Calavo(US:CVGW)2022-06-03 02:48Financial Data and Key Metrics Changes - The company reported a sequential improvement in gross profit by $8.5 million, a net loss improvement of $3.7 million or $0.21 per diluted share, and an adjusted EBITDA increase of $7.9 million [11] - Total available liquidity at quarter-end was $15.9 million, including unrestricted cash investments and available borrowings under the facility [27] Business Line Data and Key Metrics Changes - In the Fresh segment, despite a 13% volume decrease due to lower available export volume from Mexico, the average gross profit per case of avocados improved by $1.50 compared to Q1 2022 and $1.30 compared to Q2 2021 [14][15] - The RFG business saw a 3% price increase compared to Q1 2022 and a 6% increase compared to Q2 2021, with a customer fill rate reaching 99% [16][17] - The Foods segment faced challenges with gross margins decreasing from $2.2 million in Q1 to $1.3 million in Q2 due to rising fruit costs [21] Market Data and Key Metrics Changes - The company maintained flat market share year-over-year despite a decrease in volumes sold, consistent with the decrease in total exports from Mexico [15] - The price of fruit used for processing nearly doubled compared to the same time last year, impacting the Foods segment [20] Company Strategy and Development Direction - The company reorganized its leadership and business segments into two reporting segments: ground and prepared, to enhance execution and customer service [6][7] - Project Uno continues to drive efficiencies, with a targeted annualized EBITDA improvement of approximately $70 million within two years [29] Management's Comments on Operating Environment and Future Outlook - Management expects continued sequential improvement in operating results while generating positive cash flow from operations [29] - The company anticipates inflation to persist and plans to counteract higher costs with pricing actions and productivity initiatives [34] Other Important Information - The company is conducting a search for a new Chief Financial Officer, with interviews already underway [35][36] - The company paid down over $22 million in debt during the quarter, ending with $48.1 million in total debt [26] Q&A Session Summary Question: Were Fresh margins below or within the $3 to $4 range? - Management indicated that the gross margin in Q2 was higher than the historical range, despite a unique quarter with strong demand and less available product [40][41] Question: Are supplies from Mexico improving? - Management noted that initial estimates suggest relief in available product starting mid-July, while managing inventory tightly [43] Question: Is more pricing needed in RFG? - Management confirmed a 6% year-over-year price increase and noted that improvements in labor productivity and cost efficiencies are contributing to gradual improvements in the P&L [46][48] Question: How does the company plan to grow revenue? - Management highlighted improvements in customer service metrics, existing customer expansion, and new customer acquisition as key growth strategies [57][62] Question: Are there differences in gross revenue volume between retail and foodservice channels? - Management stated that overall volume was down 13%, making it difficult to compare segments, but market share remained stable [66] Question: What is the target gross margin structure for RFG? - Management aims for a gross margin run rate of 10% by fiscal 2024, emphasizing continuous improvement [70][72]