SANTA PAULA, Calif., Dec. 20, 2022 (GLOBE NEWSWIRE) — Calavo Growers, Inc. BB #:113203, a global avocado-industry leader and provider of convenient, ready-to-eat fresh food, today reported its financial results for the fiscal fourth quarter and fiscal year ended October 31, 2022.
Fourth Quarter Financial Overview
- Total revenue of $243.6 million, an 11% decline from prior year
- Grown segment revenue declined 20% year-over-year to $119.1 million
- Prepared segment revenue increased 0.6% year-over-year to $125.0 million
- Gross profit of $20.4 million compared to $9.1 million for the year-ago quarter
- Grown segment gross profit increased $1.1 million from prior year to $8.6 million
- Prepared segment gross profit increased $10.1 million from prior year to $11.8 million
- Net loss of $(3.3) million, or $(0.19) per diluted share, compared to net loss of $(13.0) million, or $(0.73) per diluted share, for the same period last year
- Adjusted net income of $0.6 million, or $0.03 per diluted share, compared to adjusted net loss of $(1.4) million, or $(0.08) per diluted share for the year-ago quarter
- Adjusted EBITDA of $9.6 million, or $0.55 per diluted share compared to $1.4 million, or $0.08 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.
Fiscal Year 2022 Financial Overview
- Total revenue of $1.2 billion, compared to $1.1 billion for fiscal year 2021
- Gross profit of $73.8 million compared to $57.4 million for fiscal year 2021
- Net loss of $(6.2) million, or $(0.35) per share, compared to a net loss of $(11.8) million, or $(0.67) per share for fiscal year 2021
- Adjusted net income of $8.9 million, or $0.50 per share, compared to adjusted net income of $6.2 million, or $0.35 per diluted share for fiscal year 2021
- Adjusted EBITDA of $35.1 million, compared to $26.8 million for fiscal year 2021
- Reduced net debt by approximately $38 million
Fourth Quarter and Fiscal Year Highlights
- Established new executive leadership team and better aligned corporate compensation programs to company performance
- Achieved significant performance improvement in Prepared segment
- Realized $16 million of benefits from Project Uno in Q4 and $46 million for full year
- Generated $18.5 million in gross proceeds from sale of non-strategic Limoneira shares
- Launched a brand refresh, updating the company’s logo, tagline, brand personality and website to support Calavo’s One Company vision
- Announced official certification and opening of Jalisco avocado packing facility for the U.S. market
Management Commentary
“In the fourth quarter, we generated sequential and year-over-year improvements in total company gross profit and adjusted EBITDA led by our Prepared segment with both the guacamole and fresh-cut fruit and vegetable divisions contributing to the continued momentum,” said Brian W. Kocher, President and Chief Executive Officer of Calavo Growers, Inc. “Earnings were moderated by the Grown segment, which had a slower than anticipated recovery from the challenging market conditions that occurred late in the third quarter.
“Prepared segment gross profit for the quarter increased $10.1 million versus the prior year quarter, achieving a gross margin of 9.4%. The gross profit increase occurred across the segment with the fresh-cut division, formerly RFG, generating a gross margin of over 8% and the guacamole division, formerly Foods, realizing a gross margin of about 14% as fruit input costs declined over the course of the quarter. Grown segment gross profit increased versus the prior year quarter despite a 4% decline in avocado volume as avocado earnings per carton increased and performance in our tomato and papaya business improved.
“For the fiscal year, both the Grown and Prepared segments contributed to higher earnings, with the Prepared segment showing significant improvement as a result of Project Uno initiatives. Prepared gross profit more than doubled as improvements in the fresh-cut division more than compensated for lower profit in the guacamole division caused by input cost pressure. Grown gross profit increased as avocado volume declines of 12% were more than offset by higher gross profit per carton.
“The mindset of continuous improvement established with Project Uno has led to $46 million in benefits in fiscal 2022 from pricing initiatives, SKU rationalization, unified procurement, labor efficiencies, freight consolidation and administrative synergies. Since its inception, Project Uno has systematically focused on improving profitability. It isn’t a one-time program, and I’m pleased to report that the practices and attitudes we’ve developed around Project Uno are being integrated into our daily operations and we will continue the focus even if we no longer report specifically on Project Uno.”
