Mission Produce (AVO) Q1 2026 Earnings Transcript

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Date

Thursday, March 12, 2026 at 5 p.m. ET

Call participants

• Executive Chairman — Steve Barnard
• Chief Executive Officer — John Pawlowski
• Chief Financial Officer — Bryan Giles

Takeaways

• Avocado Volumes -- Increased 14%, reflecting execution on volume-centric strategy amid significant normalization in industry pricing.
• Revenue -- $278.6 million, a 17% decrease, driven by a 30% pricing decline linked to increased Mexican supply.
• Gross Profit -- $31.6 million, flat versus prior year, enabled by volume growth and per-unit margin expansion.
• Gross Margin -- Rose by 190 basis points to 11.3%, attributed to improved performance in the Marketing and Distribution segment.
• Adjusted EBITDA -- $18.5 million, up 5%, driven by avocado volumes and improved per-unit margins, with partial offset from increased per-unit blueberry production costs.
• Adjusted Net Income -- $7.3 million, or $0.10 per diluted share, consistent with prior-year performance.
• SG&A Expense -- Increased by $6.9 million, or 31%, entirely due to $7.0 million in transaction advisory costs for the pending Calavo Growers acquisition; otherwise flat year over year.
• Marketing and Distribution Segment Sales -- Dropped 21% to $234.8 million, reflecting avocado pricing dynamics.
• Marketing and Distribution Segment Adjusted EBITDA -- Rose 33% to $12.9 million, with gains attributed to volume growth and solid per-unit margins.
• International Farming Segment Sales -- Increased 15% to $10.6 million, driven by improved pack house utilization.
• International Farming Segment Adjusted EBITDA -- Increased $0.5 million, or 28%, to $2.3 million, attributed to higher operational leverage.
• Blueberry Segment Sales -- Rose 12% to $40.8 million, due to higher average sales price (up 9%) and volume (up 3%).
• Blueberry Segment Adjusted EBITDA -- Decreased to $3.3 million from $6.2 million, reflecting lower yields and higher production costs from newer acreage maturation.
• Cash and Cash Equivalents -- $44.8 million at quarter end, compared to $64.8 million at the end of last fiscal year.
• Net Cash Used by Operating Activities -- $3.0 million, up from $1.2 million, attributed to higher working capital requirements typical for the season.
• Capital Expenditures -- $11.9 million, reflecting a reduction from $14.8 million last year, aligning with planned step-down; company expects approximately $40.0 million for the year.
• Calavo Acquisition Progress -- Preliminary proxy filed, deal under SEC review, and regulatory approvals advancing in both the United States and Mexico; targeted to close in the fiscal third quarter, subject to closing conditions.
• Annualized Cost Synergy Target from Calavo Acquisition -- At least $25 million achievable within 18 months of closing; management sees "meaningful" potential upside beyond this figure.
• Industry Avocado Volume Outlook -- Expected increase of 10%-15% for 2026, due to larger Mexican crop.
• Industry Pricing Outlook -- Anticipated year-over-year decline of approximately 30%-35% from the $2 per pound average of 2025.
• Outlook for Q2 Per-Unit Margins -- Management expects contraction due to low pricing and sourcing concentration, leading to a forecasted decline in Marketing and Distribution segment profitability compared to last year.
• California Avocado Harvest -- Expected to start about a month later as growers await improved conditions; this delay reduces asset utilization at the California packing facility in the second quarter.
• Blueberry Segment Q2 Forecast -- About 10%-15% of Peruvian season to be sold through Q2; lower owned-farm volume forecast due to earlier pruning and unfavorable weather; revenue reduction expected despite higher sales prices.
• International Farming Segment Q2 Headwind -- Lower pack house utilization driven by reduced blueberry volumes from owned farms.
• Consolidated Adjusted EBITDA Guidance -- Projected to be below prior-year level for Q2, per management's explicit remarks.
• Household Avocado Penetration -- Reached a high watermark of approximately 72% in the fiscal fourth quarter, based on syndicated data cited by management.
• Long-Term Capital Allocation Strategy -- Management is actively developing a plan balancing reinvestment, deleveraging, and shareholder returns, to be discussed after the Calavo closing at a planned Investor Day.
• Prepared Foods Growth -- Company views Calavo's guacamole and ready-to-eat lines as natural adjacency with significant growth potential and value-add to the existing platform.
• Equity Method Income -- Increased to $1.5 million from $0.8 million, attributed to performance from the Henry Avocado Corporation joint venture.
• Interest Expense -- Decreased by $0.5 million, or approximately 23%, reflecting lower rates and prudent balance sheet management.

