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01/10 05:46
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The company reported strong financial performance, with a 22% increase in gross profit and record sales in key segments. Despite increased SG&A expenses, the overall financial health is robust with a significant rise in adjusted net income. The Q&A session revealed stable tariff impacts and promising international market strategies, although some management responses were vague. The positive outlook is reinforced by optimistic guidance in blueberry acreage expansion and strategic global sourcing. Given the absence of negative critical factors, the stock price is likely to experience a positive movement in the next two weeks.
Total Revenue $357.7 million, a 10% increase year-over-year. This growth was driven by a 10% increase in avocado volumes sold, partially offset by a 5% decrease in average per unit sales prices due to improved supply conditions from higher Peruvian avocado production and greater availability of Mexican avocados.
Gross Profit $45.1 million, a 22% increase year-over-year. The gross profit percentage increased by 120 basis points to 12.6% of revenue. This was driven by higher avocado production due to increased yields at the company's farms in Peru.
SG&A Expense Increased by $3.9 million or 19% year-over-year. This was primarily due to higher employee-related costs, including incentive and performance-based stock compensation, and higher statutory profit sharing expense in the International Farming segment.
Adjusted Net Income $18.2 million or $0.26 per diluted share, compared to $16.7 million or $0.23 per diluted share last year. The growth was driven by increased operating income, a $0.8 million reduction in interest expense, and a $0.3 million increase in equity method income.
Adjusted EBITDA $32.6 million, a 3% increase year-over-year. This was primarily driven by increased avocado production in the International Farming segment.
Marketing & Distribution Segment Net Sales $344.1 million, a 7% increase year-over-year. This was due to the avocado volume and pricing dynamics, with segment adjusted EBITDA at $20 million compared to $26.8 million last year, reflecting normalization of per unit avocado gross margin.
International Farming Segment Gross Sales $49 million, a 79% increase year-over-year. Segment adjusted EBITDA increased by 163% to $12.1 million, driven by a significant recovery in Peruvian avocado production and increased avocado packing and cooling services for third-party growers.
Blueberries Segment Net Sales $4.5 million, up from $1.6 million in the prior year period. Adjusted EBITDA increased to $0.4 million, driven by higher volumes from growth in acreage and yield, as well as higher average per unit sales prices.
Cash and Cash Equivalents $43.7 million as of July 31, 2025. Cash provided by operating activities was $21.4 million for the 9 months ended July 31, 2025, compared to $55.4 million last year, primarily due to higher working capital requirements from increased avocado production and harvest timing.
Avocado production: Achieved a 10% increase in avocado volumes sold, with a 5% decrease in average per unit prices. Per unit margins remained solidly within historical averages.
Blueberries: Expanded acreage to over 700 hectares, with yield improvements expected. Revenue increased to $4.5 million from $1.6 million in the prior year.
Mangoes: Utilizing avocado expertise to build market share in mangoes through strategic pricing, supply consistency, and packaging innovations.
European market: Sales increased 37% in the third quarter, driven by improved customer penetration and facility utilization in the U.K.
Asian market: Broadened reach with new customers, leveraging Peruvian fruit to meet regional demand.
Global sourcing strategy: Optimized sourcing mix across multiple countries, leveraging strong Peruvian production and improved Mexican supply.
Mexican packhouse enhancements: Improved capacity during peak season to streamline distribution and enhance efficiency.
Diversification strategy: Focused on expanding into adjacent categories like mangoes and blueberries, leveraging avocado expertise.
Tariff impact management: Addressed $10 million annualized tariff impact on avocado and mango imports, representing less than 1% of total costs.
Tariffs on avocado and mango imports: The company expects to incur approximately $10 million of direct tariff impact on avocado and mango imports to the U.S. annually, which could affect cost structures and margins.
Lower avocado pricing: Pricing for avocados is expected to decrease by 20% to 25% year-over-year in the fourth quarter due to higher volumes in the market, potentially impacting revenue and profitability.
Higher working capital requirements: The company faced higher working capital requirements due to increased avocado production and harvest timing, leading to higher inventory balances and reduced reliance on third-party growers.
Operational disruption during Mexican harvest season: The company experienced operational disruptions during last year's Mexican harvest season, which they are addressing with enhancements to a Mexican packhouse. However, risks remain during the transition to Mexico-centric sourcing.
Economic exposure to tariffs: Approximately half of the $10 million tariff impact is attributed to South American production, which could affect the company's competitive position and cost efficiency.
Lower blueberry sales prices: While blueberry volumes are expected to increase, lower average sales prices may partially offset revenue growth, impacting overall profitability.
Fiscal Fourth Quarter Outlook: Focus on balancing the completion of the Peruvian season with the onset of the Mexican season. Enhancements to a Mexican packhouse are expected to improve capacity during peak season, allowing for more efficient packing and distribution.
Diversification Strategy: Continued focus on building market share in adjacent categories such as mangoes and blueberries. Blueberry production is expected to exceed 700 hectares, with meaningful volume increases anticipated during the peak harvest in the fourth and first quarters.
Capital Expenditures: Full-year fiscal 2025 CapEx guidance remains in the range of $50 million to $55 million, with a trajectory of moderating capital spending through fiscal 2026, positioning the company for meaningful free cash flow in future periods.
Avocado Production and Pricing: Exported avocado production from owned farms in Peru is expected to range between 105 million to 110 million pounds, with pricing expected to be lower year-over-year by approximately 20% to 25% due to higher volumes in the market.
Blueberry Harvest: The Peruvian blueberry harvest season will ramp up in the fourth quarter, with meaningful volume increases expected from owned farms, though revenue impact may be partially offset by lower average sales prices.
The selected topic was not discussed during the call.
The earnings call highlights record revenue and EBITDA growth, strong cash flow, and debt reduction, indicating robust financial health. Despite lower avocado prices, volume growth and margin improvements are positive signs. The Q&A reveals optimism about mango growth and strategic flexibility, though some responses lacked clarity. Overall, the positive financial performance and strategic focus on growth and market expansion suggest a likely positive stock price movement.
The company reported strong financial performance, with a 22% increase in gross profit and record sales in key segments. Despite increased SG&A expenses, the overall financial health is robust with a significant rise in adjusted net income. The Q&A session revealed stable tariff impacts and promising international market strategies, although some management responses were vague. The positive outlook is reinforced by optimistic guidance in blueberry acreage expansion and strategic global sourcing. Given the absence of negative critical factors, the stock price is likely to experience a positive movement in the next two weeks.
The earnings call summary shows mixed results: strong revenue growth but decreased margins and increased SG&A expenses. The Q&A highlights uncertainties in supply chain and working capital issues, but management expects improvements in the latter half of the fiscal year. The lack of a share repurchase program and unclear guidance further contribute to a neutral outlook. Given these factors, along with no market cap information, the stock price reaction is likely to be within the neutral range (-2% to 2%) over the next two weeks.
The earnings call presents a mixed picture. Positive aspects include a 29% revenue increase and strategic investments in Guatemala. However, concerns arise from declining margins, operational risks, and economic uncertainties. The Q&A reveals management's lack of clarity on co-packer reliance and working capital, adding to uncertainty. The absence of a share repurchase program and increased expenses further balance out the positives, leading to a neutral sentiment.
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