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CALAVO GROWERS INC (CVGW)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 continuing operations delivered net sales of $179.6M (+11.7% YoY), gross profit of $20.1M (-8.7% YoY), and diluted EPS of $0.30; adjusted net income rose to $10.2M and adjusted diluted EPS to $0.57, reflecting strong avocado margins offset by FX losses and higher guacamole input costs .
  • The Grown segment benefited from a 25% YoY increase in avocado prices and improved margins, while avocado volumes fell 4.5% due to temporary Mexico supply disruptions; Prepared gross margin compressed to 12% from 16% YoY on higher fruit costs .
  • Balance sheet improved: net debt reduced by $9.5M in Q3 and fully retired post quarter using Fresh Cut sale proceeds; liquidity was ~$57.3M at quarter-end; dividend doubled to $0.20 per share for October 30, 2024 payment .
  • Management expects momentum to continue into Q4, with Prepared (guacamole) margins improving as input costs recede and new product launches supporting FY25 growth; no formal numerical guidance provided .

What Went Well and What Went Wrong

  • What Went Well

    • Avocado pricing and margin strength drove Grown segment performance despite supply disruptions; average selling price up 25% YoY and margins improved .
    • Adjusted profitability improved: adjusted net income rose to $10.2M from $7.7M YoY; adjusted EBITDA increased to $13.5M from $13.0M YoY .
    • Strategic focus and capital returns: Fresh Cut divestiture closed for $83.0M (estimated ~$75.0M after-tax net cash), debt retired subsequent to quarter, and quarterly dividend doubled to $0.20 per share .
    • Quote: “Our third quarter results reflect continued momentum in our flagship avocado business... we generated strong financial results due to our operational flexibility and our resilient team” — Lee Cole, CEO .

  • What Went Wrong

    • FX headwind: $4.2M foreign currency remeasurement loss this quarter vs $2.0M gain last year, prompting non-GAAP exclusion going forward .
    • Prepared margin pressure: gross margin fell to 12% from 16% YoY on higher fruit input costs; Prepared gross profit decreased to $1.9M (-$0.8M YoY) .
    • Lower YoY gross profit and EPS (GAAP): gross profit down 8.7% to $20.1M and diluted EPS from continuing ops down to $0.30 from $0.48 amid FX and tax impacts .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Net Sales ($USD Millions)$160.9 $127.6 $184.4 $179.6
Gross Profit ($USD Millions)$22.0 $12.5 $20.4 $20.1
Gross Margin (%)13.7% 9.8% 11.0% 11.2%
SG&A ($USD Millions)$13.0 $13.5 $13.0 $10.5
Operating Income ($USD Millions)$10.2 $(1.4) $7.1 $9.4
Net Income from Continuing Ops ($USD Millions)$8.7 $(2.6) $6.5 $5.4
Diluted EPS – Continuing Ops ($USD)$0.48 $(0.15) $0.36 $0.30
Adjusted Net Income ($USD Millions)$7.7 $(0.174) $8.9 $10.2
Adjusted Diluted EPS ($USD)$0.43 $(0.01) $0.50 $0.57
Adjusted EBITDA ($USD Millions)$13.0 $4.8 $13.4 $13.5

Segment Breakdown

Segment MetricQ3 2023Q2 2024Q3 2024
Grown Net Sales ($USD Millions)$144.1 $166.8 $163.2
Prepared Net Sales ($USD Millions)$16.8 $17.6 $16.4
Grown Gross Profit ($USD Millions)$19.3 $16.0 $18.2
Prepared Gross Profit ($USD Millions)$2.7 $4.3 $1.9

KPIs

KPIQ3 2023Q3 2024
Avocado ASP YoY ChangeN/A+25%
Avocado Volume YoY ChangeN/A-4.5%
Prepared Gross Margin (%)16% 12%
Guacamole Volume YoY ChangeN/A+7%

Balance Sheet and Liquidity (Selected)

  • Net debt at Q3: $39.0M; liquidity ~$57.3M; subsequent to quarter, remaining debt retired with Fresh Cut sale proceeds .
  • Dividend increased to $0.20 per share (paid Oct 30, 2024; record Oct 2, 2024) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per ShareQ4 2024$0.10 (Q2 declaration) $0.20 (declared for Oct 30) Raised
Prepared (Guacamole) MarginsQ4 2024N/AExpect margins to improve as input costs recede Raised (qualitative)
SG&A Savings Target (Corporate)Annualized~$20M+ targeted (Q1 disclosure) Reiterated focus post Fresh Cut sale; no new numeric update Maintained
D&A ReductionAnnualized~$(10)M from divestiture (Q1 disclosure) No update; Fresh Cut sale completed Aug 15 Maintained/Implemented
Capital AllocationFY 2024–2025N/ADeploy Fresh Cut proceeds into core avocado/guacamole and return cash to shareholders New qualitative
DebtPost-Q3N/ARemaining debt retired subsequent to quarter Improved balance sheet