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Risks

• Management explicitly forecasted "consolidated adjusted EBITDA performance to be below the prior-year level" for Q2, identifying margin compression due to lower industry pricing and delayed California harvest.
• Blueberry profitability will remain pressured in Q2 due to lower per-hectare yields from immature acreage and earlier pruning, as well as weather-related volume reductions.
• Sourcing mainly from Mexico in a low-price environment reduces geographic flexibility and asset utilization, directly impacting per-unit margins and packing facility profitability, especially in California.

Summary

Mission Produce (NASDAQ:AVO) reported substantial 14% volume growth in avocado sales, which partially offset the negative impact of a 30% price decline and drove improved operating margins despite revenue contraction. The pending Calavo Growers acquisition advanced through SEC and regulatory processes, with management emphasizing potential scale, cost synergy realization, and expanded product adjacencies, including entry into prepared foods. Management provided explicit guidance for lower consolidated adjusted EBITDA in the next quarter, citing margin compression from seasonal pricing shifts, delayed harvests, and persistent cost headwinds in the Blueberry segment. Per management, a robust capital allocation plan prioritizing shareholder returns, reinvestment, and deleveraging will be outlined at an Investor Day post-closing. The company highlighted record high household avocado penetration, supporting its favorable long-term demand outlook and rationale for supply- and margin-focused execution.

• Management reaffirmed pursuit of at least $25 million in annualized synergies from the Calavo acquisition within 18 months, calling further upside "meaningful" but declined to provide more detail.
• The Blueberry business will remain challenged into Q2, with both maturational and weather-related yield pressures continuing to impact segment profitability and utilization in International Farming.
• Current cash and capital expenditure trends reflect seasonal factors, yet the reduced capex aligns with guidance for $40.0 million in total fiscal year investment, setting up for improved free cash flow generation in later quarters.
• Management repeated that, while Q2 faces operational headwinds, the platform remains positioned to capitalize on long-term demand tailwinds and category leadership in avocados.

Industry glossary

• GLP-1: Class of medications used in metabolic disease treatment; referenced here due to possible impacts on consumer food purchasing and dietary habits.
• Pack House Utilization: Metric describing the efficiency and operational capacity use of facilities where fresh produce is sorted, graded, and packed.

Full Conference Call Transcript

Steve Barnard: 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. Forty-plus years building this company alongside an incredible team of people. There is nothing else like it. I am proud of what we have accomplished together. With that said, I am even more excited about what is ahead.

Between the momentum we are carrying, the pending Calavo acquisition we announced in January, and the team we have in place, Mission Produce, Inc. 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 will still be very much involved as Executive Chairman. This company is in my DNA, and that is not going to change. But the future belongs to John and his team, and I cannot wait to watch it unfold. With that context, I will turn it over to John to walk you through the operational and commercial highlights of the quarter. John?

John Pawlowski: Thanks, Steve. And on behalf of the entire Mission Produce, Inc. team, thank you. What you have built over four decades speaks for itself, and it is 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 are making across the business. I also want to spend some time talking about the future of Mission Produce, Inc., because we have a lot to be excited about. We are 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 volumes 14%. 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 is what drives our results. Our commercial teams drove volume growth, improved per-unit margins, and continued to deepen the customer relationships that underpin our business.

That is the combination we are 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, expanding our reach, strengthening existing partnerships, and leveraging our category management tools to add value for our retail and foodservice 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 in emerging growth markets internationally. We have been working hard to maximize returns from our international asset base. For instance, we are focused on driving improved pack house 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 segment during what was historically a seasonally softer quarter. The Blueberry segment itself continues to grow. Revenue was up 12% in the quarter on higher volumes and modestly higher pricing. Per-acre yields on some of our newer acreage impacted profitability, but that is 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 stand-alone 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 in prepared foods through an established brand. Two months after announcing that transaction, I am 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.

Calavo was a unique opportunity, and we believe Mission Produce, Inc. 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 SEC 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 is the prepared foods opportunity that I am particularly excited about.

