10-Q: Mission Produce Reports Q1 Loss Amid Calavo Merger Costs

Mission Produce reported a net loss of $0.7 million for Q1 2026, driven by lower sales and increased transaction advisory costs related to its pending merger with Calavo Growers, Inc.

Summary

• Net sales decreased by 17% to $278.6 million for the three months ended January 31, 2026, compared to $334.2 million in the prior year.
• The decrease in net sales was primarily driven by a 30% decrease in per-unit avocado sales prices, partially offset by a 14% increase in avocado volume sold, due to increased Mexican avocado supply.
• Gross profit remained flat at $31.6 million, but the gross profit percentage increased to 11.3% from 9.4% in the prior year.
• Selling, general and administrative (SG&A) expenses increased by 31% to $29.1 million, primarily due to $7.0 million in transaction advisory costs associated with the Calavo acquisition.
• Operating income decreased significantly to $2.5 million from $9.3 million in the prior year.
• A net loss attributable to Mission Produce of $0.7 million, or $0.01 per basic and diluted share, was reported, compared to net income of $3.9 million, or $0.06 per basic share, in the prior year.
• Adjusted EBITDA increased to $18.5 million from $17.7 million in the prior year.
• The company entered into an Agreement and Plan of Merger with Calavo Growers, Inc. on January 14, 2026, valued at approximately $490 million, which is expected to close in the third fiscal quarter of 2026.
• A limited duration stockholder rights plan was adopted on January 21, 2026, to deter the acquisition of 15% or more of the outstanding common stock without Board approval.
• The Supreme Court declared recent tariffs imposed under the International Emergency Economic Powers Act illegal on February 20, 2026, creating significant uncertainty regarding refunds and future trade policy.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with cautious optimism. While the net loss and sales decline are negative, the underlying operational metric (Adjusted EBITDA) showed growth, and the strategic Calavo merger holds long-term potential, albeit with significant integration risks and short-term costs.

Positives

• Gross profit percentage improved to 11.3% from 9.4% year-over-year, driven by higher volumes and improved per-unit margins in the Marketing and Distribution segment.
• Adjusted EBITDA increased to $18.5 million from $17.7 million in the prior year, indicating underlying operational strength despite the reported net loss.
• Interest expense decreased by $0.5 million (23%) due to lower average balances on the revolving credit facility and lower interest rates.
• Equity method income increased by $0.7 million (88%) to $1.5 million, primarily from the investment in Henry Avocado Corporation.
• The proposed merger with Calavo Growers, Inc. is expected to enhance Mission's position in the North American avocado category, expand supply reliability, and provide entry into the high-growth prepared food sector with anticipated cost synergies and SG&A savings.
• The company was in compliance with all financial covenants of its credit facility as of January 31, 2026.

Negatives

• Net sales decreased by $55.6 million (17%) to $278.6 million, primarily due to a 30% decrease in per-unit avocado sales prices.
• Reported a net loss attributable to Mission Produce of $0.7 million, compared to net income of $3.9 million in the prior year.
• Operating income significantly decreased by 73% to $2.5 million.
• Selling, general and administrative (SG&A) expenses increased by $6.9 million (31%), largely due to $7.0 million in transaction advisory costs for the Calavo acquisition.
• Blueberries segment operating income decreased by $6.5 million (86%) due to lower per-acre yield and higher per-unit fruit production costs.
• Net cash used in operating activities increased to $3.0 million from $1.2 million in the prior year.
• Other (expense) income, net shifted from a gain of $1.5 million to an expense of $1.3 million, primarily due to foreign currency transaction losses.

