Calavo Growers, Inc. (NASDAQ:CVGW) Q2 2020 Earnings Conference Call June 8, 2020 5:00 PM ET
Lisa Mueller – Financial Profiles
James Gibson – CEO & President, Renaissance Food Group
Kevin Manion – CFO
Conference Call Participants
Robert Dickerson – Jefferies
Mark Smith – Lake Street Capital Markets
Mitchell Pinheiro – Sturdivant & Co.
Benjamin Bienvenu – Stephens Inc.
Hello, and welcome to Calavo Growers’ Second Quarter 2020 Earnings Conference Call. [Operator Instructions].
I would now like to turn the conference over to Lisa Mueller, Investor Relations for Calavo Growers. Please go ahead.
Thank you, Operator, and thank you all for joining us today to discuss Calavo Growers’ second quarter 2020 financial results. This afternoon, we issued our earnings release, and this document is available in the Investor Relations section of our website at ir.calavo.com.
I am here today with Jim Gibson, Chief Executive Officer of Calavo; and Kevin Manion, Chief Financial Officer. On today’s call, management will provide prepared remarks and then we will open the call up for your questions. In order to maximize participation while keeping our call to an hour, we will be observing a 2-question limit during the Q&A portion of the call. Participants can then reenter the queue if you have follow-up 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 our outlook and adjusted EBITDA are also forward-looking statements. Our actual financial condition and results of operations may vary materially from those contemplated by such forward-looking statements. Discussion of the factors that could cause our results to differ materially from these forward-looking statements are contained in our SEC filings, including our reports on Form 10-K and 10-Q.
With that, I would now like to turn the call over to Jim Gibson. Jim, please go ahead.
Thank you, Lisa. Good afternoon, and welcome to Calavo’s first ever earnings call. I hope everyone is staying safe and healthy as we navigate through these challenging times in our nation. During times of uncertainty, we think it is especially important to keep the lines of communications open and increase transparency with our investors.
Before discussing results, I’d like to spend some time reviewing the unique aspects of the Calavo story. As you may know, we’ve been around for nearly 100 years, so that alone is a testament to our staying power. Earlier this year, I was honored to assume the CEO role of this outstanding company as Lee Cole stepped down as Chairman, President and CEO. I have had the good fortune of working alongside Lee for 10 years as President of Renaissance Food Group, a company that I co-founded and was acquired by Calavo. While Lee has left us a proud legacy, I am even more excited about our future.
First, we are the leading U.S. publicly traded avocado company with global operations and long-standing blue chip customers. Founded by farmers and over the course of our long history, we have successfully evolved the business and perfected our craft to meet growing consumer demand for avocados, another healthy fresh food. Today, Calavo through its 3 complementary business segments: Fresh, Renaissance Food Group, or RFG, and Calavo Foods is a leading supplier of avocados as well as other prepared foods and refrigerated prepared fruits and vegetables. Furthermore, we have a long track record of delivering returns to our shareholders including 18 consecutive years of annual dividend payout since our IPO.
Second, the avocado market opportunity continues to be robust. Over the past decade, avocados earned the name of green gold, as U.S. demand more than doubled to 2.6 billion pounds during that time period. This translates per capita annual consumption of about 8 pounds of fruit today compared to about 3 pounds 10 years ago. A broad demand for the fruit is also trending upward, especially in Asia. While COVID-19 will certainly disrupt some near-term growth, we believe the long-term potential for the avocado market remains strong.
Third, our best-in-class operating platform is well positioned to capture growth opportunities ahead. In recent years, we have reinvested nearly $80 million in capital to strengthen our supply chain. This includes expanding distribution and processing capacity and improving manufacturing efficiencies. Just as important, the expansion of our own production facilities has reduced the reliance on co-packers, which I will expand on later. Our strong operating platform also reinforces our ability to develop our new hospitality market, which we entered through the acquisition of Simply Fresh Fruit. We closed the acquisition this quarter and the new line of fresh-cut fruit with longer shelf life is highly complementary to RFG’s retail grocery expertise. Through this acquisition, not only do we expect to establish a strong foothold in the large and diverse hospitality market, but we also expect to boost margins by using Calavo-owned facilities rather than relying on co-packers. Calavo indeed is ready and primed for growth as market conditions normalize.
