Calavo(CVGW) - 2025 Q3 - Quarterly Results

Executive Summary This section provides an overview of Calavo Growers' financial performance for Q3 and the nine-month period ended July 31, 2025, highlighting key operational and financial metrics Third Quarter 2025 Highlights Calavo Growers reported a slight decrease in total net sales for Q3 2025, primarily due to a decline in the Fresh segment, which was significantly impacted by a temporary FDA detention hold on avocado imports and lower selling prices, while the Prepared segment showed strong growth in sales and gross profit, and adjusted net income and EBITDA increased Third Quarter 2025 Key Metrics | Metric | Q3 2025 (in millions) | Q3 2024 (in millions) | Change (%) | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Total Net Sales | $178.8 | $179.6 | -0.4% | | Fresh Segment Sales | $155.9 | - | -5% | | Prepared Segment Sales | $22.9 | - | +40% | | Gross Profit | $18.2 | - | -9% | | Adjusted Net Income | $10.2 | $10.0 | +2% | | Adjusted Net Income Per Diluted Share | $0.57 | $0.56 | +1.8% | | Adjusted EBITDA | $15.1 | $12.9 | +17.1% | - Fresh segment results reflected an 8% decrease in cartons sold, driven by declines in both avocado and tomato carton sales[9] - Gross profit included approximately $4.2 million of discrete costs associated with a temporary Food and Drug Administration ("FDA") detention hold on certain avocado imports from Mexico, which resulted in third-party inspection and testing costs, incremental logistics and handling expenses, and inventory write-downs[5][9] - Prepared segment net sales increased primarily due to a 35% increase in sales volume[9] Nine-Month Period Ended July 31, 2025 Highlights For the nine-month period, Calavo Growers achieved a 7% increase in total net sales, with both Fresh and Prepared segments contributing to growth, and net income and adjusted metrics saw significant improvements, partly due to reduced SG&A expenses and strong Prepared segment performance, despite the Fresh segment facing challenges including the FDA hold Nine-Month Period 2025 Key Metrics | Metric | 9M 2025 (in millions) | 9M 2024 (in millions) | Change (%) | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Total Net Sales | $523.8 | $491.6 | +7% | | Fresh Segment Sales | $470.3 | - | +6% | | Prepared Segment Sales | $53.5 | - | +10% | | Gross Profit | $52.0 | $51.5 | +1% | | SG&A Expenses | $29.8 | $36.9 | -19% | | Net Income from Continuing Operations | $16.1 | $9.3 | +73.1% | | Diluted EPS from Continuing Operations | $0.89 | $0.52 | +71.2% | | Adjusted Net Income | $23.8 | $19.2 | +24% | | Adjusted Net Income Per Diluted Share | $1.33 | $1.08 | +23.1% | | Adjusted EBITDA | $35.7 | $29.9 | +19.4% | - Fresh segment results reflected a decline in avocado and tomato sales, together with approximately $4.2 million of discrete costs in the third quarter related to a temporary FDA detention hold on certain avocado imports from Mexico[9] - Prepared segment sales and profitability increased meaningfully, driven by higher volumes, lower fruit input costs, and improved operating efficiencies[9] - SG&A expenses declined 19% compared to the prior year period, reflecting a reduction in professional and consulting fees (including reduced FCPA investigation-related legal expenses), a reduction in compensation expenses reflecting lower headcount and severance costs and a decrease in stock-based compensation expenses[10] Management Commentary Management discusses Q3 operational challenges and successes, including the FDA hold resolution, avocado pricing, Prepared segment growth, and a significant legal development in Mexico Management Commentary CEO Lee Cole acknowledged Q3 challenges in the Fresh segment due to the temporary FDA detention hold (now resolved) and lower avocado selling prices, highlighting the outstanding growth and higher volumes in the Prepared segment, and also noted a significant legal milestone in Mexico regarding maquila status, strengthening the company's position for IVA recovery and defense against a 2013 assessment, and projected strong fiscal 2026 sales for the Prepared segment - Fresh segment results were adversely affected by a temporary FDA detention hold tied to trace detection of Imazalil in a single shipment from the Mexican facility, which required enhanced testing and slowed cross-border movement[11] - Third quarter avocado selling prices were significantly lower sequentially versus the second quarter as avocado supply from Mexico, California, and Peru converged[11] - The Prepared segment delivered outstanding growth with higher volumes[11] - The