Earnings call transcript Q1 2023

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Operator

Good afternoon, and welcome to the First Quarter 2023 Calavo Growers Earnings Conference Call and Webcast. [Operator Instructions]. I will now turn the conference over to your host, Julie Kegley, Investor Relations for Calavo.

You may begin.

Julie Kegley

Good afternoon, and thank you for joining us today to discuss Calavo Growers' financial results for the first quarter of fiscal 2023. our Relations and at section issued in is ir.calavo.com. we Investor the of afternoon, earnings it release, available This our website Chief With Kocher, Munsell, call today's Financial Executive and Chief me Shawn Officer; are Officer. and on President Brian

then with your call and up the We will remarks open begin prepared for questions.

to I today's you comments federal will we begin, remind under laws. Before include securities would like that forward-looking statements

Statements intend, that identified and by forward-looking not improvement words words believe, be, expect, are will, comparable expected anticipate statements statements. such Forward-looking and operating facts, as phrases. are historical about also as other or such profit statements are revenue in

actual of our to on these Our by discussion the contemplated factors in those forward-looking statements that XX-Q. results compared is a materially SEC reports may in our results contained filings, could including from difference Form A such forward-looking our and statements. cause XX-K vary material

the to will I over Brian call that, Kocher. now With turn

Brian Kocher

today. you and Thank good Julie, us you, We afternoon, appreciate joining everyone.

Our with we fiscal as more we high Mexican the shelf than that small improve challenging will Grown both first In fiscal our pressured results the and retail combined and avocados, in reflect taken prices year. of action have fruit, margins segment, quarter through expect still the results progress high quarter. volumes segments, but prices, especially conditions wholesale during anticipated

quarter. fourth to $XX the in contract $XX we the fell quarter, price quarter the volume during about quarter did prices increase average industry year as much in versus as to to avocado they and first and around prior anticipate While margins we did. in expected our $XX case not The

Bowl. improve to We also Super and the expected prices approaching margins

more anticipated. later the impact muted Although conditions in January, did than improve was

combination the prior Prepared segment weaker a than and but year expected volume was softness winter to due better weather. of was performance than

decline exceeded volume sales typical softness segment the conditions. that which seasonality, quarter in retail We to in Prepared segment seasonality categories we Velocity division, but a experienced food decline the volume due in economic expected total down our to in tough reacted attributed XX%. fresh-cut across quarter, fourth to general versus a and earnings volume consumers about slowed Prepared in inflation was partly with as

the of weather incremental during cost cost about division, $X closure we of cut Separately, quarter our from the manufacturing fresh incurred that the events unfavorable facilities. of million in mainly some temporary

sales almost about quarter X%. the X% volume Higher Understanding We as attribute as in import retail industry the prices over rose declined the market of X%, to of us also the grew in from extent our results context pressured same prices. total the versus around is U.S. while grew important. volumes inventory. volume Mexico through aging only retail worked but in compressed retail inventories to haven't quarter which inventories first the XXXX, wholesale same relatively avocados and lower part margins prices, wholesale Avocado

the we During faced the all from in participate. almost segment sales retail, up In categories prepared across category. volume pressures dollar a declining quarter, which are our Prepared

every almost store declined on passed according down categories X% by convenience from to as traded we anywhere However, categories Consumers certain half in 'XX. second in stick X% unit or in the whole in category IRI, produce volumes of to which the either a participate in perimeter.

cost As we absorption. as basis, volume benefits and store-by-store lose unit on Prepared declines suffer margins our a fixed from

in We volume most the in Grown as prior sequential to and see expect realized year, results targeted and avocado believe for our and volume may of term. persist within in the to improvement year. improved case quarter. But versus increases of to the conditions the margin in we in worst $X fiscal year in volatility second our margins softness range see is for February. progress range in did segment X% throughout we've the the X% us We Prepared Grown $X And the the we behind near per

start the of in Grown California Peru avocado in seasons However, to and the margins. may ongoing volatility lead

one unit half of of Prepared volume the category perimeter the segment, deli that second in saw store growth In 'XX items. grab-and-go the our was

mentioned our customer grab-and-go deli national focused grab-and-go As onboard acquisition been on the half and on strategy customers call, year. with has of during deli second new our last X the Prepared items, to are in we and new schedule volume

volume expect until We to persist weakness then.

