Calavo Growers announces fiscal Q1 net loss of US$4M, compared to year-ago earnings of US$5.3M; total revenue rises 24% to US$274.1M

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SANTA PAULA, California , March 15, 2022 (press release) –

Calavo Growers, Inc. (Nasdaq-GS: CVGW), a global avocado-industry leader and provider of value-added fresh food, today reported its financial results for the first quarter ended January 31, 2022.

First Quarter Financial Overview

* Total revenue of $274.1 million, a 24% increase from the year-ago quarter.

* Fresh segment revenue increased 41% year-over-year to $162.6 million, and Renaissance Food Group (RFG) and Foods segments revenues increased 6% and 4% year-over-year, respectively.

* Gross profit of $13.2 million, or 4.8% of revenue, compared to $17.8 million, or 8.1% of revenue, for the year-ago quarter.

* Net loss of $(4.0) million, or $(0.23) per diluted share, compared to net income of $5.3 million, or $0.30 per diluted share, for the same period last year.

* Adjusted net loss was $(0.4) million, or $(0.02) per diluted share, compared to adjusted net income of $3.0 million, or $0.17 per diluted share last year.

* Adjusted EBITDA of $4.7 million, or $0.27 per diluted share compared to $9.4 million, or $0.53 per diluted share for the same period last year.

Adjusted net income (loss) and adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Financial Measures” below.

First Quarter Highlights

* Showed sequential improvement in the first quarter of 2022 over the fourth quarter of 2021:

- Gross profit improved by $4.1 million;

- Net loss improved by $9.0 million, or $0.50 per diluted share;

- Adjusted EBITDA improved by $3.3 million.

- Maintained focus on Project Uno, a profit improvement project, making progress on pricing initiatives, SKU rationalization, unified procurement, consolidating freight and administrative functions across all business units.

- Appointed Brian W. Kocher as Calavo’s President and Chief Executive Officer.

- Named former interim CEO Steven Hollister as Chairman of the Board of Directors.

Management Commentary

“I want to thank interim CEO Steve Hollister and the Calavo team for getting the company back on course following the challenges created by the COVID-19 pandemic,” said Brian W. Kocher, President and Chief Executive Officer of Calavo Growers, Inc. “While we still have considerable progress to make, we are showing sequential improvement quarter to quarter in revenue, gross margin and EBITDA, and these trends are continuing into the second quarter.

“As Calavo’s new President and CEO, I am encouraged by how our team has embraced the profit improvement steps that are underway with Project Uno. We are working with our customers not only on pricing but also on ensuring they have the right product mix, which is supporting our continued efforts in SKU rationalization. Calavo also for the first time has taken a consolidated view to its freight programs and is finding substantial savings as we implement the new carrier agreements. We have adopted e-procurement practices across all our facilities, initiated labor productivity projects and have begun integrating human resources, and back-office functions to improve efficiency. These efforts bring dollars to the bottom line that we will see in our results going forward.

“I’m a veteran of the produce industry, and I’ve known for many years that Calavo is a great company and a great business. We have healthy, sustainable, convenient products that are popular with consumers and provide a great value. We have steadily improved our performance from Q3 to Q4 to Q1, and we are focused on continuing that improvement going forward. We have strong customer relationships, and we want to supply them with relevant products for their consumers so our businesses will grow and thrive together. If our customers win, we win, and we will be positioned for growth for decades into the future.”

First Quarter 2022 Consolidated Financial Review

Total revenue for the first quarter 2022 was $274.1 million, compared to $220.6 million for the first quarter 2021, an increase of 24%. Fresh segment sales increased 41%, and the RFG and Foods business segments generated sales growth of 6% and 4%, respectively. The average selling price of avocados in the Company’s Fresh segment was higher by 64% while volumes were 12% lower than the prior-year period due to lower available supplies.

Gross profit for the first quarter was $13.2 million, or 4.8% of revenue, compared to $17.8 million, or 8.1% of revenue, for the same period last year. The decrease in gross profit margin reflected inflationary pressures on labor, raw materials and freight combined with supply constrained volume declines and adverse foreign currency impacts in the Fresh segment.

Selling, general and administrative (SG&A) expenses for the first quarter totaled $15.3 million, or 5.6% of revenue, compared to $14.2 million, or 6.4% of revenue, for the same period last year. The year-over-year increase in SG&A expenses primarily was related to increases in outside consulting services related to restructuring efforts and investment in key personnel to advance Project Uno.