As many aspects that make Calavo’s story unique can be attributed to the decades-long leadership of Lee Cole, we are very grateful to Lee for his many contributions, and I am honored to lead Calavo through the next chapter of growth. Lee left big shoes to fill, but we have a strong leadership team in place. Our operations here in the U.S. and Mexico are led by a senior team with more than 200 years of collective industry knowledge and experience. Furthermore, many of them have had long careers with the Calavo family. We also recently appointed Kevin Manion to our Chief Financial Officer and promoted Joel Silva to our Corporate Controller and Chief Accounting Officer. Kevin’s strong background includes leadership roles at several major food companies. He has deep experience in corporate finance, operations and capital markets plus a history of building and leading high-performing teams. Joel was previously our Division Controller for the Fresh and Food segments, and now has assumed greater responsibility at the corporate level. Both have hit the ground running under some very challenging circumstances.
With the guidance of our experienced Board of Directors, which is chaired by long-time director, Link Leavens, our mutual goal is to build upon our strong foundation to drive continued success over the long term.
Now turning to COVID-19. We have been closely monitoring the situation and strictly following CDC guidelines to ensure a safe working environment for more — for our more than 3,500 employees across 13 facilities and operations. We did experience a minor disruption in our Santa Paula, California packing house in mid-May as several of our employees tested positive for COVID-19. We quickly closed the plant for 4 days to have a third-party sanitation company conduct a deep cleaning of the entire facility and added a variety of other enhancements to our safety protocols. Fortunately, we were able to reopen the packing house shortly thereafter and employees who passed mandatory health screenings are back to work. Since then, we’ve had no new incidence of COVID-19. Our proactive efforts have allowed us to minimize supply chain disruptions and continue to safely serve our customers. As of today, our facilities are open and operating, and I want to thank the team for their dedication and commitment during these challenging times.
Shifting to our results. Despite significant impacts associated with COVID-19 in our RFG and Foods segments, total revenue for the second quarter was comparable to the same period last year totaling $281 million. Net loss was $3.3 million or a loss of $0.19 per share and the adjusted income was $7 million or $0.40 per share.
Kevin will provide the details in his remarks, but I’ll turn to an update on each of the 3 business segments. First, our Fresh segment, which procures and distributes avocados and other fresh produce. While overall second quarter revenues increased 13% year-over-year, growth was constrained by COVID-19. Sales fell sharply in mid-March with the stay-at-home orders that affected retail store traffic and our foodservice customers. Gross profit also declined due to canceled orders being resold on consignment at discounted prices, costs associated with product returns and the rapid devaluation of the Mexican peso, which Kevin will discuss later. However, we were first fortunate that our complementary Foods business segment helped absorb some of the impact. We redirected some of the unsold inventory and repurposed it for guacamole, which can be frozen to extend shelf life.
We also donated a portion of the unsold inventory to local food banks. The Fresh segment began to recover in April and May as consumers shifted back to normal buying patterns at retail grocery outlets and the foodservice industry began to open for takeout and delivery. In addition to higher volumes, profit per carton returned to our historical average range as the quality of avocados improved compared to the first quarter. Looking ahead, we expect gross profit per carton to be more consistent with our historic average. We have higher volumes this year due to an earlier crop season in California and Peru’s harvest coming on this summer. Moreover, the overall fruit quality has been improving since the first quarter of 2020.
Turning to our RFG business segment, which creates markets and distributes a portfolio of convenient, fresh prepared foods, including fresh-cut fruit and vegetables. Net sales for the quarter decreased 18% due to lower consumer demand for grab-and-go items and the closure of our Midwest co-packing partner in March. COVID-19 concerns also put a damper on any hospitality revenue from Simply Fresh in March and April, so RFG did not get any lift in revenue from the acquisition. As noted over the last 3 quarters, our Midwest co-packing partner has had a series of plant closures that weighed on our results. This quarter, the co-packer finally closed its last plant and while we have strong national customer relationships, we were no longer able to service our customers in that specific region. While this will result in near-term lost revenue, we have been working hard on transitioning out of this third-party relationship into a company-owned asset model. Becoming more vertically integrated will allow us to have better control over our supply chain while improving margins in the long run. In fact, we are already seeing this begin to play out. RFG’s gross profit held for the quarter as the manufacturing margins for our own facilities improved over last year. The margins of our newer production facilities in Georgia and the Pacific Northwest are continuing to improve both year-over-year and on a sequential basis.
