Mission Produce's Q4 2025 Earnings Call: Contradictions Emerge on Strategic Growth Plans, CapEx Allocation, and Global Expansion Strategy

Date of Call: None provided

Financials Results

• Revenue: $319 million (Q4), down 10% YOY; FY2025 record revenue $1.39 billion, up 13% YOY
• EPS: $0.31 per diluted share (adjusted), compared to $0.28 in prior year quarter
• Gross Margin: 17.5%, up 180 basis points YOY

Guidance:

• FY2026 CapEx expected to step down to approximately $40 million.
• Q1 FY2026 avocado industry volumes expected to increase ~10% YOY; avocado pricing expected to be ~25% lower YOY vs prior-year Q1; some sequential margin compression expected due to seasonality and sourcing.
• Blueberry harvest peaks in Q1 with higher volumes from new acreage; prices expected flat-to-slightly-higher but profitability pressured by higher unit costs from lower yields.
• Exiting heavy CapEx cycle should enable accelerated free cash flow and greater capital allocation flexibility.

Business Commentary:

* Leadership Transition and Succession Planning: - Mission Produce announced a leadership transition with Steve Barnard stepping down as CEO and John Pawlowski taking over, effective April 2026. - This change is part of a long-term succession plan aimed at ensuring a seamless transition and continued strategic direction for the company.

• Record Financial Performance and Revenue Growth:
• The company reported record revenue of $1.39 billion for fiscal 2025, with a 13% year-on-year growth.

• This growth was driven by record avocado volumes sold and successful execution of a major capital investment cycle.

• International Expansion and Market Penetration:

• Mission Produce achieved a 40% increase in European volumes sold during 2025.

• This growth was attributed to effective management of demand and supply shifts, strategic market penetration, and improved customer programming.

• Strong Cash Flow and Debt Reduction:

• The company generated $88.6 million in operating cash flow in 2025, contributing to a cumulative total of more than $180 million over two years.

• This was due to strong operational performance and a disciplined focus on debt reduction, leading to a healthy net leverage ratio of well below 1x EBITDA.

• Profitability and Cost Management:

• Mission Produce's adjusted EBITDA reached a record $41.4 million in Q4 2025, marking a 12% increase from the prior year.
• This was driven by increased avocado production, higher overall volumes sold, and effective management of per unit margins despite pricing volatility.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized record FY2025 revenue of $1.39B (up 13%) and record adjusted EBITDA, noted generation of $88.6M operating cash flow in the year and >$180M over two years, and stated they are exiting a heavy CapEx cycle giving "real flexibility to create value for shareholders."

Q&A:

• Question from Mark Smith (Lake Street Capital): I was curious about your outlook for mangoes. You've had fantastic growth here the last several years. Kind of curious where we are in that cycle? And any insights you can give us into potential growth here this next fiscal year?
  Response: Expect a similar glide path to 2024–2025: continue market-share penetration, cross-selling with avocado customers, and continued growth in fiscal 2026.

• Question from Mark Smith (Lake Street Capital): I'm curious to the biggest risks in accomplishing this free cash flow growth?
  Response: Free cash flow is driven by strong operations and lower CapEx (~$40M); primary risks are weather/crop variability and industry pricing cycles.

• Question from Mark Smith (Lake Street Capital): How should we think about use of cash going forward? Are there other places like buybacks where you may put cash to work?
  Response: Priority is growth and shareholder value: pursue growth investments and opportunistic M&A, while remaining open to buybacks as appropriate given low leverage.

• Question from Mark Smith (Lake Street Capital): With the management change, should we expect any changes in strategy?
  Response: No material immediate strategic change; continuity in execution with an increased focus on accelerating organic and inorganic growth and capital deployment.

• Question from Pooran Sharma (Stephens): You mentioned $40 million CapEx for next year—can you give a sense of how much of that could be growth CapEx?
  Response: Roughly split: about $20M maintenance and ~$20M growth-oriented CapEx for FY2026.

• Question from Pooran Sharma (Stephens): Where do you see the most upside from growing into your footprint? Any specific regions or facilities to call out?
  Response: Most upside from deeper U.S. market penetration and expanded European presence leveraging Peruvian supply; Guatemala and existing assets will improve operational efficiency as volumes grow.

• Question from Pooran Sharma (Stephens): Given a lower pricing environment, how long to reach household penetration levels of more mature fruits and will lower prices accelerate that process?
  Response: Household penetration currently ~70%; management targets ~73–75% within 2–3 years by leveraging higher availability and promotional activity during lower-price periods.

Contradiction Point 1

Strategic Focus and Growth Expectations

It directly impacts the company's strategic direction and investor expectations regarding growth and market penetration.

What are your growth expectations for mangoes in the next fiscal year? - Mark Smith(Lake Street Capital)

20251219-2025 Q4: The strategy for mangoes remains consistent with the approach in the previous years, focusing on increasing market share penetration and expanding global sourcing initiatives. The growth path in 2026 will be similar to 2024 and 2025, with potential for growth driven by cross-selling opportunities with existing avocado customers and potential entry into new customer bases. - John Pawlowski(COO)

What is the outlook for mangoes and potential growth in this area next fiscal year? - Mark Smith(Lake Street Capital)

2025Q4: The growth strategy for mangoes is aligned with the previous years, focusing on market share penetration and global sourcing initiatives. The goal is to cross-sell with existing avocado clients and offer category insights. This approach has shown success in the past two years and will continue into 2026. - John Pawlowski(COO)

Contradiction Point 2

Capital Expenditure Allocation

It involves changes in financial forecasts, specifically regarding capital expenditure allocation, which are critical for understanding the company's investment strategy.

How much of the $40 million CapEx for next year is growth CapEx? - Pooran Sharma(Stephens)

20251219-2025 Q4: Roughly $20 million will be for maintenance and $20 million for growth, based on the nature of investments in farming operations and commercial expansion, particularly in Europe, and potential capacity additions in North America. - Bryan Giles(CFO)

What is the 2026 CapEx budget and how much is allocated to growth versus maintenance? - Pooran Sharma(Stephens)

2025Q4: CapEx spending will be approximately $40 million in fiscal 2026, with a mix of $20 million for maintenance and $20 million for growth. This allocation reflects a balance between maintaining existing operations and supporting future growth. - Bryan Giles(CFO)

Contradiction Point 3

Geographic Expansion Strategy

It directly impacts the company's strategic direction and investor expectations regarding geographic expansion.

Which regions offer the most growth potential, and which specific regions or facilities have expansion potential? - Pooran Sharma(Stephens)

20251219-2025 Q4: Opportunities exist in growing into the U.S. market and expanding in the European market with Peruvian fruit, focusing on operational efficiencies and overhead absorption. Peruvian and Guatemalan production will play significant roles in supporting these expansions. - John Pawlowski(COO)

Where do you see the most upside for geographic growth, and which regions or facilities have expansion potential? - Pooran Sharma(Stephens)

2025Q4: The focus areas for growth include expanding market share in the U.S. and further penetrating the European market with Peruvian production. Additionally, Guatemala's fruit production is set to contribute to operational efficiencies as it comes online in the next 2 to 3 years. - John Pawlowski(COO)