Calavo Growers, Inc. Q1 FY2022 earnings call

• Brian Kocher joined as President and CEO in February, impressed by the Calavo team and progress on Project Uno aiming for $70M EBITDA improvement in 2023.
• Addressed headwinds like labor shortages, freight costs by launching RFP for freight, and pricing initiatives.
• Closed Florida RFG plant and consolidated operations into Georgia facility, though initial inefficiencies due to Omicron, but labor and productivity improved.
• Consolidated shared service centers for efficiency.
• USDA avocado ban from Michoacan was short-lived. Anticipated firm prices and tight supplies as California crop comes in, with Jalisco supply expected mid-year.
• Mentioned progress in Project Uno with $5M profit improvement in Q1 vs Q4, total $9M since start.

Fresh Segment

• Avocado prices were 64% higher compared to Q1 2021. Volume was down 12% y-o-y. Gross profits were down y-o-y mainly due to foreign currency rates, but excluding FX, gross profit per carton was $3.31, $0.54 higher than prior year, and improved $4.3 million from Q4 2021.

RFG Segment

• Sales increased 6% compared to Q1 last year. Gross margin loss widened during the quarter due to commodity cost inflation, higher labor turnover, and Georgia facility transition. Excluding Georgia, RFG's gross margin improved by $700,000 from the same quarter last year and $150,000 over Q4 2021.

Foods Segment

• Sales increased 4% year-over-year due to improved retail demand. However, increased fruit and labor costs pressured gross profit, which was down $2.5 million from Q1 2021 but up $300,000 from Q4 2021.

• Planning to continually improve profit generation quarter-over-quarter as Project Uno takes off, with margin enhancements through price initiatives, SKU rationalization, and plant optimization.
• Expect trajectory to improve for each quarter with higher growth in some quarters than Q1.

• Labor shortages and inefficiencies still present.
• Higher freight costs.
• Industry-wide inflationary pressures on raw materials, freight, packaging, and labor costs remain ongoing and uncertain.

Q: On RFG volumes and Grab and Go market?

A: Volume flat due to closing Florida plant and consolidating into Georgia. Grab and Go market continues to grow, with customers shifting towards such products. Expect demand to continue and plan to grow once right product line is in place.