Calavo Growers (CVGW) 21 Dec 202020 Q4 Earnings call transcript

Greetings, and welcome to Calavo Growers Incorporated Fourth Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the former presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Lisa Mueller. Lisa. you, Thank

begin. You may

this operator, today up and financial for you, our release you This Investor in Relations section thank discuss Calavo us of and earnings to our XXXX we joining is Growers available afternoon, the Thank website issued all document fourth will results. with quarter we at Manion, On Officer. Chief today Chief call provide remarks Officer then Jim the management and prepared I open questions. ir.calavo.com. here of your Executive will Financial today's Gibson, am Calavo; Kevin for call, and

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

Forward-looking anticipate not about statements outlook facts, such words or such for historical believe, our adjusted EBITDA revenue other statements. statements comparable phrases. forward-looking identified expect, are are intend, words by that also as as will, are and and be, Statements

are factors by results forward-looking those financial statements. including Discussion actual on materially vary Our XX-Q. Gibson. filings, and please Jim XX-K from the would over could and may our that, ahead. call in condition contained such from these forward-looking go I the operations Form like differ With our now materially of Jim, reports to that cause contemplated results of to to statements turn our SEC

this and restriction Mexico out supply expand, We saw led played year. to volumes country. continued Thank continue quarter Avocado to was there had families was the which your price demand compared experienced the there reflecting seasons, in XX% you, had larger year. as and you growing across and last we ample opportunity contraction The popularity supply the Good heavy California to Peru strong meet and hope rising a so, last no that to demand. year, afternoon, also harvest fourth you Even and welcome the today quarter. be Lisa. to everyone. to and to trends third speak to safe. similar healthy we

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innovation, have we steps to a continued COVID-XX including on our that focused the to While improve on efficiency remain processes, things control, our impact across organization. business, we can negative

company. one our chain during of we to strong green serve For times. family high-value the innovate closed. better based for When maintain continue for to meal operating to dedication enhanced proud are and to nearly provide configuration deli leave side vegetable single-serve X,XXX our now service salads, quick want already in collective made ultimately company current the service these are supply food meals return. as which products, implement dishes, for of and counters meet emerge and example, when hospitality and reputation transformative the position such the as dropped drive us continuity our seeing pandemic, a approach the customers. category to were adapt, RFG adapted self-service home. solutions We and bars Their will has and especially sold am I and and initiatives, a thank challenges, our we Company we to unprecedented commitment. stronger the from once we at a for and to ability daily sized very pivots The markets power our our allowed items team Regardless grab-and-go shifted efforts solutions easy customers to sales customers, in for employees of rising demand one our demand fast their its serving team

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committed accomplished including audiences. As third. all the we firsts our calls, I've said year, we conference this being to increasing hosting with transparency investor very our are This before, many with community, quarterly

with for January. can found which in virtual be presentation, on the our investor investor scheduled participated and an produced also third website We conferences two

for As foundation Company the reflect we top and an our centralized on for our upon and additions We to hard entire We future back supply and growth. team out a position very the balance and promotions year, board key bolstered leadership all and initiatives. management senior priority that worked XXXX made our uninterrupted our team maintain customers. solutions operational flexibility. it to build with close chain. solid our ample critical our introduced and financial organizational commitment deliver innovative efficiency. operational structure initiated will to and financial We and We functions. our to expanded to sheet a strong We redoubled our We independent representation consolidate maintained improved ESG new products programs

annual to we as we the across We and growth for an domestically objectives, internationally avocados XX the pay demand for to to X.X% and in dividend XXXX. to will our both position push past our increased continue by shareholders our the U.S. strengthened increasing capture year. We it continue this have and years, we

into second expect selling to This The As continuation quarter. the lining retained margins circumstance silver input benefit maintain segment which large solid expand new as that costs opportunities impact business. we allow channels scenario in at be XXXX, of harvest segment a of for to situation supply look The gain will and is to with we lower into will allowing the COVID-XX to Mexico developed the will as across continued will all food than progress we higher see this segments. combined current demand. trends this remains in

the platform closure provide still accelerate RFG operations Midwest year. the While of sales XXXX, to RFG With and is year-over-year to the facilities the half impacted out of April I'll expected sales our with by is over will through the existing that, margin to co-pack during turn Kevin. growing call and growth of continue second