Risks

• Reliance on primarily one main product (avocados).
• Limitations regarding the supply of fruit, either through purchasing or growing.
• Fluctuations in the market price of fruit.
• Increasing competition.
• Risks associated with doing business internationally, including Mexican and Peruvian economic, political and/or societal conditions.
• Inflationary pressures.
• Establishment of sales channels and geographic markets.
• Loss of one or more of our largest customers.
• General economic conditions or downturns.
• Supply chain failures or disruptions.
• Disruption to the supply of reliable and cost-effective transportation.
• Failure to recruit or retain employees, poor employee relations, and/or ineffective organizational structure.
• Inherent farming risks, including climate change.
• Seasonality in operating results.
• Failures associated with information technology infrastructure, system security and cyber risks.
• New and changing privacy laws and our compliance with such laws.
• Food safety events and recalls.
• Failure to comply with laws and regulations.
• Changes to U.S. trade policy, tariff and import/export regulations, including significant uncertainty regarding the Supreme Court's ruling on tariffs and potential refunds for previously paid tariffs.
• Risks from business acquisitions, if any.
• Lack of or failure of infrastructure.
• Material litigation or governmental inquiries/actions.
• Failure to maintain or protect our brand.
• Changes in tax rates or international tax legislation.
• Risks associated with global conflicts.
• Inability to accurately forecast future performance.
• Risks related to the viability of an active, liquid, and orderly market for common stock.
• Volatility in the trading price of common stock.
• Concentration of control in executive officers and directors over matters submitted to stockholders for approval.
• Limited sources of capital appreciation.
• Significant costs associated with being a public company and the allocation of significant management resources thereto.
• Reliance on analyst reports.
• Failure to maintain proper and effective internal control over financial reporting.
• Restrictions on takeover attempts in charter documents and under Delaware law, including the recently adopted Rights Agreement, which could discourage a takeover.
• Selection of Delaware as the exclusive forum for substantially all disputes between the company and its stockholders.
• Failure to complete the proposed transaction with Calavo, which could lead to adverse consequences, potential litigation, and termination fees of up to $15.02 million.
• Combining with Calavo may be more difficult, costly or time-consuming than expected, and the company may fail to realize the anticipated benefits of the transaction.
• The combined company may be unable to retain Mission's and/or Calavo's personnel successfully after the transaction is completed.
• The company will be subject to business uncertainties and contractual restrictions while the transaction with Calavo is pending.
• The company has incurred and is expected to incur substantial costs related to the transaction and integration.
• Regulatory approvals for the Calavo merger may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the company following the transaction.
• Risks related to restrictive covenants under the credit facility, which could affect flexibility to fund operations and strategic initiatives, and potentially lead to liquidity challenges or debt acceleration if compliance is not maintained.

Future Outlook

The transaction with Calavo Growers, Inc. is expected to close in the third fiscal quarter of 2026, aiming to enhance Mission's position in the North American avocado category, expand supply reliability, and provide entry into the high-growth prepared food sector, with anticipated cost synergies and SG&A savings. For fiscal 2026, total capital expenditures are projected to be approximately $40 million, primarily focused on avocado orchard development in Guatemala and blueberry plant cultivation in Peru. Loans outstanding due to shareholders in the Blueberries business are expected to be repaid by the end of fiscal 2026. The company anticipates that over longer periods, the impact of exchange rate fluctuations on cost of goods sold will largely be passed on to customers.

Management Comments

• "The transaction will enhance Missions position in the North American avocado category with expanded supply reliability across Mexico and California."
• "The transaction also represents entry for Mission into the high-growth and attractive prepared food sector, complementing our existing value-add avocado business."
• "The transaction also provides a significant value opportunity for both Mission and Calavo shareholders to realize cost synergies and SG&A savings."
• "The Rights Agreement was designed to deter the acquisition of actual, de facto, or negative control of the Company by any person or group without appropriately compensating its Shareholders for that control."

Industry Context

StockSavvy.ai notes that the avocado industry is subject to significant price and volume fluctuations due to supply-demand dynamics, weather, and geopolitical factors. The proposed acquisition of Calavo Growers, Inc. represents a strategic move towards consolidation and diversification into value-added prepared foods, a trend seen across the fresh produce sector as companies seek to capture more margin and reduce reliance on raw commodity pricing. The Supreme Court ruling on tariffs introduces a new layer of uncertainty for import-reliant businesses, potentially impacting cost structures and competitive landscapes.