Calavo's guacamole and ready-to-eat product lines sit within a large and growing market, and it is 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 Produce, Inc. does today. On synergies, our conviction has only grown as we have 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. 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 stand-alone basis, Mission Produce, Inc. has 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 Calavo 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 returns 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. I will now turn the call over to Bryan for the financial results.

Bryan Giles: 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 the prior year and driven by a 30% decrease in pricing given higher industry supply driven by greater availability from Mexico 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 and Distribution segment is managed primarily on a per-unit basis, which can lead to volatility in 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 $7.0 million of transaction advisory costs associated with the pending acquisition of Calavo 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 volumes sold and year-over-year improvement in per-unit margins in our Marketing and Distribution segment, partially offset by higher per-unit fruit production costs in our Blueberry segment. Turning now to the segments, our Marketing and Distribution segment net sales decreased 21% to $234.8 million, driven by the avocado pricing dynamics previously described. As we have mentioned, we manage 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 and 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% to $10.6 million. Segment adjusted EBITDA increased $0.5 million, or 28%, to $2.3 million compared to the prior-year period due to improved pack house utilization versus the prior year. As John discussed in his remarks, we are 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 12% to $40.8 million due to increases in average per-unit sales price and volumes sold of 9% and 3%, 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 have discussed previously, this is part of the natural maturation process for newer acreage, and we expect yields and per-unit cost 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 01/30/2026, compared to $64.8 million as of 10/31/2025.

Net cash used by operating activities was $3.0 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 the 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 $40.0 million.

This setup positions us for accelerated free cash flow generation going forward. Now let me provide some context on our near-term outlook. For 2026, avocado industry volumes are expected to increase by approximately 10% to 15% 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% compared to the $2 per pound average experienced in 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 price environment is leading to a delayed start of the California harvest season. It 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 and Distribution segment versus the prior year. For Blueberries, harvest timing for the 2025/2026 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 a headwind for our International Farming segment as a result of lower pack house utilization. Blueberries profitability will continue to be impacted by higher costs resulting from lower yields per hectare as we close out the current harvest season in the second quarter. Taking this all together, we anticipate our consolidated adjusted EBITDA 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 will 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 Calavo acquisition, Mission Produce, Inc. is building a differentiated platform with significant runway for EBITDA growth and value creation in the years to come. That concludes our prepared remarks.

I will now turn the call back to the operator to take us to Q&A.

Operator: We will now open for questions. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, you may need to pick up your handset before pressing the star key. Your first question comes from Puran Sharma Stephens with Stephens. Please go ahead.

Puran Sharma Stephens: Good afternoon, and thanks for the question, and congrats on putting up those results in this lower pricing environment. I did want to start off by asking about the Calavo acquisition. You have said a lot here in the past few months about it, but in your prepared comments, you said you feel more confident as you have 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 are tackling?

What do you see as lower-hanging fruit and higher-hanging fruit in terms of synergy realization?

John Pawlowski: Hi, Puran. This is John. Thanks for the question. I hope you are doing well. In regards to the synergy question, I am going to stick with my comments that I have been making over the last couple of months. We feel, as we have been having conversations with the Calavo team and we are working towards consummating the relationship here and all the different elements that have to happen structurally, really good about the estimate assumptions that we made around that $25 million.

The estimates around that $25 million were really built around some core cost structure items, and the buckets that we have been always talking about have been around the operating footprint and how synergistic that operating footprint is, around some duplicate costs in the overall structure, and we 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 is 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 are at today. I am not going to give any more color in regards to where I think those go, except to stress that I feel really confident in the word “meaningful,” as I have been, quite frankly, pretty consistent in saying around where we go beyond that $25 million.

Puran Sharma Stephens: That is great. I appreciate the color there, John, and hope you are doing well as well. Just as my follow-up here, I wanted to ask about, and this is, I guess, more on Bryan's comments around guidance here. I understand that we are 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 the benefit you would get from the increased volumes. Are you able to give us any color, qualitative or quantitative, into how much fixed cost deleveraging you are like, benefit you would get from the increased volumes?

Bryan Giles: Hey, Puran. This is Bryan. The vast majority of the costs, particularly this time of year, in our cost structure are variable in nature. When we are 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 is still the most meaningful item in there. 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 is 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 getting 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 are in a single-source market like we are today with Mexico and there is ample supply, again, it just makes it more difficult to lean into the advantages that we really have. I do think that, in 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 we are at today. In the moment, it was meaningfully higher-end price to retail.

