CALAVO GROWERS INC Q4 FY2021 earnings call

• 2021 was challenging but ended strong; fiscal 2022 started well. Market conditions improved from August-October. - Avocado demand in US continues to grow, with per capita consumption over 9 lbs, double that of 10 years ago. Hispanic population growth will boost avocado consumption. - Value added fruits/vegetables grow faster than broader produce categories. - Project Uno picked up speed in Q4: price increases across RFG and foods customers, supply chain unification, rationalization of less profitable SKUs, and consolidating RFG Florida processing to Georgia. Expected annualized EBITDA increase of $70M by early-mid fiscal 2023. - Jalisco state approved to ship fresh avocados to US mid-next year; Calavo's Jalisco facility can help balance supply/demand. - Confirmed plans to reduce board size; welcomed new independent director; search for new CEO nearly complete; new CHRO and CFO joined. - Dividend of $1.15 per share maintained.

On a consolidated basis, fourth quarter revenue increased by 17% year-over-year. The Fresh segment saw a 26% increase, driven by a 37% higher average selling price for avocados but a 7% decline in volume. RFG revenue was up 7% due to 2% higher volume and 5% average selling price. Food segments delivered 6% higher sales, mostly from higher foodservice volume and price increases.

• Project Uno initiatives expected to fully realize $70M annualized EBITDA increase by early-mid fiscal 2023. - Expect gradual and increasing improvement in quarterly results through fiscal 2022 from Project Uno. - Operational initiatives and price increases expected to offset market inflationary pressures on materials, freight, and labor. - Long-term outlook of business remains favorable.

• Labor shortages, suboptimal raw materials at higher prices, and high freight costs weighed on the business in 2021. - Uncertainty around Mexican state approvals and certification for avocado shipments from Jalisco. - Potential challenges in fully realizing Project Uno benefits due to ongoing market dynamics and execution risks.

Q: How to think about the progression of Project Uno benefits and major milestones?

A: Project Uno benefits will be proportional each quarter sequentially with pricing initiatives, SKU rationalization, and asset optimization. Investments at the start of the program, but expect gradual improvement.

Q: Size and timeline for Jalisco facility to ship to US?

A: Jalisco approved for shipments to US mid-next year. Facility is large, primarily handles fruit for export but will help balance US supply/demand. Ramping to utilize for additional product movement.

Q: Margin vs volume opportunity with Jalisco?

A: Both; allows more product movement and provides margin and volume benefits by utilizing another sourcing avenue.

Q: Improvement in gross margins for RFG?

A: Closure of Jacksonville facility and consolidation to Georgia expected to yield $4M-$6M annualized savings, with benefits seen as production moves to Georgia.

Q: Timing for Calavo Foods margin normalization?

A: Moving in the right direction; food costs and labor are key components, and moving towards historical margins as pricing and supply stabilize.

Q: Timing and impact of Project Uno start?

A: Project Uno started with aim to consolidate supply chains, rationalize SKUs, and improve profitability. Good timing as it allowed addressing challenges like COVID and supply chain issues, with ongoing benefits expected.