Thank good results you, otherwise. followed I'll for Paula, comparisons year-over-year by the by fourth afternoon and balance all Please global scenic, from our start note Santa financial Jim, discussing are headquarters unless our and sheet California. that outlook. in world quarter,

factors: demand, $X.X in year-over-year. primarily a attributable consolidated see. international X% co-packing We website financial XX% was primarily business. basis, be volumes three of avocado particularly non-GAAP results at lower ongoing ir.calavo.com. relationship; of XX% to loss was of charges from which lower of the million in reflecting segment or to and co-packing million. up of million our our from This the earnings by the a The the Gross at in revenue updated impact at excluding declined environment COVID-XX, Service a points. On from will RFG offset of pricing year-over-year, impacted RFG in $XX and pleased year-over-year Midwest which decline decreased declined of consumer of from we margins higher $XX our last price an million; revenue also impact XX% These the discussing also X% particularly on profit avocado our $XX.X our segments. lower gross the the Even and Midwest presentation year Relations Food slightly increased are the impact RFG prices, included decline million underperformance in million various relationship, from ongoing and RFG which our decrease Also, driven fourth the non-GAAP Fresh revenues, legacy were by items revenue had improved due terminated items release. is Investor We've $XX.X trend $XX consolidated non-recurring measures quarter reconciliation operations. to profit year-over-year, to were with

gross X.X% profit gross fourth X%, in Our from of margins quarter more margin offset and Higher XXXX to in margins than RFG fourth the quarter expanded Fresh. in percentage lower Foods XXXX. the up

second $XX.X noted, reduction percentage the decrease would compensation, declined a of X% expenses the in headcount from million XX.X%. the ago, took to SG&A and and quarter. I million reduced to due marketing gross the at the just non-recurring primarily that $XX.X a year items travel effect expenses margin end been Excluding in have performance-based

share. by a increased per quarter's million $X.XX Adjusted $XX.X per that revenues, for basis would as X.X% of quarter percent year-over-year, a income X.X% comparable year-over-year the of have million charges $X.XX the share, with period. $X.X points in provided $X.X compared quarter to the was non-recurring to the would If X% Adjusted was a on a lower to the SG&A non-recurring share these earlier. adjusted or we Absent million or consistent XX the This up share. to items, the $X.X income $X.X As the last mentioned adjusted we decline EBITDA increased that in $X have year or was net was items million by items, of EBITDA impact operations million million due Net due from compared legacy from ago. revenue the in $XX.X fourth guidance to international $X.XX income for period. been fourth the I exclude or quarter $X.XX the prior million call.

in million the to XX% Sales quarter year-over-year business on our $XXX.X moving of from three XXXX. segments. fourth decreased Now segment Fresh to $XXX.X the million in

revenue while demand X% volumes consumer Importantly, avocado declined, has for strong. remained as avocado increased

many higher offset of quarter's and This The and And to a year. the Fresh non-recurring $XXX.X in to supply, in was smaller segment the or and the increased revenue to price wholesalers fourth RFG, lower customers harvest $XX.X California, million XXXX. food small Furthermore, a fourth $XX.X charges large quarter retailers million profit supply harvest, XXXX. volume sales XX% supply on fourth to to decline profit the down market in million a and margins. pricing or, both continue result average and declined in $X.X which the quarter of the of low and this X.X% year's relative by contributed cases, service of per serve gross unusually ago. constrain pricing restaurants to last revenue, of due avocado absorb prevent when from in last sales Mexico historically year, in X.X% to high COVID-XX or that quarter. unlike as weighed selling help a from to fourth Gross year declined these was million in the In profit gross quarter carton in

from increased decrease the reflects While in the revenues year-over-year. X% sales sales underlying termination of relationship the lost Midwest, our co-packer

profit million during from April of Midwest this or reflects $X.X vegetables. so relationship the or will and X.X% sales margin in the increased manufacturing gross of fruit our XXXX. lap late in the Gross this X.X% efficiencies the co-packer fresh-cut As period longer runs of last up was quarter to for production shift to from of facilities reminder, This and comparison of production we same year. of March company-operated sales, benefit ended $X.X production a million year, our improvement in

at In we our addition, volumes contribute higher higher margins. are to new which facilities, experiencing the helped

retail service the impacted For to consumer channel, as patterns. along food volumes not softer the impacted returned their Food continued COVID with segment, lower to pre-COVID sales and be demand have buying by in heavily habits

the Gross million higher to to last quarter profit costs. of sales million XX.X% $X.X a million For avocado or million year. $X.X ago. of in of the lower primarily sales was result margin from sales compared XX.X% year declined or was as $XX.X the quarter, The gross $XX.X

