CVGW Q1 2023 Earnings Call Summary

Revenue: $226 million, down $48 million from Q1 2022.
Grown Segment Revenue: $118 million, down $45 million year-over-year; average avocado case price fell to $28 from $43 in the prior year.
Prepared Segment Revenue: $108 million, down $4 million; volume declined by 13%.
Gross Profit: $14 million, up $1 million from the prior year.
Adjusted EBITDA: $3.6 million, down from $4.7 million in Q1 2022.
Cash and Equivalents: Approximately $2 million; available liquidity around $26 million.
Capital Expenditures: $5 million in Q1; expected total for FY 2023 is $13 million, down from previous guidance of $18 million.

The company is focusing on improving operational efficiencies and has initiated a restructuring of U.S. and Mexico operations.
Calavo is exiting its noncore salsa business to concentrate resources on guacamole growth.
A new transportation management system is being implemented to enhance freight cost competitiveness.
The Prepared segment is targeting new customer acquisitions, particularly in deli grab-and-go items, with plans to onboard two national customers in the second half of the fiscal year.

Adjusted EBITDA for FY 2023 is now estimated to be between $40 million and $45 million.
Expectation of sequential improvement in results throughout the fiscal year, although margin volatility in the Grown segment and volume softness in the Prepared segment may persist.
Grown segment margins are anticipated to be at the low end of the $3 to $4 range per case, with volume expected to increase.
Prepared segment gross margins in the fresh cut division are expected to be at the low end of the 10% to 12% range by year-end.

The Grown segment faced significant pricing pressure due to high volumes of smaller Mexican avocados and stubborn retail prices.
The Prepared segment experienced a decline in volume sales due to inflation and challenging economic conditions, leading to lower fixed cost absorption.
Weather-related costs of approximately $1 million impacted the fresh cut division.
Overall market conditions have led to a cautious outlook, with the need to adjust margin expectations and a potential slowdown in recovery to historical performance levels.

Management acknowledged that consumer demand has been more elastic than previously expected, with consumers trading down or reducing purchases in response to inflation.
The decision to exit the salsa business was driven by its lack of critical mass and the desire to focus on more profitable areas.
Future capital expenditures will be closely monitored, with a commitment to invest in high-return projects while maintaining fiscal discipline.
Management emphasized the importance of improving operational efficiencies and maintaining flexibility in their business model to adapt to changing market dynamics.

CVGW — Calavo Growers, Inc.