FDA matter has been resolved as of September 2, 2025, and is believed to be a non-recurring event[11] - A Federal Court in Mexico formally recognized Calavo de Mexico as a maquila, strengthening the company's position to recover value-added tax ("IVA") receivables and bolstering its defense in the 2013 assessment[11] - The Prepared segment projects sales of approximately $115 million for fiscal 2026, with July sales annualizing to over $100 million on a monthly run-rate basis[11] Consolidated Financial Review for Continuing Operations This section details Calavo Growers' financial performance for the third quarter and nine-month period, covering overall financials, segment-specific results, and liquidity Third Quarter 2025 Financial Performance Calavo Growers' third quarter saw a slight dip in total net sales and gross profit, primarily due to Fresh segment challenges and FDA-related costs, however, SG&A expenses decreased significantly, and adjusted net income showed a modest increase Overall Financials This subsection provides a summary of Calavo Growers' consolidated net sales, gross profit, operating expenses, and net income for the third quarter of 2025 Third Quarter 2025 Overall Financials | Metric | Q3 2025 (in thousands) | Q3 2024 (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Net Sales | $178,822 | $179,596 | -0.4% | | Gross Profit | $18,198 | $20,093 | -9.4% | | SG&A Expenses | $9,232 | $10,510 | -12.2% | | Net Income (GAAP) | $4,714 | $5,395 | -12.6% | | Diluted EPS (GAAP) | $0.26 | $0.30 | -13.3% | | Adjusted Net Income (Non-GAAP) | $10,156 | $10,005 | +1.5% | | Adjusted Diluted EPS (Non-GAAP) | $0.57 | $0.56 | +1.8% | | Adjusted EBITDA (Non-GAAP) | $15,051 | $12,909 | +16.6% | - SG&A expenses declined 12% from the prior year quarter, primarily due to a reduction in professional and consulting fees (including lower FCPA investigation-related legal expenses), partially offset by increased bonus expense[14] Segment Performance This subsection details the net sales and gross profit performance of Calavo Growers' Fresh and Prepared segments for the third quarter of 2025 Third Quarter 2025 Segment Performance | Metric | Q3 2025 (in thousands) | Q3 2024 (in thousands) | Change (%) | | :--------------------- | :--------------------- | :--------------------- | :--------- | | Fresh Segment: | | | | | Net Sales | $155,851 | $163,218 | -4.5% | | Gross Profit | $12,427 | $18,175 | -31.6% | | Prepared Segment: | | | | | Net Sales | $22,971 | $16,378 | +40.2% | | Gross Profit | $5,771 | $1,918 | +200.9% | - Fresh segment sales were down 5% year over year, reflecting an 8% decrease in overall cartons sold, including lower avocado volumes (down 5%) and tomato volumes (down 27%)[16] - Fresh segment gross profit was down 32%, primarily due to lower avocado volumes and approximately $4.2 million of discrete costs associated with a temporary FDA detention hold on certain avocado imports from Mexico[16] - Prepared segment sales were up 40%, driven primarily by volume growth of approximately 35%, complemented by modestly higher average selling prices, reflecting strong demand and the benefits of scaling programs with customers[16] - Prepared segment gross profit increased to $5.8 million (up 201%), primarily reflecting improved operational efficiency and stronger cost management[16] Nine-Month Period Ended July 31, 2025 Financial Performance For the nine-month period, Calavo Growers reported a 7% increase in total net sales, with gross profit seeing a modest increase, while SG&A expenses significantly decreased, and net income and adjusted net income both showed substantial year-over-year improvements, driven by strong Prepared segment performance and cost management Overall Financials This subsection provides a summary of Calavo Growers' consolidated net sales, gross profit, operating expenses, and net income for the nine-month period ended July 31, 2025 Nine-Month Period 2025 Overall Financials | Metric | 9M 2025 (in thousands) | 9M 2024 (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Net Sales | $523,753 | $491,585 | +6.5% | | Gross Profit | $52,015 | $51,514 | +1.0% | | SG&A Expenses | $29,822 | $36,993 | -19.4% | | Net Income (GAAP) | $15,979 | $9,281 | +72.2% | | Diluted EPS (GAAP) | $0.89 | $0.52 | +71.2% | | Adjusted Net Income (Non-GAAP) | $23,807 | $19,231 | +23.8% | | Adjusted Diluted EPS (Non-GAAP) | $1.33 | $1.08 | +23.1% | | Adjusted EBITDA (Non-GAAP) | $35,733 | $29,946 | +19.3% | - SG&A expenses for the nine-month period were down 19% from the prior year period, primarily due to a reduction in professional and consulting