$XXX ratio Turning to and debt debt available was the X.Xx. year our was million investments $XX ended balance of at and cash, with our leverage sheet. We year-end million, capacity. liquid Total

We advantage to opportunistic remain low take positioning have time. leverage, us or a strong balance in and uncertain situations very sheet conservative this of

We to another well for five an in upsized facility. extend our to the years amending are senior also as with facility process as of for the greater term allow credit flexibility

Xth is increasing declared consecutive we increase As share, Jim from dividend year. our per of year This last which of $X.XX an was cash X.X% mentioned, dividends. an annual of

see makes to we for of predict demand end will we Therefore, to year. levels. the pre-COVID a continuation difficult full a when guidance toward position in to XXXX, impact, we As it pandemic near-term are not return which provide the market look

guidance $XXX However, the Because XXXX, to at than we with wanted mentioned, non-retail which not year. the lower uncertainty guidance for prior to million will increase such view see EBITDA do to is XX% we margin is first million, due range XXXX. of which $XX when this to and we expect of first of sizes volumes midpoint, situation. from to quarterly provide of to for respect important continuing grow, the of pricing adjusted the of $X the resumes, at which avocado COVID levels to quarter a we a in an between year year-over-year keep the midpoint an Again, as due marketplace margins providing the million XXXX be as million, will XX% specific we first supply Jim be have quarter quarter full and foodservice the decrease of at as be which $XXX is to the and not revenues and outlet support, overall to

our filed we Lastly, XX-K today.

business. details information and and we included by transparency. perspective provided which net additional adjusted adjusted complement metrics another operational EBITDA, ongoing metrics, You margin have to income we our on will use which We've the are for and more and non-GAAP providing manage business also pound notice tables revenue financial performance on believe our Fresh the GAAP we the for provide to per

to the of the XXXX. Before I close, January ICR I'll turn seeing that, conference at Jim the and in I over look With you forward call to questions. operator for

you. Thank

now will be you. a conducting question-and-answer Instructions] We [Operator Thank session.

comes question with Please Ben first Our Bienvenu with Stephens. question. proceed your from

of least will being to I does as of And there crop fiscal that know of into we into the some early as to reason abundant well elaborate look as on that to see is patterns far maybe transition tell time, California you at crop, want the crop provided from I of next we ask, less still a we're see next bit still normal made can you be little of comments, same until kind some tell kind return slightly a summer like detail hopeful release a the summer? sourcing what about Can press Kevin, year, Mexico as what into you primarily but is abundant head XXXX. thinking? Mexico or as can terms at and demand convergence in any on you might what we now you be overall

Hi, Ben. Yes, absolutely.

what very Bloom that Mexico, crop is out in strong. is we're I think certainly of the seeing this

we're way that like at more March in -- long all annually, I in certainly, in we the may think and demand going believe area, Food out is probably experiencing on to now immensely of seen little just side, range, look X% that now. the the than to off believe growth, we've bloom we've XX% we environment. to seen suffering the restaurant know to we're as second operating up the trade we probably the be and less that in strong we are XX% the which Yes. come X% that in on XX% looking February, As the and and between we bit this to we're extension estimates pandemic, right currently is And service right as kind a

relief we that regard, continue on the And operate get to think until I side we're some so the that to world in from way. going of same

volume On I are speak. we're we month-to-month, think to so seeing we side, to the very in hard, promoting an would is through retail increase increase say, -- the but retail moving while moving not, as certainly from

early tell summer? like Okay. the And it to what California too looks for is

absolutely. that's sorry, I'm No,

Sure, sure.