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2024)Trend
Avocado Pricing/MarginsQ2: ASP +28% YoY; strong avocado margins; prioritized margin over volume ASP +25% YoY; margins improved; volumes -4.5% due to temporary Mexico supply disruptions now resolved Improving margins; temporary volume headwind resolved
Prepared/Guacamole PerformanceQ1: Prepared gross margin 30% on lower fruit costs ; Q2: Prepared gross profit +40% YoY, margin 24% Prepared margin 12% (vs 16% LY) due to higher fruit costs; expect margin improvement in Q4; guacamole volume +7% Near-term pressure; improving outlook
Supply Chain (Mexico)Q2: Robust sourcing; balance sheet FX loss $0.3M vs $1.0M gain LY Temporary Mexico supply disruptions impacted avocado volume; resolved by quarter-end Stabilizing
FX / Peso ExposureQ1–Q2: Investigation costs and FX variances noted $4.2M FX remeasurement loss; beginning to exclude FX from non-GAAP due to volatility Adverse in Q3; mitigated in non-GAAP
Legal/Regulatory (FCPA, SAT)Ongoing FCPA investigation costs (Q1: $2.4M; Q2: $2.7M); Mexican tax matters ongoing FCPA investigation ongoing; Mexican tax matters: $0.225M in Q3; continue cooperating with SEC/DOJ Ongoing; costs moderating vs Q2
Portfolio StrategyQ1: Target $20M SG&A savings; plan Fresh Cut sale Fresh Cut sale completed (Aug 15, $83.0M); intent to invest in core and return cash; dividend raised Executed and refocused

Management Commentary

  • “Despite temporary industry supply disruptions from Mexico during the quarter, we generated strong financial results due to our operational flexibility and our resilient team.” — Lee Cole, CEO .
  • “We intend to deploy the cash that we generated from the sale of our Fresh Cut business by investing in our core avocado and guacamole businesses and by returning cash to shareholders over time... we have doubled the quarterly dividend to $0.20 per share.” — Lee Cole, CEO .
  • “We expect margins in the guacamole business to improve in the fourth quarter as input costs recede... innovative new guacamole products... expected to support growth in fiscal 2025.” .

Q&A Highlights

  • The Q3 2024 earnings call transcript was not available in our document catalog or via public transcripts; as a result, Q&A details and any clarifications are unavailable at this time [ListDocuments returned none for earnings-call-transcript; InternetSearch yielded no transcript: https://seekingalpha.com/symbol/CVGW/news].

Estimates Context

  • S&P Global consensus estimates were unavailable due to request limits; therefore formal SPGI comparison could not be retrieved.
  • As indicative context (non-SPGI), Yahoo Finance preview cited consensus revenue of $178.55M and EPS of $0.43 for Q3 2024; Calavo reported net sales of $179.6M and adjusted diluted EPS of $0.57, implying a beat vs these non-SPGI figures. Use with caution; SPGI consensus is the preferred benchmark and was not retrievable .
ItemConsensus (Non-SPGI)ActualNotes
Revenue ($USD Millions)$178.55 $179.6 Above indicative consensus
EPS (Reported basis) ($USD)$0.43 $0.57 adjusted; $0.30 GAAP continuing ops Adjusted EPS above indicative consensus; GAAP EPS below

Key Takeaways for Investors

  • Core avocado franchise is driving adjusted earnings momentum; three consecutive YoY improvements in adjusted EBITDA and higher ASPs offset volume variability, supporting the margin-over-volume strategy .
  • FX volatility is material ($4.2M loss in Q3) and management now excludes FX in non-GAAP, improving comparability but highlighting currency risk tied to Mexico operations .
  • Prepared segment margin compression from higher fruit costs should abate in Q4; guacamole volume growth (+7%) and product innovation pipeline are incremental positives for FY25 .
  • Balance sheet de-risking post Fresh Cut sale (debt retired; liquidity healthy) enables reinvestment and shareholder returns (dividend doubled), improving capital allocation flexibility .
  • Legal/regulatory processes (FCPA; SAT/Mexican tax matters) remain ongoing; Q3 professional fees were $1.4M for the internal investigation, but costs are moderating versus Q2 .
  • Near-term trading lens: dividend increase and refocused portfolio are supportive; watch FX, guacamole input costs, and Mexico supply stability for quarter-to-quarter volatility .
  • Medium-term thesis: streamlined operations, disciplined margin focus, and brand/product innovation in Prepared provide a path to sustain adjusted EPS and EBITDA growth, contingent on currency and supply-chain normalization .
Sources: All figures and commentary cited directly from Calavo’s Q3 2024 8‑K press release and attached tables, Q2/Q1 press releases, and Fresh Cut sale release.