Next, sales from our Foods segment declined 19% in the second quarter, largely due to lower volume as a result of canceled orders and shipment delays from our foodservice customers. That said, we saw recovery in this segment in volume and gross profit following the most severe months of COVID-19. We also resumed product shipments to Asia in April, including our first shipment of guacamole products to Japan in late May.
In summary, while COVID-19 had a meaningful impact on the second quarter results, all of our business segments are on the path to recovery with visible opportunities ahead to expand sales, identify and execute cost savings opportunities and improve profitability.
With that, I will turn the call over to Kevin.
Thank you, Jim, and good afternoon to everyone on the call. I’m thrilled to be part of Calavo, and I am excited by what I’ve seen in my initial weeks here. The fringe benefits of fresh avocados prepared meals to take-home enhance my status at my own home quite substantially.
Today, I’ll start by discussing our financial results for the second quarter ending April 30, followed by our balance sheet and outlook. Please note that all comparisons are year-over-year unless otherwise noted. We will also be discussing non-GAAP results and a reconciliation of non-GAAP financial measures is included in our earnings release.
On a consolidated basis, second quarter sales were essentially flat year-over-year. The quarter began strong as we saw year-over-year growth in February and into the first few weeks of March. However, as Jim mentioned, with shelter-in-place restrictions due to COVID-19, we saw a significant negative impact on our business. Foodservice sales fell sharply, and retail sales declined as consumers shifted purchasing to nonperishable goods. The impact of the pandemic resulted in $6 million in canceled orders and an additional $9 million reduction in sales run rate related to changing customer buying patterns from mid-March through the end of April. The Simply Fresh business acquired in February 2020 also generated $3 million less revenue from the same period in the prior year.
While we saw these negative impacts, we did see improving sales to the retail channel as the month of April progressed. In addition, sales to foodservice also improved as restaurants reoriented their businesses for curbside pickup and takeout service, but still remains well below year ago levels.
Our gross profit declined 40% year-over-year to $22.1 million from $36.8 million in the second quarter of 2019. In addition to lower sales volumes, gross margin in the Fresh segment was lower due to a $3.4 million foreign currency remeasurement impact. To provide clarity, we have a VAT receivable from the Mexican government. The decline in the value of the peso from MXN 18.91 to MXN 23.93 per U.S. dollar during the quarter led to the decrease in the value of the VAT receivable when converted into U.S. dollars. While normally, we benefit from a stronger dollar, which typically results in lower labor and material costs, in this situation, it worked against us. As an update, the peso was at MXN 22.18 at the end of May. So the $3.4 million impact would have only been $2.2 million at the end of May.
Furthermore, gross profit was directly and negatively impacted by costs incurred due to canceled orders, products sold on consignments and the closure of the Simply Fresh facility. These costs totaled an additional $1.8 million for the quarter.
Most importantly, excluding the impact of this currency issue and COVID-19 items, gross margins were ahead of historical averages. In addition, the uptrend in gross margins continued into May. SG&A expenses declined 7.4% to $14.5 million from $15.7 million in the year ago quarter. As a percentage of sales, SG&A declined 30 basis points to 5.2% of sales in the second quarter 2020 from 5.5% 1 year ago, primarily due to lower performance-based compensation.
Operating profit fell to $7.6 million in the second quarter, down 67% from $23.1 million in the same quarter last year. This decline in operating profit was largely the result of the lower sales volumes creating lower gross profit in the Fresh segment.
Our income statement also reflects $10.3 million of unrealized loss on the value of our Limoneira stock based on a 32% decline in Limoneira’s share price during the quarter. As a reminder, we filed a 10b5-1 last year, but the current price is below our threshold. We incurred a pretax loss of $2.4 million prior to the impact of losses from unconsolidated entities, down from $25 million of pretax earnings in the second quarter of 2019. Losses from unconsolidated entities improved to $2.2 million loss in the second quarter 2020, down from a $3.1 million loss in the second quarter of 2019. Net loss in the second quarter was $3.3 million or a loss of $0.19 per share. Adjusted net income was $7 million or $0.40 a share.
In the earnings release, we provided a reconciliation of EBITDA and adjusted EBITDA, which accounts for adjustments for unconsolidated entities and onetime items. We believe adjusted EBITDA provides a good representation of our business results. We plan on continue reporting and providing this reconciliation moving forward. That said, adjusted EBITDA for the second quarter of 2020 was $14.4 million, down 46% from $26.7 million in the second quarter of 2019.
