Calavo Growers, Inc. (NASDAQ:CVGW) Q1 2023 Earnings Call Transcript

So what you see otherwise is us also reducing and streamlining some operations in the U.S. and Mexico and using those funds to put more skills and capabilities in growth areas. And whether that’s international or guac or on our prepared fresh cut or even in channel development where we see club and national retailers as big opportunities, you see us reinvesting those funds. So that’s what I would call the summary and context between the Project Uno launch and what we’re communicating today. Ben, I think it’s also appropriate, we will never be finished making changes in trying to make our organization more efficient. I don’t see big restructuring charges and things of that nature, but we will never be finished because our customers are always changing, the category is changing and we need to make sure that we’re driving our organization to be efficient, effective and place our resources in the areas that have the biggest chance to grow.

Operator: Our next question is from Mitch Pinheiro with Sturdivant.

Mitchell Pinheiro: I guess my first question is, so I guess with Project Uno and the whole — the plan was that it would take a couple of years, 3 years plus to get back to like your performance, your EBITDA generation back in fiscal ’19 and somewhere you did, I think, roughly $80 million in fiscal ’19. And we’ll be — you’re looking maybe around $40 million, $45 million this year. And so, I guess — and then I see we’re lowering the dividend. We’re cutting capital spending a little bit, a little disciplined here. But it doesn’t — are you — is this not getting back to fiscal ’19 levels any time soon? I don’t see in the cash flow a drastic need to cut the dividend and CapEx. I mean I could see being financially sort of conservative, but it doesn’t — it seems like you’re messaging that things are a lot worse at least in the climb out of the bottom and back to the fiscal ’19 level. And I’m wondering what has changed.

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

And therefore, we lowered some of our guidance, particularly in our Prepared fresh cut on where we thought we’d be at the end of the year on an exit run rate on gross profit. So I do think that that’s one of the things that we’re recognizing is that this market will face some challenges. We faced some challenges with consumer performance. I think we’ll be in a period in avocados, we’ve probably been several weeks now, months where demand has exceeded — or sorry, supply has exceeded demand, and we’ve got some volume coming on from California and Peru in a heavy Mexican season, so I think we’re trying to be cautious and respectful that there’s some volatility in Grown margin as well. So it’s really the combination of those 2. I would also just be totally clear, Mitch, there’s not a CapEx project that we’re cutting that we think is a high yield, high return and high growth initiative.