Calavo Growers, Inc. Q2 FY2022 earnings call

• Reorganized leadership and business segments into Ground (fresh avocados, tomatoes, papayas) and Prepared (RFG and Food segments aggregated). - Launched brand refresh to support the one Company vision. - Advanced Project Uno with initiatives like product optimization, procurement, labor effectiveness, etc. - Sequential improvement in financial results: gross profit up $8.5M, net loss improved by $3.7M, adjusted EBITDA up $7.9M. - Balance sheet: paid down over $22M in debt, total debt $48.1M, unrestricted cash $2.3M, total available liquidity $15.9M.

Fresh segment: Gross profit improved by $8.5 million sequentially. Despite a 13% volume decrease due to lower export volume from Mexico, gross margin dollars offset this decline. Average gross profit per case of avocados was $1.50 higher than Q1 '22 and $1.30 higher than Q2 last year. Market share was flat year-over-year and vs Q1 '22. Prepared segment: - RFG: Pricing increased 3% Q/Q and 6% Y/Y. Customer fill rate reached 99% (up from 96% Q1 '22), customer and consumer complaints decreased over 17% Y/Y and 8% Q/Q. Labor productivity increased 9% Q/Q. Gross profit percentage improved from negative 1% to positive 2%. - Foods: Fruit costs were high, leading to a sequential decrease in gross margins Q/Q. However, the summer avocado crop in Mexico expected in mid-July should relieve prices. Still gross profit positive, with strong demand for processed avocado and guacamole.

• Project Uno targeted $70M annualized EBITDA improvement in 2 years, achieved ~$13M by end of Q2. - RFG aiming for gross margin range 10%-12% by end of 2023, with back half of year usually outperforming front half. - Avocado prices expected to normalize as summer crop arrives in mid-July. - Foods segment margins expected compressed due to raw material prices continuing into Q3. - Plan to pass on higher costs via pricing, productivity, and sourcing.

• Inflationary pressures affecting costs. - Supply constraints in Fresh segment. - Seasonality and market fluctuations impacting Foods segment. - Potential material differences from forward-looking statements as per SEC filings.

Q: Eric Larson asked about Fresh margins and when better supplies from Mexico might arrive.

A: Brian Kocher said Fresh margins were above historic norm, and summer avocado crop in Mexico expected in mid-July to relieve prices.

Q: Mitch Pinheiro asked about RFG cost components and volume growth.

A: Brian Kocher said labor productivity up 9% Q/Q, material cost up only 2% with e-sourcing and yield improvement, and growth from existing and new customers on service and availability.

Q: Ben Klieve asked about RFG gross margin target and C-suite turnover.

A: Brian Kocher said RFG aims for 10%-12% gross margin by end of 2023 and that C-suite turnover hasn't slowed operations, with resources beneath C-suite relatively stable