Calavo(US:CVGW)2023-03-07 04:43Financial Data and Key Metrics Changes - Consolidated first quarter revenue was $226 million, a decrease of $48 million from the first quarter of 2022 [33] - Adjusted EBITDA for the first quarter was $3.6 million, down from $4.7 million in the prior year [35] - The average case price for avocados fell to about $28 in the first quarter, compared to around $34 in the fourth quarter and $43 in the prior year quarter [122] Business Line Data and Key Metrics Changes - Prepared segment revenue was $108 million, down $4 million from the prior year quarter, with volume declines of about 13% [21] - Grown segment gross profit for the first quarter was $9.5 million, down from $11.7 million for the same quarter last year, with avocado margins falling to about $2.20 per case [22] - Gross profit in the Prepared segment increased to $5 million from $1.6 million in the prior year quarter, with a gross margin of 4.6% [34] Market Data and Key Metrics Changes - Avocado import volume from Mexico grew over 8% compared to the same quarter in 2022, while retail sales volume only grew about 3% [4] - Total U.S. inventories rose almost 7%, which pressured wholesale prices and compressed margins [4] - The overall produce category saw unit sales decline by 3%, while non-value-added commodities were down 4% [55] Company Strategy and Development Direction - The company plans to reduce fiscal 2023 capital expenditures to approximately $13 million while navigating near-term uncertainties [17] - A restructuring of U.S. and Mexico operations was implemented to streamline costs and upgrade organizational capabilities [29] - The company is focusing on growth in the guacamole and deli categories, with new customer acquisitions scheduled for the second half of the year [15][100] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the first quarter performance was disappointing but expects sequential improvement throughout the fiscal year [32] - The company anticipates ongoing margin volatility in the Grown segment as the California and Peru avocado seasons begin [24] - Management emphasized the importance of maintaining competitive dividend metrics and plans to reset the dividend to $0.10 per share for the second quarter [8] Other Important Information - The company incurred about $1 million in unfavorable incremental costs due to weather events affecting the fresh cut division [7] - A one-time charge of approximately $3.2 million is expected in the second quarter related to restructuring activities [37] - The company has a strong balance sheet and sufficient liquidity to manage through current market challenges [38] Q&A Session Summary Question: Can you discuss the demand elasticities in the Prepared business and expectations for volume recovery? - Management noted that inflation moderation is expected to help demand, and they still see long-term growth potential in Prepared categories [43] Question: Is this the last of the restructuring decisions, or might there be more? - Management indicated that while this restructuring is less significant than previous ones, ongoing adjustments will continue to enhance organizational efficiency [44] Question: What are the expectations for capital expenditures and their relation to growth? - Management clarified that most of the deferred CapEx is related to lower-performing projects, but they remain open to investing in compelling growth opportunities [86] Question: How did the mix of avocado sizes impact pricing and margins? - Management explained that smaller fruit sizes negatively impacted gross profit per case due to lower nutrient availability [88] Question: What competitive pressures are affecting avocado sales? - Management highlighted that consumers are switching to other products due to high retail prices and reduced promotional activity [95]