Fourth Quarter 2022 Consolidated Financial Review
Total revenue for the fourth quarter 2022 was $243.6 million, compared to $273.4 million for the fourth quarter 2021, a decline of 11%. Grown segment sales decreased 20% and Prepared segment sales increased 0.6%. The average selling price of avocados in the Company’s Grown segment decreased by 20% while volumes were down 4.2% versus the prior-year period.
Gross profit for the fourth quarter was $20.4 million, or 8.3% of revenue, compared to $9.1 million, or 3.3% of revenue, for the same period last year.
Selling, general and administrative (SG&A) expenses for the fourth quarter totaled $17.1 million compared to $16.3 million for the same period last year. SG&A was higher than prior year mainly due to higher costs associated with compensation including short-term incentive expense.
Net loss for the fourth quarter was $(3.3) million, or $(0.19) per share. This compares with a net loss of $(13.0) million, or $(0.73) per diluted share, for the same period last year.
Adjusted net income was $0.6 million, or $0.03 per diluted share, compared to adjusted net loss of $(1.4) million, or $(0.08) per diluted share last year.
Adjusted EBITDA was $9.6 million, or $0.55 per diluted share, compared to $1.4 million, or $0.08 per diluted share for the same period last year.
Balance Sheet and Liquidity
The Company ended the quarter with $7.2 million of total debt, which included $1.2 million of borrowings under its line of credit and $6.0 million of other long-term obligations and finance leases. Cash and cash equivalents (unrestricted) totaled $2.1 million as of October 31, 2022.
Fourth Quarter Business Segment Performance
Grown
Fourth quarter 2022 sales in Calavo’s Grown business segment were $119.1 million, down 20% from $149.8 million for the same period last year. Avocado prices were 20% lower year-over-year, and avocado volume was 4.2% lower. Grown segment gross profit for the fourth quarter was $8.6 million compared to $7.4 million for the same period last year. The increase in gross profit primarily was driven by higher avocado earnings per carton in addition to higher earnings in our tomato and papaya business. Although improved versus the prior year, the volume and margin recovery in our avocado business occurred more gradually from the third quarter than anticipated. By October, margins were improving and volume was increasing. Industry volume from Mexico in Q4 was estimated to be up about 12% versus the prior year.
Prepared
Prepared segment sales in the fourth quarter of 2022 were $125.0 million, up from $124.2 million in the same period last year, benefitting from price and mix improvements. Segment gross profit was $11.8 million, increasing more than $10 million from the same period last year primarily due to the benefits from ongoing performance initiatives in our fresh-cut division. The Prepared segment generated a gross margin of over 9%, which consisted of a gross margin of over 8% in the fresh-cut division and about 14% in the guacamole division. Along with steady improvement in the fresh-cut division, guacamole margins normalized during the quarter as fruit input costs declined and operational initiatives drove cost benefits. From Q3 to Q4, fruit input costs declined by about 50%.
2023 Outlook
In fiscal 2023, we expect and plan for several market trends and corporate initiatives:
- We estimate the Mexican avocado crop will be 10-20% larger in 2023 and Jalisco fruit will be available for the full year; we expect our Mexican avocado volume to grow in conjunction with increased supplies from Mexico and generally expect volume growth across the businesses
- Avocado pricing is expected to decline with increased supply, but we expect to maintain our targeted gross profit per carton between $3 and $4
- Input costs for guacamole are expected to be lower due to the supply outlook; we expect gross margin to approximate 25% in the guacamole division
- Performance in our fresh-cut business is expected to continue improving in 2023, and we expect to exit 2023 delivering a gross margin run rate of 10-12%; however, we expect the first quarter to be weaker due to seasonality
- We expect around 15-20% of our full year earnings to be generated in Q1 and our Q1 Prepared earnings to decline by about a third from the Q4 level due to seasonality
- We expect 2023 capital expenditures to approximate $18 million
About Calavo Growers, Inc.
Calavo Growers, Inc. (Nasdaq: CVGW) is a global leader in quality produce, including avocados, tomatoes and papayas, and a pioneer of healthy fresh-cut fruit, vegetables and prepared foods. Calavo products are sold under the trusted Calavo brand name, proprietary sub-brands, private label and store brands.
Founded in 1924, Calavo has a rich culture of innovation, sustainable practices and market growth. The company serves retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers worldwide. Calavo is headquartered in Santa Paula, California, with processing plants and packing facilities throughout the U.S. and Mexico. Learn more about The Family of Fresh™ at calavo.com.