Now moving on to our 3 business segments. Sales in the Fresh segment increased 13% year-over-year to $170.9 million from $151.2 million in the second quarter of 2019. However, that 13% increase masked the trends during the quarter, as sales grew strongly in February and early March, slowed sharply in mid-March as shelter-in-place restrictions were enacted and rebounded in April and into May. However, despite the higher sales, gross profit in the Fresh segment declined to $14.4 million or 8% of revenue, down from $27.8 million or 18% of revenue in the second quarter of 2019. The lower gross profit resulted from lower profit per carton related to a year ago when profitability was especially favorable. However, as retail volumes rebounded in April and May, gross margins improved and were above historical average levels in both months.
As I mentioned at the start of my comments, the impact of the foreign currency remeasurement reduced gross profit by $3.4 million in this segment. Retail sales have now rebounded to exceed the pre-COVID cohort levels, whereas foodservice sales remain well below pre-COVID levels.
In RFG, sales declined to $93.9 million in the second quarter of 2020 from $114 million in the second quarter of 2019. The decrease primarily resulted from revenue losses from the ending of our co-packer relationship in the Midwest, as Jim had mentioned, as well as gaining only limited sales from the Simply Fresh acquisition as the hospitality business paused due to the COVID-19. Gross profit increased slightly to $2.7 million or 2.9% of sales, up from $2.5 million or 2.2% of sales from the same period last year. The upward trend in gross margin is a function of the benefit of our shift in production to our company-owned production facilities, and we expect to see these favorable trends continue. In addition, at the end of the quarter, we took steps to reduce SG&A overhead costs, which will result in savings in the second half of 2020 and into 2021. On the sales front, we’ve been pleased to see grocers and retailers bringing back the fresh healthy food options that had temporarily been dislocated to make space for more shelf-stable items. In addition, we have focused on new product development with grab-and-go options for both retail and new foodservice and hospitality customers.
For the Foods segment, sales were impacted by the curtailed orders to the foodservice channels starting in mid-March. For the quarter, sales declined to $17.9 million from $22 million in the year ago quarter. Gross profit moderated to $4.9 million or 28% of sales from $6.5 million or 30% of sales in the second quarter of 2019. Retail sales trended favorably as the quarter progressed and again into May. We also shipped our first Guacamole Dip & Go Cups to Japan during the quarter.
Turning to our balance sheet. We ended the quarter with $110 million of cash, liquid investments and available debt capacity. Our $50 million of total debt at the end of the quarter included $19 million related to our acquisition of Simply Fresh in February. Our leverage is very low, enabling us to continue looking for accretive opportunities.
As for the remainder of 2020, we withdrew our guidance based on the lack of clarity around the economic reopening and recovery, especially in foodservice. We are pleased with the sequential trends as we progress into the third quarter, with demand increasing in all of our businesses. However, we remain mindful of the uncertainties of the pace of the economic recovery. That said, we’re in frequent communication with our customers to enable us to understand end-market demand and to recalibrate our business. May’s results give us confidence as we expect adjusted EBITDA to improve sequentially next quarter from a combination of higher sales volumes and seasonally lower input costs.
Since this is our first earnings call, which also makes it the best one yet, I just want to repeat Jim’s comments about maintaining an open dialogue with current investors, our objective to attract new investors while providing transparent communications on a regular basis.
I will now turn it back to Jim.
Thanks, Kevin. Before we take questions, I want to reiterate that Calavo is a company with strong roots and a long successful operating history. Our robust operating platform is well positioned to capture the rising global demand for avocados and emerging trends in fresh and prepared foods. We also have a strong balance sheet that not only provides additional comfort during these uncertain times, but will also support future growth. And finally, we have a very experienced leadership team and a Board of Directors focused on delivering profitable growth and returns to our shareholders.
As a leader in the industry, we remain committed to being good corporate citizens and building an even stronger legacy going forward. I want to thank our shareholders for your continued support, and I look forward to updating you on our progress in next quarter’s earnings call. Until then, stay healthy and safe.
Operator, we’re now ready to take questions.
[Operator Instructions]. Our first question comes from the line of Rob Dickerson with Jefferies.