fees (including reduced FCPA investigation-related legal expenses), a reduction in compensation expenses reflecting lower headcount and severance costs, and a decrease in stock-based compensation expenses[19] Segment Performance This subsection details the net sales and gross profit performance of Calavo Growers' Fresh and Prepared segments for the nine-month period ended July 31, 2025 Nine-Month Period 2025 Segment Performance | Metric | 9M 2025 Fresh (in thousands) | 9M 2025 Prepared (in thousands) | 9M 2024 Fresh (in thousands) | 9M 2024 Prepared (in thousands) | | :-------------------- | :----------------------------- | :------------------------------ | :----------------------------- | :------------------------------ | | Net Sales | $470,307 | $53,446 | $442,999 | $48,586 | | Cost of sales | $431,690 | $40,048 | $402,041 | $38,030 | | Gross profit | $38,617 | $13,398 | $40,958 | $10,556 | - Fresh segment sales were up 6%, driven by higher average avocado pricing year over year, partially offset by a decline in avocado and tomato sales[23] - Fresh segment gross profit was down 6% from the prior year period, primarily reflecting lower avocado and tomato volumes and approximately $4.2 million of discrete costs associated with a temporary FDA detention hold on certain avocado imports from Mexico in the third quarter[23] - Prepared segment sales were up 10%, reflecting higher volumes and expanded programs with key customers[23] - Prepared segment gross profit increased 27% to $13.4 million, reflecting higher sales volumes, lower fruit input costs compared to last year, and improved operating efficiencies[23] Balance Sheet and Liquidity As of July 31, 2025, Calavo Growers maintained a strong liquidity position with $63.8 million in cash and cash equivalents and $114.3 million in available liquidity, with no borrowings under its revolving credit facility - Cash and cash equivalents were $63.8 million as of July 31, 2025[21] - Available liquidity was $114.3 million, defined as cash and cash equivalents plus available borrowing capacity under the revolving credit facility[21] - The company had no borrowings under its credit facility and total debt of $5.1 million consisting of other long-term obligations and finance leases as of July 31, 2025[21] Non-GAAP Financial Measures This section defines Calavo Growers' non-GAAP financial measures, explains their rationale, and provides detailed reconciliations to GAAP equivalents Definition and Rationale Calavo Growers uses non-GAAP measures such as EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share to provide investors with a clearer view of core operating performance and to help isolate unusual items, excluding specific items like interest, taxes, depreciation, amortization, stock-based compensation, acquisition/restructuring costs, litigation, foreign currency, asset impairments, tariffs, and one-time items, with the calculation of Adjusted Net Income modified in Q3 2025 to add back stock-based compensation expense for enhanced comparability - Non-GAAP measures include EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share[22][24] - EBITDA is defined as net income (loss) from continuing operations attributable to Calavo Growers, Inc. excluding interest income and expense, income tax (benefit) provision, depreciation and amortization, and stock-based compensation expense[22] - Adjusted EBITDA includes further adjustments for acquisition-related costs, restructuring-related costs, certain litigation/internal investigation costs, foreign currency gain (loss), asset impairments, discrete tariff or other tax charges, and one-time items[22] - Adjusted net income (loss) excludes acquisition-related costs, restructuring-related costs, certain litigation/internal investigation costs, foreign currency loss (gain), asset impairments, discrete tariff or other tax charges, and one-time items[24] - During the third quarter of fiscal 2025, the calculation of Adjusted Net Income was modified to add back stock-based compensation expense to enhance comparability with industry peers and provide a clearer representation of core operating performance[4][35] - Management believes these measures are useful to investors because they help isolate unusual items not indicative of ongoing operations and reflect how management monitors operating performance and allocates resources[25] Reconciliation of Adjusted Net Income This section provides a detailed reconciliation of GAAP net income from continuing operations to adjusted net income for both the three-month and nine-month periods ended July 31, 2025 and 