absolutely. Yes,

think of going we -- It's crop. follow Sorry, of I us, question some the it's time like this we're rain of in of than are maybe less kind the the for the range a wins in. that seeing and that We're experience can be hopefully, scenario. XX% part then I lighter second come year to in We you to missed bit also a the year, is alternate XXXX. if to -- counter change waiting Yes, seasons And probably there. while California to the -- cropping. just

could will we anything saw some be -- I good regard could drop still it think from just be if will last they they going influenced -- to like be it's get that, solid XX% they be So or fruit maybe year. crop. but It of that a have what

Switching to a great. RFG. bit right, little All gears

that What nature, some facility the center guys Yes, you up overall Midwest you seeing doing result head we Georgia. impact. I distribution noted grow look the this transitory X% that environment pleased seeing a change COVID because are and as exist in You that's noted you're you in know are in had as you as I business COVID? that that the revenue else out know new of to of revenue there's with change, x you obviously but exciting of guys headwinds what midst that are

mentioned what really think Portland. fold it in Atlanta those young over plants we're in excited Right, little efficiency those but with. the and really bit presentation, that And specifically plants a I the coming still in are that is fairly what we into seeing, we're talking we're are two about about, operating

Florida we've well. of from bit a and several years, and of those executing learning think Riverside I got are very plants openings the over the last quite

is to for that younger a those Renaissance are So, I the as begin think at begin perform to the margin what going extent higher of level associated. XXXX facilities we're full up in the operations, six lift looking to plants meaning those average

quick one for last Okay, me.

You in XQ should decline modeling will on offer we revenue. guidance across you as just of big we gave year? know be that avocados. portion color think about next into out be other the I a segments additional Any mindful price that absolute of can the

Sure, as Kevin was mentioning.

Specific piece, clearly. more one see to them I sorry,

a Right, lot and in as mentioning, I both Foods. initiatives, Kevin of got we've was Renaissance think in

a I good market and I just in think, foothold we're innovation of to that of on getting think new and the segment. on in of a Fresh pandemic play. result as innovation channels nature lot And food, there's

for looking -- to quarter. that first we're play second into so, And quarter, out the maybe into the in

seeing marketplace. the food We're similar. selling industrial then to type mentioned even ingredients products the the Food for seeing initiatives are that the on nice out substitution finished for this U.S., bit it's And that is we're type industrial on a other the little service I've foodservice And maybe type in side, products. goods. standard industrial side, going as products before really On think in I

next Please proceed your Rob with Our with question. comes question Jefferies. Dickerson from

questions. I just So I two have guess

a reasons. is up, is volumes positive, was said, side. on number of were different lot, a but down question you've as Obviously, just the pricing First for volume which always

down. the the Prices time. been I guess, go down, for and So back food, maybe Jim, can long volumes you've I'm go up curious, kind different. of on you, can Depending business just volumes and up, U.S. statistics categories a can in be go go prices

you. some is still right, right? the Do next broadly, prices the you're more and pricing just this cheaper. down just contingent curious point, I'm the XX% kind say, a in what and to avocados", right go there. segment on you just continue go up or the let's to environment If prices some thinking wow, XX% this because more So kind the -- reaching, I'm more buy you -- more. would like volumes next normalized years, obviously lot we're Maybe supply say, think to have look, you up, so to prices X% you asking relative if U.S. I'm at year three, through the feel going got "Oh, of it's out which and five fresh on crop, and opportunity just more just because is in I'm international a are of the for is if categories, they're go

really prices I'm it up, you and they're I So rates that like to curious think the down avocados, continue go buying seems if or mean, like just go to would buy. consumers going

So volume just price great? would Can side? of bit? the that kind inelastic a be little you're talk may almost about That on

Rob. sure, for Yes,

and piece off other full talked is the that when is sizes is of the the grades the they're on there come as avocados, And food this side the the service to spectrum that out buying back going come expectation that then buying Calavo we us. for trees. think that is is before, I demand of

at And a sizes that And grade appropriate size certain with food a number they're at or certainly, in the marry for grades those service product, a so as fruit regard sell in and because of because looking we big do going product to retail to the up looking plays margin excess they're in maintain that, role level. that not two customers. either the the lot configuration we're

it. nice We have really outlets for

out allows margin plays good growth. volume good it's of retained obviously kind really matrix balanced and when for it well, that as so And

