 hectares in production today. But of that 700, probably 25% of it is new acreage that was impacted by this rollout. So, certainly, as we go forward, we expect those yields to ramp fairly quickly. We do think that, you know, we mentioned other factors that play into this. Certainly, the timing of pruning in a harvest season, where we let the seasons run a little bit longer the year before, and we ended them at a more normalized time this year, had a nominal impact. we're also you know in decisions around pruning are oftentimes driven by the weather conditions that exist at a given time as we're trying to the timing of pruning is going to determine when harvest is going to begin the following season so we're making decisions again that are really the best in the long term interests of the business and sometimes they don't always align with an individual quarter okay yeah that's really helpful um the last one for me

You know, you touched on the prepared remarks, but developing that long-term capital allocation strategy and your plans to discuss that the investor day after the acquisition closes. But just at a high level, you know, how should we think about the balance between reinvestment, deleveraging, and returning capital to shareholders as free cash flow ramps?

I mean, I think we want to stop short of committing to specifics at this point. But I think this is really a continuation of the messaging we've started to deliver over the last 12 to 18 months, which is initial priority, paying down debt. And I think we've spent two years doing that. With this acquisition, that will ramp back up a little bit again. So we will have a process to bring it back down. But these combined entities are going to create meaningfully more operating cash flow than we did individually. So we feel like we can bring that debt back down in short order. We've already had discussions about consistent capital, you know, returning cash to shareholders, and those discussions are going to continue to happen as we move forward. And I think the message that we'd want to deliver right now is that we're committed to a program to kind of look at that balance. We don't know what the figures are going to be yet. We don't know when it's going to start, but we understand it matters to us, and we feel that it creates value for our external stakeholders as well.

I would add to that, Alex, too, that I think in the past we've been very clear on our priorities of using our capital, right, and that they were around debt management as well as investing in the growth of the business. At this time, I think we're pivoting a little on that by starting to say that as we develop this capital allocation strategy, the return to shareholder piece is rising on the priority list for us. And I would say that as a combined entity, as we think about the future, the priorities don't necessarily have to be mutually exclusive, that we think that there's opportunity to parallel path that over the course of the next 12 to 18 months. and we won't have to wait for that debt leveraging to be able to provide some of that shareholder return.

That's very helpful. Thanks for taking my questions today, guys.

Ladies and gentlemen, at this time, I'm showing no further questions. I'd like to end the Q&A session and turn the conference call back over to management for ending closing remarks.

Thanks, everybody. This is John. Thanks for joining us today. I hope you can feel the positive energy that we have here with respect to our future. We believe mission is at a very critical junction in our journey, and the pending acquisition of Calavo will only serve to accelerate our growth ambitions. We appreciate your interest in Mission Produce. I want to thank Steve for all his contributions and let him know I look forward to the future together, and we collectively look forward to speaking with you again next quarter.

Ladies and gentlemen, that concludes today's conference call. We do thank you for attending. You may now disconnect your lines and have a wonderful day.