So look, just a couple of questions, trying to just keep it simple. Obviously, there’s some pressure in the quarter given everything that’s at play. But then in the prepared remarks, you — or in the press release, you pointed to EBITDA hopefully being better sequentially in Q3. So I’m just curious now, I guess, given we’re through the month of May, which is the first quarter of that third quarter, or sorry, first month of the third quarter, just all of your commentary around maybe a little bit of positive progression in foodservice and away-from-home given increase in curbside, et cetera. Just kind of how you kind of more broadly feel around that demand recovery as you’re now in Q3, really more from a sales perspective than an EBITDA perspective would be my first question.
Rob, this is Jim. So yes, I think that what we’re seeing is after a very difficult March, which really saw us feel the impact of the stay order. And then kind of sequentially, the weight of unemployment coming through, it kind of really put a damper on consumer demand, obviously. But what we were really focusing on that time was really orienting on our supply chain. And as I mentioned in the remarks about the impact of COVID, we’ve got 6 food plants in the United States and another one in Mexico, 3 packing houses, 3 value-added distribution centers. So really focusing on maintaining the supply chain coming in the United States and doing what we have to do at the factories to make our employees literally feel safe to come to work and operate. And I think we’ve done a really good job of maintaining that. And then as we’ve kind of rolled through March and into April, we have felt a little bit more of a stabilization of demand, meaning that while we’re not feeling the acceleration of a normal summer period, we are feeling a recovery from March through April. And as we arrive in May, we’re pretty satisfied with demand and with our ability to convert into returns.
Okay. That makes sense. And I would agree, you have done a great job of keeping the supply chain moving. In terms of just with that demand, obviously, but if anyone’s guess how quickly it comes back, in what form, what have you. If we look at kind of just pricing dynamics from the USDA weekly prices that we can all see, pricing in the past few weeks — over the last few weeks of May, seem — looked down like fairly materially. And I would assume that will be driven more by the kind of the demand than volume dynamic. Obviously, price volatility isn’t always that pronounced, but it seems to be now. Is that something that you would hope and expect to hope to recover fairly quickly along with demand? And again, I kind of ask because if Q3 is a higher seasonal quarter, pricing is down but volume comes back, it would seem as if there could still be some profitability pressure. But I’m hoping that, that pricing dynamic recovers quickly as we get through the summer and demand increases. Hopefully, that makes sense.
There are a lot of variables at play right now. So for sure, I think we can say that pricing is going to be impacted in the third quarter to some degree as we get other markets coming into the United States, for sure. There’s a very strong California crop in place as well. I will say though that as that is occurring and we’re feeling our own consumer demand beginning to increase into the summer with really good control. And I will say as well is that pretty much the quality, I would say, of the pick is getting better and better. And as you know, that allows us to dedicate certain sizes and grades into certain customers. And as long as we have control of that, we can maintain a margin in that kind of environment very successfully.
Your next question comes from the line of Mark Smith with Lake Street Capital Markets.
First off, I just wanted to hit on the SG&A cuts. Can you give us any more quantification on that and what we should look at for SG&A levels as we go forward?
I think probably one of the big things for me is that as I’m stepping into this role, I’m really — and for those of you that don’t know me that well, I came out of the Renaissance Food Group environment. So now that I’m sitting in Calavo, I’m able to see kind of the way that we can synergize and use our SG&A more and more effectively. And so there will be opportunities as we go forward to probably reduce cost as a part of that, and also improve maybe the way that we structure and go forward.
Okay. Perfect. And then, Jim, I think you talked a little bit about the avocado quality, you’ve kind of seen improvement on a year-over-year basis. And it sounds like maybe if you want to just reiterate, it sounds like margin potential here that you feel like you’re kind of back at historical averages? Are we looking at that correctly?
I would say that’s very fair. And really, what I was referencing in our conversations, in the first quarter, we had just a very difficult quarter with quality of raw materials on avocados. And so as we progressed into the second quarter and certainly into the third, it’s coming back into more expected stable environment. And in that environment, we can expect that we’re running at our normal good averages on margin.
Your next question comes from the line of Mitchell Pinheiro with Sturdevant & Company.
I didn’t think my Calavo earnings call would be part of the new normal, but I’m happy it is. The — I guess, first question is, can you help us maybe frame how much — how big foodservice is as a percentage of your sales, either totally or for the Fresh segment?