way U.S. to in that, find lockstep is increase to to marketplace pre-pandemic is continuing back the forward. in going expectation go that Our are volume as yes, our we we

there. way. Europe is into supply in ignorance. in bit not and the my previously of see opportunity sure, guess your material I around selling then excess on Okay, really if I'm into because then any still Europe I'm I a sure Asia great. some little you've not sold just frankly, And obviously, comments or

curious, the I'm So discussion. kind just of absent

On driver thanks you Europe just and it, over of And maybe that's lot. Europe anything the opportunity, selling growth few a the Asian becomes actually the regarding run? in past have learned months, into another long

the Rob. into Yes, realize I Sure, think that some of big into for Europe an process that is thing a example. Yes. as us we got the thought infrastructure build selling we've

And partners of so, that in European the evolve theater to boots the finding some the perspective, getting of Calavo and right idea on begin some that process. -- our belong from ground the to

So certainly, light opportunity interested the it's to think be is and not is a it Calavo in very going we there. that is an developing, but that switch, certainly initiative

next with proceed comes Smith Please question. question from your Lake with Our Capital Street Mark Markets.

a we've more to quarter? then, that during some a demand bit during the on the reopening during talk as maybe kind food want with you touch little maybe bit. quarter And about just trends as you shutdowns what I seen little Can of today service trends far saw QX?

Right.

that's of So, service is know sections. been One that, food which world, trade. the the like and obviously, is things customers channel, of one side as talk if we're out both by is looking be kind year. and next there's wholesale, would we'll that about of both piece the three fresh shutdowns -- ongoing first QSR debilitated the we is into in of The our and that's like the that, we're type in food this And different to restaurant at the kind the seeing ongoing coming is back the this that things feels -- that. and service how like figures certainly channel environment. quarter And to degree a the it into

the that the on new the expecting efforts. is at early of supporter to and to out on was way really things going chipotle, and side And fresh in we're that pandemic of grow figuring the supplier as is we're then we're with arena. their looking the customers, which of to in strong very connect we're continue one, into So a the year, a big their likes which successful other

of we the so the where three of three And be to those are and end pandemic, on dependent afraid. we're third back coming I'm operating, nicely; areas going two is think the are

Did some fall life during more you see Did see much winter? of before later signs we within in the enter maybe the volatility, that? you shutdowns in I quarter guess, the

Yes. following, trying measurable, be honest, side, were the would I little they a but to maybe and the if to as were and you could where up process. out restaurant bit, figure be say there down on in hardly they

so, a didn't feel we other wholesale in but the side, And really two. certainly lot on the whole

the enters continue Okay. more we at and at And the and grocery more kind out to more towards package, they're around the within customer trends forward, outside just far then they looking as fresh seen kind at as in we goods? packaged they're evolution look of of question, similar you as if of hanging look as have if stores customers of store more a kind versus move or what fresh what from

Right.

to store again, middle towards we there to I of but movement we just dollars, their a in-house we're out going was to that were and and -- cooking see, think were buying to move that the it, the stores but on, of talked of more was the out when the produce figure time, the what customers office, as we out a next of exterior they're may and the again. over base waiting grab-and-go though, the and customer thing. to is it piece at they spend early position, and pandemic not about the sandwich, early like look to of feel begin work how bringing while concept remote people of it was going sort challenged move we've extent seen back the to to deli that, trying back The buy to the products and on,

probably Renaissance our years that the out States, kind products there towards that eating were was one additions last the in took And lift customers during the so store. support home drumbeat. support and to the almost people cooking is to then were the the was or week times get there pandemic People the in are grocery food and was products of of to the store lot often movement grocery the maybe United quite rationalization a last and of the probably hold, at pandemic. innovate way habits, efforts a that So several is as in during shopping over daily during habits the to a only of and were And two and grocery piece changed, with shopping week. then of going the new of

an the moving of things on avocados, likeX get bad to to very do selling individual five the able Calavo also selling so be would heavily of a bag, configuration pick it to quickly that not they shopped, cart and avocados the we lot avocado, Fresh a individual, to in the put bag the where shopping in just were up instead one to as touch or so was And is have a side on product of in keep moving. that and

saw in type And pretty so, product. growth dramatic we that

then me, one question. of last just modeling kind great. for the And Okay,

reported -- kind we look going in any big forward changes is here? over been rate, rates, tax there As expect it's barring of the all you would at for what a tax place statutory rate and

difference XX, We've got allowances the so there the on middle we've that K probably you're of put get. significant Page in that's that to for enterprise I had going think few for, there's permanent you credits to only valuation the reconciliation our on a but zone