with our margin for to us coupled our The caused operating has both lower expectations fiscal results, first year environment segments. quarter

For million to XXXX, in $XX we estimate adjusted the range $XX of EBITDA million.

of indication of precedent in the the believe top undeniably resulting this priority. to to setting expectations year for we it guidance, not Investing first is long-term are results. important we business, quarter is our our value giving annual shareholder grow EBITDA allocation an capital While the provide given

a relative We metrics benchmarks. payout are to also with to committed paying yield and dividend competitive

to elevated will plan However, metrics. We second the the current a rate XXXX the under Board dividend a that more metrics remain provides associated declare to been environment. with current fiscal $X.XX quarter. market-aligned operating elevated the for anticipate Directors level of share and our of have dividend reset the We since dividend per

discipline uncertainties. remain while the maintaining to expenditures for of allow to XXXX We XXXX growing approximately These now adjustments reduce committed fiscal business, investment we continue million. capital expenditures fiscal we we metrics. deliberate us to while for Although that navigate fiscal prioritizing expect reflect competitive dividend plan also our $XX near-term capital growth

fiscal to focused the improvement to on disappointing, steady been making has start we lasting year business. remain the the Although

During quarter, we immediate earnings. several initiated offer will activity the second fronts on to that benefits

This a during enables the on freight, which our first competitiveness of outsourced recently we costs. went most RFPs implemented will the management new second improve of system our significantly transportation freight As that system an quarter. with be fully of phase example, will live the

consolidated costs. of noncore salsa upgrade and will intend streamline In recently that and to our exit we agreement organizational We our to as early March, towards guacamole direct distribution into resources more us network business within And reduce an Grow recently implemented related to activities certain to functions. our operations U.S. reduce growth. entered and to we capabilities Mexico to restructuring and a allow we essential operations streamline costs

Pricing is always focus for us. a

know, As priced on Grown our daily you product we a basis. probably

business However, contracts. exclusively annual our Prepared fixed-price of or multiyear been has almost comprised

immediate not market we influential the but represent and These industry dynamics, I most actions Over improvement than the exhaustive that wanted some see expected X have in between last items that that an react to allowing are XX% of the of course do we activities and stream converted relevant range windows of months, changes have list Xx Prepared our year, to highlight contractually a inflation of quickly pricing costs. more underway, revenue annual us impact. to X to committed and will

expectations, I'd commitment like saying was hasn't market and that to category wavered. wrap up my prepared that than comments our performance less by our despite

and focused straight and challenging response keep improvement, are be growth growth we generating must and line The market on to to nimble market still on to in We through on obstacles, a our and our are there condition, shareholder forward. changing driving is value. in performance It's a manage are job will but path dynamics. we

the I'll turn to report on financials. now to over Shawn the And call

Shawn Munsell

Thank Brian. you,

our on a significant earnings. earnings stated full plays call in of December, seasonality As cadence role the XXXX we in year our

we some While market-driven we as the improving quarter, this year. do results. to which we first fiscal experienced progress adversely seasonally year, results pressures, sequentially is quarter expect additional our weakest the Brian through But our impacted deliver typically said, as

price summer. first decrease from selling the year was from were million of quarter the as over estimated million, Mexico. be were basis, sales average Grown be sales while first in highs consolidated Avocado year the to $XX increased a decreased XX% to was over X% up prices down $XXX segment to by were million up of supply industry from Mexico avocado adjust prior $XXX X% X%. On up revenue quarter by last quarter as of to due their from about million, XXXX. continue Industry volumes the from revenue versus imports a $XX avocados retail estimated

million segment revenue a segment prior segment XX%. quarter from primarily Grown million profit. the gross million higher million million, a $X offset by in quarter, $XXX offset by Prepared gross up increase profit volume over $X prices as $XX partly gross from Prepared of $X was was declines prior partially year the profit $X in about million, Consolidated decline down driven year

Grown quarter for $X.X million was first $XX.X compared first the profit the segment to million for quarter gross last year.

the in costs Our $X.XX margin case about last from the fourth about per of lower, continuing versus decline XXXX. quarter $X sales prices fiscal avocado and year. fell field per case quarter margins between with to avocados for tighter to spreads drove Generally,

