SANTA PAULA, Calif., June 06, 2023 (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 second quarter ended April 30, 2023.
Second Quarter Financial Overview
- Total revenue of $244.7 million, a 26% decline from prior year
- Grown segment revenue decreased 33% year-over-year to $140.7 million
- Prepared segment revenue decreased 14% year-over-year to $104.5 million
- Gross profit of $15.0 million, compared to $21.7 million for the year-ago quarter
- Grown segment gross profit decreased $5.6 million from prior year to $12.6 million
- Prepared segment gross profit decreased $1.1 million from prior year to $2.4 million
- Net loss of $(4.0) million, or $(0.23) per diluted share, compared to net loss of $(0.2) million, or $(0.01) per diluted share, for the same period last year
- Adjusted net loss of $(0.2) million, or $(0.01) per diluted share, compared to adjusted net income of $5.8 million, or $0.33 per diluted share for the year-ago quarter
- Adjusted EBITDA of $6.9 million compared to $12.7 million for the same period last year
- Adjusted net income (loss), adjusted net income (loss) per diluted share, and adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Financial Measures” below.
Second Quarter Highlights
- Lee E. Cole appointed President and Chief Executive Officer
- Avocado margins improved versus fiscal first quarter
- Implemented restructuring activities
- Ramping up new Prepared volume for the fiscal second half
- Board declared a quarterly cash dividend of $0.10 per share to be paid on July 11, 2023 to investors of record on June 27, 2023
Management Commentary
“I am excited to be back at Calavo, a company that I helped to build and lead as CEO for 20 years and as Chairman for 28 years,” said Lee E. Cole, President and Chief Executive Officer of Calavo Growers, Inc. “I am back because I believe in the long-term earnings potential of this company, and I am confident that our team under my leadership can restore Calavo’s profitability. My primary focus since returning has been on the avocado business, and I am really pleased with the progress we’re making. Avocado margins have improved from the first quarter, and avocado volume in the second quarter was up 11% compared to the prior year quarter.
“Our Prepared segment continues to see strong performance in guacamole as we benefit from both fruit cost declines and operational improvements as compared to the year ago quarter,” Cole continued. “The results from the guacamole business, however, were more than offset by lower earnings in the fresh cut division attributed primarily to lower volume. We expect fresh cut earnings to improve in the second half as we onboard volume for new and existing customers and realize benefits from various operational projects.
“With the improvements we’re making to the business, I’m optimistic about the second half of the year and feel confident that we’re putting Calavo back on track for long-term success. It’s an exciting time to be at Calavo, and I look forward to seeing the results of our work.”
Second Quarter 2023 Consolidated Financial Review
Total revenue for the second quarter 2023 was $244.7 million, compared to $331.4 million for the second quarter 2022, a decline of 26%. Grown segment sales decreased 33% and Prepared segment sales decreased 14%. The average selling price of avocados in the Company’s Grown segment decreased by over 40% while volumes were up 11% versus the prior-year period.
Gross profit for the second quarter was $15.0 million compared to $21.7 million for the same period last year.
Selling, general and administrative (SG&A) expenses for the second quarter totaled $18.1 million, compared to $16.6 million for the same period last year. The increase primarily was due to costs associated with restructuring and the departure of our former CEO.
Net loss for the second quarter was $(4.0) million, or $(0.23) per share. This compares with a net loss of $(0.2) million, or $(0.01) per diluted share, for the same period last year.
Adjusted net loss was $(0.2) million, or $(0.01) per diluted share, compared to adjusted net income of $5.8 million, or $0.33 per diluted share last year.
Adjusted EBITDA was $6.9 million compared to $12.7 million for the same period last year.
Balance Sheet and Liquidity
The Company ended the quarter with $29.3 million of total debt, which included $22.2 million of borrowings under its line of credit and $7.1 million of other long-term obligations and finance leases. Cash and cash equivalents totaled $4.2 million, and the Company had $22 million of available liquidity as of April 30, 2022.
Segment Performance
Grown
Grown segment gross profit declined $5.6 million from the prior year to $12.6 million despite an 11% increase in avocado volume as profit per case declined. Avocado prices rose from the first quarter but were below prior year levels by over 40%. Our second quarter avocado volume from Mexico increased 35% compared to the prior year quarter while volume from California declined 83% as the harvest was delayed by wet field conditions. Industry volume from Mexico was up 48% in the fiscal second quarter, rebounding from a lower volume crop last year, and we expect volume from Mexico to remain strong for the balance of the fiscal year. The California season is now underway and, given the delayed start, we expect higher than typical California volume in our fiscal second half.
Prepared
Prepared segment gross profit declined $1.1 million from the prior year to $2.4 million, consisting of a $3.0 million gross profit decline in the fresh cut division, partially offset by a $1.8 million increase in the guacamole division. Fresh cut gross profit declined primarily due to weaker volume, down 19% from the prior year, and a more challenging price environment. Syndicated retail data indicates unit sales remain down on a calendar year-to-date basis for produce categories, particularly for value-added produce, while dollar sales are about flat. Similarly, retail guacamole unit sales are also down, as are dollar sales. We are on track to deliver new volume to customers in fresh cut in the second half, but we anticipate that generally slower retail velocities will persist. Gross profit in the guacamole division more than doubled compared to the prior year as lower fruit cost and improved plant performance generated a guacamole gross margin of 22% compared to 8% last year. We expect avocado input costs to remain favorable in the second half of fiscal 2023 relative to fiscal 2022 due to improved avocado supply. Prepared gross profit in the second quarter also was impacted by write-offs of $0.4 million associated with restructuring our Salsa business.
Outlook
We expect earnings to improve in the second half of the year compared to the first half on improved performance in both Grown and Prepared. In Grown, avocado margins in the fiscal third quarter through early June have exceeded the average level realized in our fiscal second quarter. We expect avocado volumes in the fiscal second half to exceed prior year levels.
In Prepared, we expect the impact of new volume and other operational initiatives to drive improved performance in fresh cut in the fiscal second half compared to the fiscal first half. We expect the guacamole division to continue to benefit from reasonable fruit costs and operational improvements versus the prior year, achieving a gross margin of approximately 20% for the full year.
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.