Yes. Yes. I think sometimes you think about it in a variety of different ways. So in our 3 segments — and I’ll start with Renaissance as we — as we’re coming into the Simply Fresh acquisition that is adding foodservice. So that’s an environment where, historically, we have not done much with foodservice at all. And in the Foods section, which is the fresh guacamole side of things, we’re kind of at a 50-50 range as far as like retail versus the foodservice environment. And then lastly, as we go into the Fresh side, then we’re kind of in that 15% to 20% range for foodservice.
That’s very helpful. And does — is there any discernible difference in gross profit, on the Fresh side that is, between foodservice and retail volume?
No. I would say probably overall, not. But remember, we are talking sizes and grades. And one of the great things about foodservice is that foodservice is happy to take the number two grade. And so it helps overall in the kind of the overall average gross margin of the avocado side of things. Does that makes sense?
It does. All right. And then you also talked about — I mean, obviously, you have the ability to freeze avocados for the guacamole — I mean you have some flexibility there. I was just looking at your inventory levels year-over-year, and they’re actually down. I know, obviously, there’s a lot of moving parts there, but how much can you commit to inventory in this time for like the Foods business? Is it not — I won’t say unlimited, but do you have a lot of flexibility to take product in at these favorable prices?
Well, and we have been doing that. I guess the short answer to your question is yes, we can. And I will mention that as we’ve talked about capital investment, in that area, we are adding more freezer space. So that’s an opportunity for us going forward when the environment is correct or right for us to take advantage of that.
And just one last question on RFG. Has — based on your mix pre-COVID and now post-COVID, do you anticipate any long-term changes to your product mix as a result of maybe the way the grocers will be maybe redesigning stores? And if so, does it have any impact on margins? Does it have any — does it give you an advantage or a disadvantage as you’re looking forward in that segment?
Yes. I think — so we go back one more step. I think Renaissance historically has been a solutions provider to our retail customers. And so in this environment, and I’ll give the quick example when the stay-at-home orders kind of began to hit and unemployment numbers kind of started cranking up a bit, the concept of the grab-and-go sandwich at retail kind of took a back seat. And so immediately, our group is working with our deli customers to begin to revamp items so that they’re more user-friendly for the customers that are going through there. And so that is kind of the environment that Renaissance operates in. And it would not — I mean, we would expect that we would be able to benefit from the margins that we get as a result.
Your final question comes from the line of Ben Bienvenu with Stephens.
I want to start on the RFG business. I think you made some comments that while the Midwest co-packer facility closed in March, you might be on the path to identifying a new facility or a new partnership. Could you elaborate on that a little bit if that is the case? And then as you think longer term about your mix of company-operated versus co-packer facilities, what do you think that looks like over the next several years?
Yes. I think probably on the first piece of that, what we really oriented on as we begun to — as we began to have problems in that region is to begin to kind of expand our footprint in other areas to absorb maybe expected loss from that region. And so that’s part of that conversation with the new facility in Atlanta and the new facility in the Pacific Northwest. We still — and then the second part of that is we still value co-packer relations. But we also recognize that where we have the capability and we can go into a region and the region makes sense for us to be there, then we like to invest at this point our own assets to make that work. The Midwest is definitely a location that we eventually want to be back into, but it’s exploratory at this point.
Okay. That’s really helpful. My second question is related to FreshRealm. I wonder has the impact of COVID and the transition of food demands to retail and potentially meal kits as well at retail, to what extent has that positively impacted FreshRealm? To what extent can you just elaborate on kind of what you’re seeing in that business on both the top line and bottom line?
Yes. I think the overall answer to that is yes, is that as a result of the kind of the heat — the eat-at-home environment in this situation that we’re in, the direct-to-consumer kind of delivery concepts, FreshRealm is definitely in place to kind of take advantage of that. They’re developing and have a product set that is all the way from kind of the meal kit that comes in component scenario that can be put together at home with recipe in like a 45-minute to an hour scenario, all the way down to kind of like the quick-serve that can be handled in a microwave in a 2- to 3-minute area. And then the in betweens, the crock pot kits and sheet pan dinners and things like that. And so yes, I think in this environment, we’re seeing a definite lift with FreshRealm, and their sales are up year-over-year about 55%, I think we were mentioning. And their losses are starting to come in line and they’re working towards the breakeven point. So if we can continue to gain that acceleration in this environment, they’ve got a bright future for us.
This concludes our question-and-answer session. The conference has now concluded. Thank you for attending. You may now disconnect.