Additionally, the strengthening although in balance the sheet in costs offset to Mexico impact increased mostly in dollar operating the was favorable the revaluation. peso by terms, relative dollar quarter that U.S. of

for case targeted margins avocado in quarter. improvement of an $X second seen to of have $X range to per our within the We most

which million The approximately in in up loss gross over fresh of a margin of cut quarter. margin closures. division last prior other mainly weather-related manufacturing that $X profit to of the cut fresh million, $X.X the from year improvement just in prior Prepared division. the X.X%, guacamole and a consisted in XX% Gross gross The X% generated segment from rose offset costs and year $X division improvements. was driven as fruit doubled in were on higher as material from million, improvements approximately almost facility raw yield of Gross the partly by impacts and from pricing operating by guacamole lower the year margin costs well

The up first quarter, increase million Adjusted for in was million was from due costs $XX.X with million to $X.X prior for quarter was first the from EBITDA associated primarily including million quarter, of SG&A down employee $X.X the year. in XXXX. first higher $XX.X stock-based compensation. compensation, the the

our to Now financial turning position.

additions million the our included was XX. our volume to million current of and quarter, we at additionally, Cash the support $XX on the working to borrowings end. needs. $X market expenditures and increased million. of During invested liquidity approximately second conditions January CapEx for in the in $XX $X about year, of capital quarter, And fund Based quarter we remainder $XX as of we investments remained Available in about million the capital Prepared. in outlook million first line at credit to expect equivalents which now approximately half about

end year is as for I'll $X are supply from approximately ongoing thoughts our on we and to our Volume sourcing outlook anticipate range XXXX. case seasons the as commensurate to margins expected changes increase share of the $X expected be begin. low remainder In balance be in the the regions. with California for primary of segment, our margin of Now Grown the per briefly or and volatility at the Peru near to some

fiscal near Prepared to we the guacamole segment, division end XX% to distribution due as term, or low customer and half fresh margins of are the in range primarily the volume will division back expected the In end at new Gross points be gross to cut margins year the the in XX% approximate are volume of the near although year. the in scheduled to in the XX%. softer launch

and Brian finalized our business. salsa we our mentioned, plans recently restructure to of to As exit operations some

related payback onetime on cost charges severance, total X.X be million, and expect these including in expected the expenses. asset second less. implementation impairments The quarter to approximately years noncash and activities $X.X We costs with to or approximately associated cash cash is to

And through wrap manage to by market strengthen have finally, sheet remain saying liquidity We a we that earnings. strong to I'll to future grow the challenges. up the investing balance business to current committed and our sufficient

I will turn prepared to over it Brian. my concludes remarks, and back That

Brian Kocher

Thanks, Shawn.

on we've undergoing a said the I As planning process. long-term quarter, strategic been last call

look of the work Directors majority of to Board to our completed rolling this forward be and it year. later presenting We the have We in out May. we'll you to

year We the our right organization. stabilize spent addressing finding our lead foundational opportunities to business, market including last to talent savvy the

And to take improving despite from is Now an still growing to that's the start the the Calavo company. to plan. company slow our plan year, a

to the right We have capabilities and product grow. portfolio service levels,

We our key people and know of overcome have execute how the business. who roles the to challenges right in dynamic

determination and and to will. we focus successful, the be have We

our I'll turn the the prepared to begin concludes operator That call the remarks. Q&A. now to over

Operator

Instructions]. [Operator

question first is Bienvenu from Our Ben with Stephens.

Benjamin Bienvenu

to want start business. Prepared on I the

needing broader to from seeing marketplace? see pricing place start see that as business you year-over-year. of you back pick take to double higher that these the the volume is talk to in elasticities And path a there about down digits something Can that little volume we about improve? else result the up? inflation as normalize volumes for along Or a of consumers critical talked demand expect that bit would you the you're You

Brian Kocher

that of cyclicality itself. sort spending I Yes. category normal the of business things expected been was thing that, time The think One, to we Ben. certainly we fourth on very lot of expected Prepared And about. than quarter, seasonality. performance and a a volume couple We've part least of seasonally, think was the our decrease at from a to greater

up, was half think down produce down. the a about nonvalue Value-added down. sales add during actually On was basis it, X%. the was volume and it's down produce overall or a category on was second you basis. produce unit if a on actually dollar but of 'XX, whole So down basis, commodity was itself Total X%