When I look at where we are at, there is fixed cost overhead that is associated with that facility that we are not able to utilize completely when we are not in the California season, so that year-over-year comp is a little bit difficult. I do not think the general per-unit margins that we are going to generate are going to be dramatically lower than the historical ranges that we have seen. I just think that we have gone through a period of time where we were seeing elevated per-unit margins that were above that normal range.

I think that what we are seeing in Q2 is a continuation of what we saw in Q1, which is a bit of a reversion back to the historical levels on per-unit margins.

Operator: Next question, Mark Smith with Lake Street Capital Markets. Please proceed.

Alex Turnicks: Yeah. Hi, guys. You have got Alex Turnicks 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 normalized margin profile for that business could look like once yields stabilize?

John Pawlowski: Hi, Alex. Thanks for the question. I will start and maybe Bryan will jump in. From a technical perspective, what we do on those farms is what we call double-density introduction into the harvest. What we are doing is putting plants—which is a very typical part of the process in blueberries and in many other crops—very tightly close together as they are maturing from, say, year one into year one and a half, when those plants are becoming much more productive and mature, and then you are spreading them out as they get into the later stages of maturity.

Sometimes when you do that and you spread them out, you have a little bit less productivity for those first couple of months or first year of the time that plant is executing against what it is trying to do, and we are 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 a cost structure standpoint as those plants become mature.

I would love to tell you it is three months, but it is probably more along the lines of 12 to 18 months until we reach the full zone where we would like to be.

Bryan Giles: And I would just build off what John said. There are a couple of metrics we look at. We are certainly looking at cost per hectare planted—we do that for our avocados and our blueberry farms. We are also looking at costs on a per-unit basis. The triangle here for profitability is overall cost incurred, production yield, and sales price, and then we work those three together. Certainly, the cost per unit is driven heavily by the overall costs that we incur as well as that yield number. To the point that John made, we do expect those yields to improve as they mature. Blueberries do get into mature production much faster than an avocado tree does.

Many of these plantings where we are seeing the reduced yield this year are plants that are one to two years old, and we would expect them to ramp their productivity very quickly, whereas an avocado tree can take four years before you even get to breakeven production. So it is a meaningful difference. It is a faster ramp. We were planting a fair amount of new acreage in blueberries. We are up over 700 hectares in production today, but of that 700, probably 25% of it is new acreage that was impacted by the spread-out. Certainly, as we go forward, we expect those yields to ramp fairly quickly. We did mention other factors that play into this.

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 in a more normalized time this year—had a nominal impact. We are also, in decisions around pruning, often driven by the weather conditions that exist at any given time. The timing of pruning is going to determine when harvest is going to begin the following season. So we are making decisions that are really in the best long-term interest of the business, and sometimes they do not always align with an individual quarter.

Alex Turnicks: Okay. That is really helpful. The last one for me: you touched on the prepared remarks about developing that long-term capital allocation strategy and your plans to discuss that at the Investor Day after the acquisition closes. But just at a high level, how should we think about the balance between reinvestment, deleveraging, and returning capital to shareholders as free cash flow ramps?

Bryan Giles: I think we want to stop short of committing to specifics at this point, but this is really a continuation of the messaging we have started to deliver over the last 12 to 18 months, which is initial priority: paying down debt. We have 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 have already had discussions about consistently returning cash to shareholders, and those discussions are going to continue to happen as we move forward. The message that we would want to deliver right now is that we are committed to a program to look at that balance. We do not know what the figures are going to be at, we do not know when it is going to start, but we understand it matters to us, and we feel that it creates value for our external stakeholders as well.

John Pawlowski: I would add to that, Alex, that I think in the past, we have been very clear on our priorities of using our capital, and that they were around debt management as well as investing in the growth of the business. At this time, I think we are 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. I would say that, as a combined entity, as we think about the future, the priorities do not necessarily have to be mutually exclusive.

We think that there is opportunity to parallel path that over the course of the next 12 to 18 months, and we will not have to wait for that deleveraging to be able to provide some of that shareholder return.

Operator: Ladies and gentlemen, at this time, I am showing no further questions. I would like to end the Q&A session and turn the conference call back over to management for any closing remarks.

John Pawlowski: 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 Produce, Inc. is at a very critical juncture in our journey, and the pending acquisition of Calavo will only serve to accelerate our growth ambitions. We appreciate your interest in Mission Produce, Inc. 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.

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

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