Calavo Growers (CVGW) Q2 2024 earnings summary

Executive summary

• Net sales from continuing operations rose 16.5% year-over-year to $184.4 million for Q2 2024, driven by strong avocado and tomato performance in the Grown segment.

• Gross profit increased 30% to $20.4 million, with consolidated gross margin improving to 11.0% from 9.9% a year ago.

• Net income from continuing operations was $6.5 million, up from $1.4 million in Q2 2023; adjusted net income reached $8.9 million.

• The company is in non-binding negotiations to sell its Fresh Cut business, now classified as discontinued operations, targeting completion in Q3 2024.

• Ongoing internal investigation into potential FCPA issues in Mexico, with $2.7 million in professional fees incurred in Q2 2024.

Financial highlights

• Grown segment net sales increased 19% to $166.8 million, while Prepared segment net sales decreased 2% to $17.6 million for Q2 2024.

• Gross profit for Grown products rose 27% to $16.0 million; Prepared products gross profit rose 40% to $4.3 million.

• Adjusted EBITDA from continuing operations was $13.4 million for Q2 2024, up from $9.9 million in Q2 2023.

• SG&A expenses were $13.0 million (7.1% of net sales), down from Q2 2023, despite FCPA investigation costs.

• Net debt at quarter-end was $48.5 million, with $47.3 million in liquidity.

Outlook and guidance

• Targeting completion of the Fresh Cut business sale in Q3 2024; proceeds expected to reduce debt and return cash to shareholders.

• Costs related to the FCPA investigation are expected to decline beginning in Q3 2024.

• Management expects robust performance to continue in Q3, citing strong starts and focus on core business value maximization.

• Management expects sufficient liquidity from operations and credit facilities to meet future needs.