So down. value-added was still fared but better,

There are in deli the bright snacks, some aisle. spots growth. and saw meat presliced or cheeses the in performance, prepared deli meals, volume some they category we the aisle of what in have exist prepared that And was unit and

we saw which were deli we on some So up. in even though a participate was unit categories deli down, that basis

of we see trade. cut. certainly We still it in inflation half retail more think term, year in probably customers see see in part this hear see did the are Prepared our long hear first And than inflation from I'd matter say. it in both growth term. and And We so significant And it the that expected. the the categories, fresh was we it do doing. year, will of up We certainly, we it moderating. of the to I consumer, our We long planning that And growth from a help. that But guacamole IRI. some the in last caught

Benjamin Bienvenu

plans. My sense. the is to restructuring makes That second Okay. related question

others? a Or there plans this it all noted have, which You is your possible expectation might handful that be that will the the of made? decisions be you it makes last of Is restructuring is sense. of that

you of kind the along as about kind think position which those for of forward noted CapEx also then line? sense, as lines, arc spending we how this you've growth when done in think what again, for your down about the with of should we makes Calavo we And move year,

Brian Kocher

question. Great Okay.

say. a that would I couple So things of

precise is certainly went less, lot a of business. say X.X I that This magnitude distribution you As where nature. some avocado in What years restructuring, doing but ago, to facility organization. Calavo significant our would through the changes years remember, is through more now finer, assets, is, went needed. of we're X consolidated is We've centers the of order -- things of a closures, in

Shawn So that which mentioned one exiting salsa that's the changes of noncore provide mix transitioning benefits make. will we're that help business, some that a of will you us. out and us

have one to grow, are the big other that you're skills oriented. the if and going and of think I to growth capabilities have is amount you the talent

international more So operations in Mexico what on streamlining otherwise development also see or channel we big opportunities, is reinvesting those as us those you And and prepared using even growth to see that's our reducing whether in fresh and some and capabilities and put national in or us club the funds. see retailers areas. funds cut skills guac or and where U.S. you

what and So that's we're call launch and context Uno what I communicating summary would the the between today. Project

changing, customers be our organization always don't but see trying make will and are organization nature, need we restructuring areas making to we make have charges Ben, efficient, finished in our resources and biggest the that and driving it's will appropriate, be efficient. sure in to more big to place that I changing never think finished is of our be our the effective we're things that to also never the we because changes chance grow. I category

Operator

Mitch from is question Pinheiro next Our with Sturdivant.

Mitchell Pinheiro

is, million, and And get my $XX roughly back I generation the think, to this around EBITDA plan with million million we'll I did, whole X plus fiscal you looking would first take somewhere a Uno fiscal -- maybe your back that years, be and guess years 'XX performance, of guess $XX question the so it you're year. 'XX. in -- couple like was Project $XX your in I to

'XX spending And then in soon? to I -- see little time levels the flow drastic the doesn't see conservative, fiscal and doesn't and a but wondering back capital the sort you're are so, least in a I disciplined guess dividend. lowering it a But cash getting see here. little -- to this climb things any is we're and it a not We're at I bit, cutting cut don't I need messaging that -- I'm financially seems lot the being level. And 'XX back the to it could the CapEx. of has of worse bottom -- fiscal dividend what are changed. mean I out you like

Brian Kocher

we I rephrase let don't know I I'll our in fair Well, we shot we're to cash first be outlook And growing has me add balance of a it's now slowed, me in. in can flow that our Shawn we've -- let got slowed. at least try we're let it generation a for I to think was the of year, the to and EBITDA towards take terms in believe adjust saying of probably is and and in this on volume that But not instead and unit the I basis. in not at revenue, to think unit basis, that, a of a know growing also worse. quarter volume where next on but performance quarter that. the but light that market progress it's that's say price, maybe market not quarter a

our fair run to be. on to I some lowered to profit. exit And we So on therefore, on be rate say guidance, where at we year it's the back where the of we'd we it's our Prepared our of want thought fresh trajectory particularly that in end cut gross slowed think an

this that will challenges. one that think we're that that's things face do some of the I So recognizing market is

with challenges We faced performance. some consumer

and or -- as in sorry, season, I I and think where there's been trying margin volume from California so supply well. coming Grown we're think has in weeks we've has to several a and got some be that respectful period be probably avocados, volatility Peru exceeded cautious demand, heavy Mexican exceeded in some we've a on demand months we'll now, in