2024, highlighting specific non-GAAP adjustments Reconciliation of Adjusted Net Income and Adjusted Net Income Per Diluted Share | Adjustment Category | Q3 2025 (in thousands) | Q3 2024 (in thousands) | 9M 2025 (in thousands) | 9M 2024 (in thousands) | | :---------------------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income from continuing operations attributable to Calavo Growers, Inc. | $4,714 | $5,395 | $15,979 | $9,281 | | Restructure costs | — | — | — | $1,037 | | Expenses related to Mexican tax matters | $307 | $225 | $858 | $810 | | Professional fees related to internal investigation and legal settlement | $42 | $1,395 | $967 | $6,431 | | Foreign currency loss (gain) | $2,483 | $4,203 | $2,488 | $2,799 | | Tariffs | $11 | — | $951 | — | | Stock-Based Compensation | $280 | $388 | $875 | $1,736 | | FDA Regulatory Hold–Related Charges | $4,231 | — | $4,231 | — | | Tax impact of adjustments | $(1,912) | $(1,601) | $(2,542) | $(2,863) | | Adjusted net income from continuing operations | $10,156 | $10,005 | $23,807 | $19,231 | | Diluted EPS from continuing operations (GAAP) | $0.26 | $0.30 | $0.89 | $0.52 | | Adjusted net income from continuing operations per diluted share | $0.57 | $0.56 | $1.33 | $1.08 | - FDA Regulatory Hold–Related Charges of $4.231 million were incurred in Q3 and 9M 2025, representing third-party inspection and testing costs, incremental logistics/handling expenses, and inventory write-downs due to a temporary FDA detention hold on certain avocado imports from Mexico[36][44] - Professional fees related to internal investigation and legal settlement significantly decreased from $1.395 million in Q3 2024 to $42 thousand in Q3 2025, and from $6.431 million in 9M 2024 to $967 thousand in 9M 2025, primarily due to reduced FCPA investigation-related legal expenses[36][38] Reconciliation of EBITDA and Adjusted EBITDA This section provides a detailed reconciliation of GAAP net income from continuing operations to EBITDA and adjusted EBITDA for both the three-month and nine-month periods ended July 31, 2025 and 2024, outlining the specific adjustments made Reconciliation of EBITDA and Adjusted EBITDA | Adjustment Category | Q3 2025 (in thousands) | Q3 2024 (in thousands) | 9M 2025 (in thousands) | 9M 2024 (in thousands) | | :---------------------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income from continuing operations attributable to Calavo Growers, Inc. | $4,714 | $5,395 | $15,979 | $9,281 | | Interest Income | $(879) | $(100) | $(2,486) | $(340) | | Interest Expense | $199 | $833 | $616 | $2,619 | | Provision for Income Taxes | $1,807 | $(1,441) | $5,598 | $(478) | | Depreciation and Amortization | $1,856 | $2,011 | $5,656 | $6,121 | | Stock-Based Compensation | $280 | $388 | $875 | $1,736 | | EBITDA from continuing operations | $7,977 | $7,086 | $26,238 | $18,939 | | Restructure costs | — | — | — | $967 | | Expenses related to Mexican tax matters | $307 | $225 | $858 | $810 | | Professional fees related to internal investigation and legal settlement | $42 | $1,395 | $967 | $6,431 | | Foreign currency loss (gain) | $2,483 | $4,203 | $2,488 | $2,799 | | Tariffs | $11 | — | $951 | — | | FDA Regulatory Hold–Related Charges | $4,231 | — | $4,231 | — | | Adjusted EBITDA from continuing operations | $15,051 | $12,909 | $35,733 | $29,946 | - EBITDA from continuing operations increased by 12.6% in Q3 2025 and 38.5% in 9M 2025 compared to the prior year periods[43] - Adjusted EBITDA from continuing operations increased by 16.6% in Q3 2025 and 19.3% in 9M 2025 compared to the prior year periods[43] Company Information This section provides an overview of Calavo Growers, Inc., its business operations, and a safe harbor statement regarding forward-looking information and associated risks About Calavo Growers, Inc. Calavo Growers, Inc. is a global leader in processing and distributing avocados, tomatoes, papayas, and guacamole, operating under its trusted brand name, sub-brands, and private labels, founded in 1924, the company emphasizes innovation, sustainable practices, and market growth, serving a wide range of customers worldwide from its headquarters in Santa Paula, California - Calavo Growers, Inc. is a global leader in the processing and distribution of avocados, tomatoes, papayas and guacamole[27] - Calavo products are sold under the trusted Calavo brand name, proprietary sub-brands, private label and store brands[27] - Founded in 1924, Calavo has a rich culture of innovation, sustainable practices and market growth[27] - The Company serves retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers