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.

Non-GAAP Financial Measures

This press release includes non-GAAP measures such as EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS, which are not prepared in accordance with U.S. generally accepted accounting principles, or “GAAP.”

EBITDA is defined as net income (loss) attributable to Calavo Growers, Inc. excluding (1) interest income and expense, (2) income tax (benefit) provision, (3) depreciation and amortization and (4) stock-based compensation expense. Adjusted EBITDA is EBITDA with further adjustments for (1) non-cash net losses recognized from unconsolidated entities, (2) goodwill impairment, (3) write-off of long-lived assets, (4) acquisition-related costs, (5) restructuring-related costs, including certain severance costs, (6) certain litigation and other related costs, and (7) one-time items. Adjusted EBITDA is a primary metric by which management evaluates the operating performance of the business, on which certain operating expenditures and internal budgets are based. The adjustments to calculate EBITDA and adjusted EBITDA are items recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded.

Adjusted net income is defined as net income (loss) attributable to Calavo Growers, Inc. excluding (1) non-cash net losses recognized from unconsolidated entities, (2) goodwill impairment, (3) write-off of long-lived assets, (4) acquisition-related costs, (5) restructuring-related costs, including certain severance costs, (6) certain litigation and other related costs, and (7) one-time items. Adjusted net income and the related measure of adjusted diluted EPS exclude certain items that are recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. We believe adjusted net income affords investors a different view of the overall financial performance of the Company than adjusted EBITDA and the GAAP measure of net income (loss) attributable to Calavo Growers, Inc. Additionally, the Company’s senior management is compensated in part on the basis of Adjusted Net Income.

Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the financial tables that accompany this release.

Items are considered one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. One-time items are identified in the notes to the reconciliations in the financial tables that accompany this release.

Non-GAAP information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. None of these metrics are presented as measures of liquidity. The way the Company measures EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in Company agreements.

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.

Safe Harbor Statement

This press release contains statements relating to future events and results of Calavo (including certain projections and business trends) that are "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995, that involve risks, uncertainties and assumptions. These statements are based on our current expectations and are not promises or guarantees. If any of the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Calavo may differ materially from those expressed or implied by such forward-looking statements and assumptions. The use of words such as "anticipates," "estimates," "expects," "projects," "intends," "plans" and "believes," among others, generally identify forward-looking statements. Risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by the forward-looking statements include, but are not limited to, the following: the impact of the COVID-19 pandemic on our business, results of operations, and financial condition, including, but not limited to, disruptions in the manufacturing of our products and the operations of the related supply chains supporting our ability to deliver our products to consumers, impacts on our employees and uncertainty regarding our ability to implement health and safety measures for our employees, uncertainties regarding consumer demand for our products, impact on our food service customers, increased costs, the impact of governmental trade restrictions imposed as a result of COVID-19 and the possible adverse impact of COVID-19 on our goodwill and other intangible assets; our ability to raise prices, particularly in our RFG and Foods segments, to offset increase costs of goods sold, and the impact of such price increases on future net sales; seasonality of our business; sensitivity of our business to changes in market prices of avocados and other agricultural products and other raw materials including fuel, packaging and paper; potential disruptions to our supply chain; risks associated with potential future acquisitions, including integration; potential exposure to data breaches and other cyber-attacks on our systems or those of our suppliers or customers; dependence on large customers; dependence on key personnel and the ability of our management team to work together successfully; potential for labor disputes; reliance on co-packers for a portion of our production needs; competitive pressures, including from foreign growers; risks of recalls and food-related injuries to our customers; changing consumer preferences; the impact of environmental regulations, including those related to climate change; our ability to develop and transition new products and services and enhance existing products and services to meet customer needs; risks associated with doing business internationally (including possible restrictive U.S. and foreign governmental actions, such as restrictions on transfers of funds and COVID-19 and trade protection measures such as import/export/customs duties, tariffs and/or quotas and currency fluctuations); risks associated with receivables from, loans to and/or equity investments in unconsolidated entities; volatility in the value of our common stock; the impact of macroeconomic trends and events; and the resolution of pending investigations, legal claims and tax disputes, including an assessment imposed by the Mexican Tax Administrative Service (the “SAT”) and our defenses against collection activities commenced by the SAT.

For a further discussion of these risks and uncertainties and other risks and uncertainties that we face, please see the risk factors described in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and any subsequent updates that may be contained in our Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission. Forward-looking statements contained in this press release are made only as of the date of this press release, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(in thousands)

CALAVO GROWERS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)

CALAVO GROWERS, INC.
NET SALES AND GROSS PROFIT BY BUSINESS SEGMENT (UNAUDITED)
(in thousands)

For the three months ended January 31, 2022 and 2021, intercompany sales and cost of sales of $0.6 million and $0.5 million between Fresh products and RFG were eliminated. For the three months ended January 31, 2022 and 2021, intercompany sales and cost of sales of $0.8 million and $1.1 million between Calavo Foods and RFG were eliminated.

CALAVO GROWERS, INC.
RECONCILIATION OF ADJUSTED NET INCOME AND EPS (UNAUDITED)
(in thousands, except per share amounts)

The following table presents adjusted net income and adjusted diluted EPS, each a non-GAAP measure, and reconciles them to net income (loss) attributable to Calavo Growers, Inc., and Diluted EPS, which are the most directly comparable GAAP measures. See “Non-GAAP Financial Measures” earlier in this release.

CALAVO GROWERS, INC.
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA (UNAUDITED)
(in thousands, except per share amounts)

The following table presents EBITDA and adjusted EBITDA, each a non-GAAP measure, and reconciles them to net income (loss) attributable to Calavo Growers, Inc., which is the most directly comparable GAAP measure. See “Non-GAAP Financial Measures” earlier in this release.

CALAVO GROWERS, INC.
OTHER INFORMATION (UNAUDITED)
(in thousands, except per pound amounts)