X. So it's really those the combination of

also a Mitch, we're CapEx totally return project that a and think high would I is there's not growth we that clear, initiative. be high yield, just cutting high

we've of In short good fact, first a launches is in second launched the cut really associated CapEx quarter And if the it's investment won't half. the most new and that we customer return. with spent in

yield And dividend, We we're a up. want responsible. then to be want I we payout peer peer that frankly, with that We metrics disciplined. want on to have group. it sure we're And returning consistent dividend the to be the paying think to has is cash been our years, that twice tightening do the mentioned, and a And we generation and several are with project. things over want payout make make sure last as I ratios our high dividend the group. earnings flow

now is of to make adjustments. all the so time those And

Mitchell Pinheiro

might in ago? you business you where to Are anything anything the helpful. Very -- would that the ability industry see your is that X back structure were seeing get that to Do different? you Grown in structurally impede years

Brian Kocher

Well, are things Mexico, years there U.S. Peru at ago. just all changed and And business X available volume export Grown to I think to Colombia were the from than perspective. the sourcing bigger X ago. that years are terms in let's a look they of have in

supply the great. of is All

lower the because demand it's But with do well. a been the service been year. than We constrained greater demand and up that for believe constrained was gone supply. it demand or Now has year, we'll and low prior a year. has has being demand keeps export down Last years food volume that as we for that historically Mexican COVID certainly pace constrained, keeps year, couple with see was said, of because see for a can't been the

and today daily ago. you I also buy compare I is to years do ago, and think a of it Again, a exceeded XX marketer to an got sell demand basis. more and supply demand supply. will balanced than think Demand XX supply on strength opportunity We've a I years model. if was think that's --

of flex We risk growth. volume opportunistic down, take some to our to think advantage and an opportunity we have take inventory to or up have want to and an when opportunity we it's

if also the profit the profile have right. to some opportunity dial isn't We volume back

model confident that of $X really feel that $X gross deliver to I So time, time. over case a our to margin us allows over

we will ago. going structural evolving have or in big have And demand, volatility some I don't so I X case And balanced of But years little that and changes I'm think when didn't say, a more ago, brings that. any that prevent bit XX years that's it market. to supply the see you maybe commodity

Shawn Munsell

Mitch, see in the those too, more to thing, inventory was more other I'd that prices, buildup we the pressure were part, right? stubborn is wholesale put quarter then prices than And unusual that And margins. retail prices, that, started narrowed that say Yes. on wholesale and in

Mitchell Pinheiro

of high? you just margin? is -- Or -- the this a a why it function just is having Just they're grocery it trade is higher stubbornly

Shawn Munsell

Yes, holding just retailers margin.

Brian Kocher

prices think last to fair, up. price also And when I retailers were going to year slower Yes. up were wholesale be the

investment think the I a on So We on slower they promotional going slower on the front moved little more and a moving are price. and see back end activity in little end.

looking it. continue at certainly it. Consumers at looking We are

There's been half looking that would suggest almost that by products now. IRI recent sale consumers are consumers on of data for are some

probably what sense promotional and for activity category. on cut them retailers are how that our drive do business. for we can we customers to they can sense fresh that for consumers that more and certainly in So shelf working believe because lives, we do in makes the and and And we've our more been Prepared -- is can in Grown, our a looking we the of than deal, makes with guac

Mitchell Pinheiro

Great.

is last Just side. the on question Prepared

in new good, a on couple a the bit. coming customers help So your of second that half, it sounds cost you should fixed leverage have

Is this, -- the throughout fair? see in equal, year. margin that improving gross things being we lot gradually a you all a in should of So if -- so should Prepared

Shawn Munsell

Yes, that's fair. completely

Operator

[Operator Instructions].

from Street Markets. is with Lake Ben Klieve question next Our Capital

Benjamin Klieve

couple a for me. Just

this line, ask the Paso. particularly El quarter -- the to about that to decision about to in Can relationship big I to want in the you with came this of about new needed the in decision particularly securing you light the Old thought last of get that one 'XX? the divested, of First, in talk to point salsa the business the rid of get context the just kind late

Shawn Munsell

Yes, Yes. sure.