worldwide[27] Safe Harbor Statement This section contains forward-looking statements regarding future events and financial results, which are subject to various risks, uncertainties, and assumptions, cautioning that actual results may differ materially from projections due to factors such as management team dynamics, weather, market price sensitivity, regulatory changes, supply chain disruptions, acquisitions, cybersecurity risks, dependence on customers/personnel, labor issues, competition, recalls, environmental regulations, and international business risks, including tax disputes and regulatory scrutiny like FDA detention holds - The press release contains forward-looking statements relating to future events and results that involve risks, uncertainties, and assumptions[28] - Risks and uncertainties that may cause actual results to differ materially include, but are not limited to, management team ability, weather impact, seasonality, market price sensitivity of agricultural products, regulatory changes (USDA-APHIS, SADER), supply chain disruptions, acquisition risks, cybersecurity, dependence on large customers and key personnel, wage inflation, labor disputes, competitive pressures, recalls, environmental regulations, and international business risks[29] - Specific risks mentioned include the resolution of pending internal and external investigations, legal claims and tax disputes (e.g., SAT assessment), and risks related to enhanced regulatory scrutiny or inspection protocols, including detention holds by the FDA[29] Unaudited Financial Statements This section presents Calavo Growers' unaudited condensed consolidated balance sheets, statements of operations, and segment-specific net sales and gross profit Condensed Consolidated Balance Sheets This section presents the unaudited condensed consolidated balance sheets of Calavo Growers, Inc. as of July 31, 2025, and October 31, 2024, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets | Metric (in thousands) | July 31, 2025 | October 31, 2024 | Change | | :-------------------------------- | :------------ | :--------------- | :----- | | Assets: | | | | | Cash and cash equivalents | $63,754 | $57,031 | +$6,723 | | Total current assets | $159,112 | $158,579 | +$533 | | Total assets | $301,249 | $301,119 | +$130 | | Liabilities: | | | | | Total current liabilities | $69,201 | $73,205 | -$4,004 | | Total long-term liabilities | $24,048 | $26,138 | -$2,090 | | Shareholders' Equity: | | | | | Total Calavo Growers, Inc shareholders' equity | $206,424 | $200,332 | +$6,092 | | Total shareholders' equity | $208,000 | $201,776 | +$6,224 | Condensed Consolidated Statements of Operations This section provides the unaudited condensed consolidated statements of operations for the three-month and nine-month periods ended July 31, 2025 and 2024, detailing net sales, cost of sales, gross profit, operating expenses, and net income (loss) Condensed Consolidated Statements of Operations | Metric (in thousands) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :---------------------------------------------------- | :------ | :------ | :------ | :------ | | Net sales | $178,822 | $179,596 | $523,753 | $491,585 | | Cost of sales | $160,624 | $159,503 | $471,738 | $440,071 | | Gross profit | $18,198 | $20,093 | $52,015 | $51,514 | | Selling, general and administrative | $9,232 | $10,510 | $29,822 | $36,993 | | Operating income | $8,659 | $9,358 | $21,335 | $13,711 | | Net income from continuing operations | $4,736 | $5,365 | $16,111 | $9,298 | | Net income (loss) attributable to Calavo Growers, Inc. | $4,714 | $(732) | $15,979 | $(937) | | Diluted EPS from Continuing Operations | $0.26 | $0.30 | $0.89 | $0.52 | Net Sales and Gross Profit by Business Segment This section presents the unaudited net sales and gross profit broken down by the Fresh and Prepared business segments for the three-month and nine-month periods ended July 31, 2025 and 2024 Net Sales and Gross Profit by Business Segment | Metric (in thousands) | Q3 2025 Fresh | Q3 2025 Prepared | Q3 2024 Fresh | Q3 2024 Prepared | 9M 2025 Fresh | 9M 2025 Prepared | 9M 2024 Fresh | 9M 2024 Prepared | | :-------------------- | :------------ | :--------------- | :------------ | :--------------- | :------------ | :--------------- | :------------ | :--------------- | | Net sales | $155,851 | $22,971 | $163,218 | $16,378 | $470,307 | $53,446 | $442,999 | $48,586 | | Cost of sales | $143,424 | $17,200 | $145,043 | $14,460 | $431,690 | $40,048 | $402,041 | $38,030 | | Gross profit | $12,427 | $5,771 | $18,175 | $1,918 | $38,617 | $13,398 | $40,958 | $10,556 |