Calavo Growers, Inc.

Good afternoon, and welcome to the fourth quarter and fiscal year 2021 Colabo Growers Earnings Conference Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. I will now turn the conference over to your host, Julie Kegley, Investor Relations for Colabo. Thank you. You may begin.

Good afternoon, and thank you for joining us today to discuss Colabo Growers' fourth quarter and fiscal year 2021 financial results. This afternoon, we issued our earnings release, and it is available in the investor relations section of our website at ir.colabo.com. With me on today's call are Steve Hollister, Interim Chief Executive Officer of Colabo, and Mariela Matute, Chief Financial Officer. We will begin with their prepared remarks and then open up the call for your questions. Before we begin, I would like to remind you that today's comments will include forward-looking statements under the federal securities laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate, or other comparable words and phrases. Statements that are not historical facts, such as statements about expected improvement in revenue and operating profit, are also forward-looking statements. Our actual results may vary materially from those contemplated by such forward-looking statements. Discussion of the factors that could cause a material difference in our results compared to these forward-looking statements are contained in our SEC filings, including our report on Form 10-K and 10-Q. With that, I will now turn the call over to Steve Hollister.

Thank you, Julie, and good afternoon, everyone. We appreciate you joining us today. 2021 was a difficult and challenging year, but we finished the year strong and were off to a good start in fiscal 2022. As we entered the fourth quarter, market conditions that we experienced in the third quarter continued. Labor shortages, suboptimal raw materials at higher prices, and high freight costs weighed on the business. Throughout the quarter, as we predicted, market conditions improved along with our ability to manage them. We saw sequential improvement from August through October, and we continue to see this improvement as we sit today about halfway through Q1. Despite the difficult year, we remain committed to paying a dividend. We announced the $1.15 per share annual dividend consistent with last year and continued the tradition of paying a dividend every year since the company became public in 2002. Now, I'd like to spend some time discussing the overall trends affecting each of our business segments. Trends for our core avocado business are favorable. U.S. avocado demand continues to grow with per capita consumption exceeding nine pounds per person, which is double the consumption rate from 10 years ago. We believe that healthy eating trends will continue in the U.S. and that avocados with their favorable nutrition profile will continue to be popular among health conscious consumers We also believe that year-round availability of imported avocados and changing U.S. demographics will favor increased demand. As an example, approximately 19% of the U.S. population is Hispanic, and that population count is expected to double by 2050. With avocados being a staple among Hispanic consumers, overall avocado consumption is expected to continue trending upward, which would naturally benefit our fresh and food segments. Value-added fruits and vegetables have also continued to grow faster than their broader produce categories. We continue to see improved demand for our products that are popular with health-conscious and time-constrained consumers who place a premium on convenience foods like those produced in our RFG segment. In addition, our guacamole and salsa products, while being affected by the pandemic in the food service channel, have strong long-term prospects as well. Turning to some recent news, a couple of weeks ago, the state of Jalisco, Mexico, was verbally approved to ship fresh avocados into the United States beginning around the middle of next year. And as many of you know, Palabo has a state-of-the-art packing facility in Jalisco. From what we understand, individual groves and packing sheds will have to be recertified before shipments are allowed. And we believe only Jalisco and Michoacan are Mexican states that currently have the facilities that comply with with certification requirements. While we have international customers for the avocados packed in Jalisco, opening up to the U.S. will give us more flexibility to manage the changing market dynamics by better balancing supply with demand, which should translate into higher margin opportunities. I would now like to provide an update on Project Uno, which picked up speed in the fourth quarter. To date, key actions have included realizing price increases across our RFG and foods customer base, continued unification of our supply chain across our three divisions to drive synergies from operating as one company, eliminating approximately 5% of less profitable SKUs, and consolidating RFG's food processing operations from Florida into our Georgia facility, which will improve capacity utilization. We're optimistic with our Project DUNO initiatives as we are beginning to see improvements in systems with automation and sourcing. We expect a total annualized EBITDA increase of $70 million as compared to the current run rate, which we expect to be fully realized by early to mid-fiscal 2023. As I said on our last call, total one-time costs of the program are expected to be approximately $30 million, which include professional fees, restructuring costs, and capital investments. On the corporate governance front, we confirmed our plans to reduce the size of our board over time from 11 to nine directors, from a high of 13, which is more in line with our company, our size. We recently welcomed Adriana Mendozavel to our board as an independent director, and Scott Vandercar has decided to retire from the board effective January 3rd, after 27 years of service. I know many of you listening today are interested in our search for a new CEO. The process is nearly complete as we are in the final rounds of interviews with several strong candidates, all with impressive skills and experience. I'm honored to serve as interim CEO as long as I'm needed, but I believe we will have a new leader in place in the very near future. And finally, I would like to welcome two new members to Calabo's executive leadership team. Graciela Montgomery, our first Chief Human Resources Officer, and Mariela Matute, our new chief financial officer. Graciela brings 30 years of HR experience to the table, and she will play a key role for our next major phase of the growth. Mariela Matute has an impressive background of financial expertise and agricultural and food industry experience that uniquely qualifies her for the role of Calabo's CFO. Mariela is already affecting change and has embraced Project Uno by streamlining processes and procedures within the finance group. She is focused on improving our methods of planning, forecasting, and measuring results to enable the long-term growth of Colabo. We're very happy she joined our team, and we're glad to have her with us on the call today. With that, I'll now turn the call over to Mariela.