-- that portfolio. it have the that's good a -- business, it's potential, and it made essentially, it essentially, guac has mass for what fine given critical salsa our us business, So the the And economics divert some to in doing. didn't of we're that product, but those to the sense just that resources business, just

be it's a So -- better by divestiture. it's going $XXX,XXX to -- frankly, we're going about making to by that be year

Brian Kocher

Ben, other co-packing know the important that relationship. arranged that's is think I we've thing a to

I remember, have last we we Mills, So General that quarter, available. as arrow the and only think that with about still relationship talked year, last not talked tool, -- our it think about tool last another in or tool, another quiver, -- of we sorry,

obviously arranged will ourselves, co-packing we what whether we've sell Old we'll guac, the do capabilities and as which now party, do So salsa, capacity have Paso so which brand third it's to capabilities that. retain be or product, we El that a with we continue to

Benjamin Klieve

Got it.

quarters, expectations you of over maintenance basic contracts here noted X next investments that that million coming $XX awful growth new a this talk an quarter. attributable And of to CapEx $X to versus are coming the that CapEx to And the that for then of over million Can question CapEx have you any CapEx. about you another how Brian, you the was Okay. in have year, in million first next lot just online. $X that the of not do much the is that's X quarters? lot kind related that

Shawn Munsell

Yes, sure.

that that deferral So at lower of versus improvement like -- performing projects, that can profit of $XX Ben, and kind the the said, any was time. I'd we the was say that CapEx kind most million, growth of of Brian original that reactivate

maintenance what line just to felt the composition conditions of kind QX But $X we million that until the defer going was current prudent to as last year. as it's just see of we be this -- given and about or guided about the performance year, change. $X outlook, plan to like in it far CapEx, So million with given

Brian Kocher

the call of seasoned Ben, capital We important added credit our the we're debt really a facility. have we to the capital. liquidity remember We've got for other working that's and really you sheet. good and is listeners that I think access on plenty thing basically -- other funded balance to through we

held an accretive exciting, we back. find entire good a a think signal and going to growth our compelling really guidance back let want if it's the for make organization that's disciplined, right, invest be want smart we hold returns we've want not certainly responsible and be investment. pound-foolish we to we got when want won't us the a we be We're don't be I to we to that it's if that and but be something to be opportunity, going and investment. we're good here. to gave, So But to really we going to to We're And -- capital. penny-wise also find we

Operator

Our next with Seaport Research. Larson question is from Eric

Eric Larson

that you mix bad comments of -- in give a of lot it about a one, prepared impact size. your that to said first sizes in hurt and the The was out Did clarity quarter a pricing? it have Did of coming food there you little you the Can Mexico, was X a of that? smaller avocado was you? that quarter,

Brian Kocher

insightful question it's Eric, and I a good really question. think

grow each more So more gets root did piece forgive tree, have more you sudden and nutrients, convey But the it on of forgive okay, nutrients. volume. systems of magically me yes, a me. an of right? and have way The fruit we less when agronomist, because not I'm individual fruit this all Think didn't

little So the a size against us bit. curve did work

the because business than fruit, we out fruit we came we available have and fruit Smaller off, business. had small-sized a fruit more mix didn't was had large-sized enough large-sized little

working the fruit margin overall, really sense? case. were we it excess gross some on hard fruit. Makes down where So small get profit to certainly per rid of the impact small saw we And that weighed

Eric Larson

that know of made it you just that noticed your I I does. in No, mix a Yes. can had it and be important. point But comments,

why that's I asked. So

this a here, were that mean average side, but avocado one's the long we carton if the you prices wasn't missing for I'm $XX, Prepared ago, it So something maybe and quarter, I $XX your talking and really right? in $XX,

And I $XX sequentially, said the a think you was quarter it carton. last in

prices a "Wow, With been Prepared for your business ingredients in in better am a to missing margins me, the mean, talk coming have have would say, headway." the of your business, quite this? what should your Prepared looking given I fruit margin So shouldn't cost novice in bit at Prepared? your -- down, So you I why