So points us on for that's to favorable a X X.X side. probably worth

you. Thank

proceed question Pinheiro your with last from Co. Please question. Mitch Sturdivant comes Our with and

very starting you start So looking get your some to comparisons if and when it price you at I'm at had predict? the October, fourth clearly, Fresh I tough year-over-year. start moderate. you're looking easier Is mean, as -- you that is to to just comparing, you something see? in want quarter they're what starting but Or comparisons September, try that don't and side

the out give of a what I works and view, let's do is way specifically think rest quarter Yes, want the we world how the to first see to is you pandemic. its

pricing Is digits. instead February? down, saying to we that January, being you But year-over-year, little continue? you're XX% worsen high down as not would it, bit or I looking now, right of seeing prices December, I'm here so area, think You in in call what and expect even could single a I'm the not what mean enter

XX%. is Well, to some I people particularly grow, anywhere even from quoted X% supply talked, going we have as to side XX%, think from the Mexico,

So increase that's substantial supply. a in pretty

And a I downward knock-on think that to it enough then on margins. be fair probably would effect pressure have that, say so, selling prices, would would which put to

Okay. new what Foods kind And you channels, when Calavo are new about you that talk of and to then referring share? can you channels the second,

also Food side, When bit about world. the the that substitutions are channels food -- of Right. side from question, is nice a the earlier of we're of on was us I this that is good very on very a little giving answer an service talking for couple there's the

then we And other use is bulk something and sell the U.S., into sell product. set product where type manufacturers bulk where for service an of going on to we're sold it seeing pack opportunities else. product, used generally well channels would similar food it in the there international, type we sell the So an industrial side a our with it's ingredient a that that in more product, going so ingredient and as as to product even avocado as and pulp market finished that then their can

Okay.

were year-over-year? excluding was that in -- two was Moving RFG, the what strongest X%, still the here, co-packing quick what on, up just and X%, comparison, questions growth, so what you lagging

another, convenience vegetables, things and operations, salads, meal type the then three of vegetables; so so one, solutions, that. like deli Well, certified sells the Renaissance areas: cut sandwiches, of is kind manufacturing fruit; wraps, style other kind So in cut USDA

those to was products over configurations, eating had been product, inhibited. mentioning teams our as consumers is are in time, type But into certainly that in have I that the So were wherever the what this able do way innovate environment. those capabilities grab-and-go a new and we support successfully now very use

And so so, that to those just items substituted speak. kind in are for pandemic of lagging,

Are the they when margin-enhancing, margin-neutral switch? make you

neutral. margin and They're more product they're substitutions pretty ingredient much there environment, literally set using same this them. the in base say to achieve would I

is question -- you And what your plans? are fiscal Okay. they final just CapEx 'XX? are then for What

So in the -- chain. going we've supply Mexico of a got support got into infrastructure we've of lot

in then are packing and to the house optimize and of to on the materials. Foods Uruapan, in So our of a both efforts labor our side, lot Renaissance looking optimization and efficiencies

margin total it were type probably last enhancement activities, they will again, certainly same about will in be dollars So be as of the most year.

much. you Thank very

this would further questions comments. I back to There Jim the are time. at no call like to turn for closing Gibson any

believe more reflect we true our a results quarter in normalized closing, environment. do In Okay. not our potential fourth

our be entire results, will factors While uncontrollable pandemic tested influence the our that there organization. certainly always

better new excited find together strategic also happy not even connections and the for We're our a stronger customers very you joining and work as they position with initiatives, in to come. prosperous valued and succeed that as will a compete strategic be and in XXXX. anticipated wish holiday year. our our and about everyone we team rose years only to solutions today. We us challenges, much reputation innovative Our to enhance Thank partner a will new for we to we safe believe season built

conference. This concludes today's

your disconnect have wonderful at You Thank and a for time. may lines participation, you evening. your this