Net loss for the first quarter was $(4.0) million, or $(0.23) per share. This compares with net income of $5.3 million, or $0.30 per diluted share, for the same period last year.

Adjusted net loss was $(0.4) million, or $(0.02) per share, for the first quarter, compared to adjusted net income of $3.0 million, or $0.17 per diluted share, for the same period last year.

Adjusted EBITDA was $4.7 million for the first quarter of 2022, compared to $9.4 million for the same period last year.

Balance Sheet and Liquidity

The Company ended the quarter with $70.8 million of total debt, which included $64.0 million of borrowings under its line of credit and $6.8 million of long-term obligations and finance leases. Cash and cash equivalents (unrestricted) totaled $7.8 million as of January 31, 2022.

Subsequent to quarter-end, the Company reached an agreement with its lenders to amend the existing revolving credit facility, which among other things reduces the total capacity of the facility to $80.0 million. Under the new terms of the facility, total liquidity at quarter-end was approximately $21.3 million on a pro forma basis, including unrestricted cash and borrowings under the facility, which we believe is sufficient for our working capital needs and investment plans as we continue the implementation of Project Uno and drive performance improvements across the business.

First Quarter Business Segment Performance

Fresh

First quarter 2022 sales in Calavo’s Fresh business segment were $162.6 million, up from $115.5 million for the same period last year. Avocado prices were 64% higher year-over-year, partially offset by 12% lower volume due to lower available market supply. Fresh segment gross profit for the first quarter of 2022 was $11.7 million, or 7.2% of segment sales, compared to $13.1 million, or 11.4% of segment sales, for the same period last year. The decrease in gross profit was primarily driven by a $1.6 million foreign exchange impact. Excluding foreign exchange, gross profit improved.

Renaissance Food Group (RFG)

RFG business segment sales in the first quarter of 2022 were $95.8 million, up 6% from $90.3 million in the same period last year reflecting price increases and favorable product mix, partially offset by a slight volume decrease year-over-year. Segment gross profit was a loss of $652,000, down from a loss of $23,000 for the same period last year. RFG results were negatively impacted by costs associated with the consolidation of our Jacksonville, Florida facility into our Georgia facility. Excluding those costs, RFG would have delivered year-over-year gross profit growth. Gross margin also was adversely affected by market-wide factors such as higher labor, material and freight costs. We have begun implementing price increases, SKU rationalization, labor productivity initiatives and freight consolidation to offset these increased costs.

Foods

Sales in the Foods segment totaled $17.1 million for the first quarter 2022, 4% higher than $16.5 million in the same period last year due to improved foodservice demand. Segment gross profit totaled $2.2 million, or 12.9% of sales, for the first quarter, compared to $4.7 million, or 28.7% of sales, for the same period last year. The decrease in gross profit for the first quarter was mainly due to year-over-year increases in fruit and labor costs. We have been implementing price increases, raw product sourcing initiatives, labor productivity projects and freight consolidation to offset these increased costs and should see results from these efforts in coming quarters.

Outlook

Demand for fresh, healthy and convenient products remains strong even as industry-wide inflationary pressures on raw materials, freight, packaging and labor costs persist. We have and will continue to implement pricing and operational initiatives to offset these items, and we are seeing quarter to quarter sequential improvement in profitability. We are optimistic that we will see ongoing profit improvement from our efforts.

Conference Call and Webcast

Calavo will host a conference call, today at 5:00 pm ET/2:00 pm PT to discuss its financial results. The conference call may be accessed by dialing 877-407-3982 (domestic) or 201-493-6780 (international) with conference ID: 13727810. A live audio webcast of the call also will be available on the Investor Relations section of Calavo’s website at http://ir.calavo.com and will be archived for replay.

About Calavo Growers, Inc.

Calavo Growers, Inc. is a global avocado-industry leader and provider of value-added fresh food serving retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers worldwide. The Company’s Fresh segment procures and markets fresh avocados and select other fresh produce, including tomatoes and papayas. The Renaissance Food Group (RFG) segment creates, markets and distributes a portfolio of healthy, fresh foods, including fresh-cut fruit, fresh-cut vegetables and prepared foods. The Foods segment manufactures and distributes guacamole and salsa. Founded in 1924, Calavo’s fresh food products are sold under the respected Calavo brand name as well as Garden Highway, Chef Essentials and a variety of private label and store brands.

Source: Calavo Growers, Inc

[Category: Financial Results]

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