Shawn Munsell

Yes. is spot on. And your observation

it's given XX%, improvement of mean we cost fruit achieved I going quarter. certainly prior that plant well year. I and the is of fourth running that we fruit, gross also is made in that the the XX%. that see that margin about the changes last the the it's some not mean, guacamole operations. -- as as the also run, in improved, the quarter but absolutely it's investments can operations in the in into was the you prior exclusively improvement versus So ever but And the year And in the versus the business

on right? total X/X division. division guacamole margin benefits, of remember, gross So smaller for the we our guacamole that Prepared, But it's So is did portion that the in first see but total XX% about portfolio. the quarter of prepared a

Eric Larson

Right.

sense. That makes Okay.

thinking -- I old quite last reason, that used I'm some Grown so of as that about yet. and still made Prepared lot to format, think was still I your and comment in a I'm still thinking you For sense. not

but your still so of taking kind you're going ingredients yet you elasticity us go those comps So some that EBITDA you'll little forth. easy have on what adjusted for for detail had going what pricing ideas elasticity forward, other you I'm into to relatively like areas is look and guac of a up gave the Could is lot reading. and of -- a more bit you're in part? But

Brian Kocher

make Eric, yes, sure understand. I that So let me

guac. guac, the is unit on is input you'll getting question on some favorability Your basic in improvement on -- coming? cost have you're Where other costs

Eric Larson

Right.

Brian Kocher

Okay.

of the part is remember, some our second think we've the got going on in the One, story. couple customers I customers year deli things. volume second really an coming to national challenges coming We'll fresh be Prepared, balance on see believe got in It I So quarter. important cut half. help We've the of a of quarter. volume the that throughout -- deli second won't X

the see but the the absorption help that it quarter, And year. and second second won't help that, half. we'll it benefits, of we'll things half see with So will other in the second happened some

on over we will the a of basis. category, cost volume but us business, help the X think guacamole long on down time volume unit the was basis, need to first well, guac in course I our time down in we unit anyway, there. also dollar up for a positive some on months last benefit basis a The get as a unit volume

that up we So one but was, really getting made we some by great other costs advantage made is efficiency think guac of I is let's of absorption that our to hard plant, good of used progress the in lower and taking yield volume. say, because in fixed see things progress lower and that lower cost in input market, of labor

I the from from on we from really, the -- is productivity really matter Prepared the of quarter. the fact had we labor fourth mean, didn't improvements So but now year-over-year -- story

to 'XX to of quarter first we of quarter reduced labor productivity. a fourth 'XX, quarter X lost unit with labor productivity, we volume, of So But first little again, bit had of first volume. the because 'XX quarter of

continuing so profile, as talking So to distribution, manage but growing you disproportionately. labor at things the volume with new our think the also that is new all is volume that, Prepared, leveraged I cost category, about that the we're look it productivity, with

Eric Larson

it. Got

Okay.

-- wholesale, and prices it have deal. been demand towards that question. historically this pay it stickier sounds is prices but fresh Is past years, more historically, the you the the what retail today, sort avocado what of for an in -- than been high even at consumers the like of for towards that that a of was I on right? apologize very ambiguity But that has sticky big for attractive So upside, would seemed that end said maybe avocado, inelastic prices, the much that wouldn't high price were and absurdly business,

avocados sensitive? more had they What's consumers are they price volumes, aren't be seem for that the customers there's be you now might down that going not group your switching your if and -- what competitive what's buying to and So into? -- to avocados

Brian Kocher

clarify things. Well, let try me to couple of a

First were produce first was quarter year-over-year. the Avocados down. the of in all, category for up still

was it think I about think it -- unit on I volume basis, a was X.X%.

I like or something X.X% think we're up, X.X% Shawn, that.

X we know and grew one our maybe share we point. could we held So even say

one think to So thing about. think I that's

think question inelasticity. just price elasticity would I that it's a not or thing is about other of The

when shrinking even promoting in the you high, and were prices remember, started retail If extraordinarily sizes. quarter, display third stopped

So a reduced they inelastic available volume. elastic. whether pricing it's the or and of just amount display wasn't it story sizes, But reduced also

the strawberries to commodities As fighting that or shelf that are making I'm or whatever, get the right, this it's at still. moved point. or and this back, But up tomatoes space. they took stand of retail in if don't rest we potatoes

activity, gain trying it's So gain and back now bit to retail of a we're little space, back promotional taking sales time. just

only suggest display not would starting see reacting but to we're price, and activity I the category also that price and And in the promotional sizes. come back. is So to change

In the we quarter, second in might far so up... fact, in Shawn, be

Shawn Munsell

X%.

