Calavo Growers Posts Mixed Results in Q3

Key Points

• Non-GAAP EPS rose slightly to $0.57 in Q3 FY2025, while overall revenue was stable at $178.8 million, a 0.4% decrease from the prior year.

• Prepared segment outperformed with a 40% sales increase and 201% jump in gross profit for the Prepared segment, driven by higher volumes and operational efficiency.

• Fresh segment faced an 8% drop in carton sales and a 32% decline in gross profit for the Fresh segment, largely due to a one-time $4.2 million FDA detention hold cost on avocado imports.

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Calavo Growers (NASDAQ:CVGW), a leading global supplier of avocados and provider of processed avocado products such as guacamole, released its quarterly earnings on September 11, 2025, for Q3 FY2025. The headline results revealed nearly flat overall revenue for the quarter, a slight rise in non-GAAP earnings, and a clear split between the company's Prepared and Fresh business segments. The period included a major regulatory event in the core Fresh segment that led to a significant one-time cost. Overall, the quarter was a mix of operational resilience and continuing challenges in core produce volumes.

About Calavo Growers and Its Key Focus Areas

Calavo Growers operates as a major player in the global produce market, best known for supplying avocados and manufacturing processed avocado products, including guacamole, to both retail and foodservice customers. The company manages sourcing from California, Mexico, Peru, and Colombia, using advanced packing, ripening, and distribution to support reliable supply and quality.

In recent years, Calavo has increased its focus on value-added offerings through its Prepared segment, which includes processed foods such as pre-packaged guacamole and avocado-based products. Key to its strategy are high standards for product quality and safety, along with robust supply chain management. The company has also sharpened its operations post-divestiture of its “Fresh Cut” business.

Quarter in Detail: Segment Results and Material Events

During Q3 FY2025, Calavo’s overall revenue was essentially flat compared to the prior year. This reflected a decline in the larger Fresh segment offset by strong growth in Prepared. The Fresh segment posted sales of $155.9 million, a decrease of 5% from the prior year, driven by an 8% year-over-year fall in cartons sold. Avocado and tomato volumes declined by 5% and 27%, respectively, reflecting adverse weather and abundant domestic supply, particularly for tomatoes.

The Fresh segment's gross profit fell 32% to $12.4 million in the quarter. This steep drop was primarily due to an isolated $4.2 million one-time charge related to an FDA detention hold on avocado imports from Mexico. These costs covered added inspection, logistics, and inventory write-downs on affected shipments. The issue was resolved by September 2, 2025, and the company characterized the event as non-recurring. Excluding this event, profitability would have been higher, but still under pressure from weak volumes and lower tomato and avocado prices due to market conditions and supply convergence from multiple regions.

The Prepared segment, which focuses on processed and value-added avocado products like packaged guacamole, reported $22.9 million in sales, up 40%. Volume grew by 35% in the Prepared segment, and gross profit surged 201% to $5.8 million. The jump came from both increased operational efficiency and improved cost control. Management noted that sales for the Prepared segment are now annualizing at over $100 million on a monthly run-rate basis as of July 2025, with a forecast of $115 million for fiscal 2026.

Selling, general, and administrative expenses fell 12% in the quarter, thanks in part to lower professional and consulting costs. This reflects the winding down of legal expenses as the company resolved both the FDA issue and a Department of Justice investigation under the Foreign Corrupt Practices Act (FCPA). SG&A savings were partially offset by increased bonus expenses.

Other notable financial developments included stable liquidity, with $63.8 million in cash as of July 31, 2025, and $114.3 million in available liquidity as of the quarter. Debt remained minimal at $5.1 million. The company continued to demonstrate financial flexibility, facing minimal balance-sheet pressure even with unexpected regulatory costs in the period.

Legal and compliance updates featured important milestones. Calavo resolved its FDA avocado hold and the FCPA inquiry, removing major near-term regulatory risks. The company also reported progress in recovering value-added tax (VAT) refunds in Mexico, as Mexican courts recognized its maquila (export manufacturer) status. A significant insurance claim is pending for FDA-related losses, which could benefit future results once resolved.

Within product lines, Fresh avocados saw a meaningful setback due to both lower demand and the one-time regulatory holdup, while tomatoes encountered ongoing oversupply issues and weather-related softness. In contrast, the Prepared portfolio—especially processed guacamole products—benefited from advanced food safety technologies, operational upgrades, and expanded customer programs, driving outperformance in this division.

The board of directors declared a quarterly cash dividend of $0.20 per share, to be paid on October 31, 2025. This continues the company’s trend of regular dividend payments.

Outlook and What to Watch

Calavo management forecasted continued strong growth in the Prepared segment, targeting about $115 million in sales for FY2026. No formal company-wide guidance on total revenue or profit was given in the earnings release. Leadership noted the benefits from resolving regulatory issues but acknowledged the ongoing need to monitor Fresh segment volumes, pricing, and possible future supply-chain volatility.

Looking ahead, investors should track execution in expanding the Prepared product portfolio and recovery in Fresh volume, especially as the company works to mitigate risks associated with cross-border sourcing and fluctuating produce markets. Monitoring for impacts from any future regulatory actions, currency losses, or insurance recovery for the recent one-off FDA charge will remain important for evaluating future quarters.

CVGW pays a quarterly dividend of $0.20 per share, with no change announced this quarter.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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