Brian Kocher

avocados. X%, second volume basis the unit in on we're quarter a up for

Shawn Munsell

Yes.

we better February, emphasizing just of the worth median just that into kind the in but to segment. that's Grown so well, an a of as gross So improvement the did volume. in we profit, once start the Not see in conditions rolled flow-through volume improvement

season that we that right is season the listen you a to lot We around there's Peruvian is fruit of that side know the cautionary California prepared in remarks, But getting underway. The the the corner. of Mexico. know from is coming

supply with potential there's so ongoing And that a volatility coming. some for

Eric Larson

we've hear it's some I display from the of different it Okay. what of Yes. It's a little fresh of just No, retailers display hot sort retailers -- the done that the it's It's avocado to a -- time they've away that always just even their oriented. -- market. kind thinking avocados. healthy item. than very that first took sense. And mean, expanding very the maybe is always And been bit makes I've had have heard in that because

of. unaware that's I'm the dynamic So

So we little little later. a queue bit bit this of back can the a maybe and get in I'll discuss

Brian Kocher

But constrained. was Eric, year, last supply also I would remember, even

constrained And out maybe going avocados and rhythm a so of to to buy, consumers look, high-usage every and can't is just week, going whatever every in their the not is. go are fickle. they that supply the consumer. avocado get day, -- it's day, going to buy is twice If The consumer high-usage

the of to not there's not available as seen side not clear, second -- winning for -- a because that or I'd like I little bit shelf what avocados back, the of the still let's it's seen be of the available But the that consumers, produce down some just sales up produce the them But was it low-usage extent was unit total potentially year, call remember, or is category promoted not say. it's on to think X%, last half was, X%. quarter was

Eric Larson

Okay.

important Okay. That's factor. the

Operator

We for have to comments. to like closing our session. conference would I over reached Brian the question-and-answer of back end turn the

Brian Kocher

that platforms. caused growth we you fact I across in, business quarter, the the expected for earnings dialing unit appreciate and in matter talk business conditions The Look, giving We the faced deliver Shawn our we first our chance the we balance earnings the the the headed. asking a to landscape growth, market to of need the need year. about where volume to the and we're is didn't you and and really of reevaluate us we questions,

all customers I existing distribution and/or market the hope. customers. by international, reducing talent, and with deli However, the new investing funded opportunities biggest I'll being you We have growth. expenses gain must We're has for our and guacamole in other are new where tell Club in resources areas. sales repurposing why channel, gain

time, and is flexible. gross consistently per model for it's our distributor able over to we've box. And deliver Our strong targeted been avocados profit

And gives help so and me that comfort.

in product mentioned that quarter our deli lines. growth We expect we release fourth our earnings in

on are third deli items with We to deli track is value We the in launch our in customers national know promising. quarter. proposition X

drive Our and deli that we've been look the really able we growth to value in at in the help yields us cost and in will as fixed And proposition labor production promising. half that maximizing second absorption efficiency volume is in hours.

to that beat drive We and continue, line and every cost the will of in P&L. we have improvement

And the the And all categories and few end in going whole organization even growth see by and products which SKUs. than though that challenges, of costs, we're volume yield, the ultimately, that There don't them commodities. delivered kits labor every at produce, day. play, day continue performing we the perform this day. isn't beating and unit worry commodities a finally, convenient about of more QX. transportation, value-added spectrum the to productivity And of year-over-year that goes led SG&A, some we the we're one input better that pack better deli deli Across are in produce are we only efficient making on meal in and of short-term every aisle. deli snacks Avocados

give me things hope. those So

quickly agile, be have every these each expected, slowed organization need Our distribution get need we We're I'd business but we're sequential sales the things. We're and focused the leaner. we We cash on didn't results deliver and what And improvement. to to We're to continue like in this quickly earnings challenges this progress gaining better expected day. that's right that making working flow you We leave And model quarter. on repurposing and that while to resources. is right. we the deliver today.

continued your Calavo. thank I time for your for thank you and today, support you of

Operator

will Thank conference. you. This today's conclude

You may disconnect time, at thank your your participation. lines this for you and

Calavo Growers (CVGW) 6 Mar 232023 Q1 Earnings call transcript