Comparison to Industry Standards

• The 17% decline in net sales, primarily due to a 30% drop in per-unit avocado sales prices, reflects the inherent volatility in agricultural commodity markets. This contrasts with more stable revenue growth typically seen in diversified food companies like Dole plc or Fresh Del Monte Produce, which have broader product portfolios and less reliance on a single commodity.
• The increase in gross profit percentage (11.3% vs 9.4%) despite lower sales volume suggests effective cost management or favorable sourcing conditions relative to sales prices, which is a positive indicator compared to industry peers struggling with input cost inflation.
• The significant increase in SG&A expenses due to transaction advisory costs for the Calavo merger is a common occurrence in M&A activities. For example, similar one-time costs were observed in the acquisition of Chiquita Brands International by Cutrale and Safra Group, where integration and advisory fees impacted short-term profitability.
• The net loss of $0.7 million is a notable deviation from profitability, especially when compared to the prior year's net income. This performance is weaker than many established food distributors that typically maintain positive net income, even if modest, during periods of market fluctuation.
• The increase in Adjusted EBITDA to $18.5 million, despite the net loss, indicates that core operational performance, excluding non-cash and non-recurring items like M&A costs, remains relatively resilient. This metric is often used by analysts to compare operational efficiency across agricultural and food processing companies, such as those in the fresh produce sector like Limoneira Company or FreshRealm, where underlying asset utilization is key.

Corporate Governance

Legal Proceedings

• Class action lawsuit (filed Oct 21, 2024) and related PAGA lawsuit (filed Dec 16, 2024) alleging violations of wage and hour laws by a former temporary worker at the California packinghouse. Mediation on Feb 25, 2026, did not reach a resolution.
• Lawsuit by Organics Consumers Association (filed Nov 6, 2024) alleging false and deceptive advertising regarding sustainable sourcing practices. Motion to dismiss denied, limited discovery completed, renewed motion to dismiss filed.
• Putative class action lawsuit by Kachuk Enterprises (filed Feb 21, 2025) alleging violations of California's False Advertising Law, Unfair Competition Law, and unjust enrichment related to sustainable sourcing representations. Defendants' motion to dismiss granted with leave to amend, second amended complaint filed, renewed motion to dismiss filed.
• Complaint filed by the decedent's estate (after March 27, 2025 fatality accident at Laredo, Texas distribution center) alleging negligence. A Stowers demand for maximum insurance coverage has been accepted, and parties are working through settlement terms.
• New class action lawsuit (filed March 4, 2026) by a former temporary worker at the California packinghouse alleging violations of wage and hour laws.

Related Party Transactions

• Purchases from and sales of fruit to, and provision of logistics services to, a small number of entities having full or partial ownership by some directors/officers, under substantially similar terms as with other growers and customers.
• The Blueberries business leases land under a long-term finance lease with a company owned by one of the directors, with the rental rate comparable to market rates.
• Utilization of a small number of transportation vendors in Mexico having full or partial ownership by some employees.
• Purchases of avocados from a small number of entities having full or partial ownership by some employees, under substantially similar terms as with other transportation carriers and growers.

Stakeholder Impact

• Shareholders: Potential for long-term value creation from the Calavo merger, but also short-term dilution risk from the Rights Plan and uncertainty from legal proceedings and tariff changes. The net loss impacts immediate shareholder returns.
• Employees: Potential for integration challenges and retention risks related to the Calavo merger. Wage and hour lawsuits indicate potential employee relations issues.
• Customers: Expanded supply reliability and entry into prepared foods through the Calavo merger could offer more diverse product offerings.
• Suppliers/Growers: Uncertainty regarding tariff refunds could lead to pressure to recover costs from the company.
• Creditors: The company remains in compliance with debt covenants, and lender commitment for additional debt for the Calavo merger indicates continued access to capital, but increased debt levels will be a factor.

Next Steps

• Closing of the Calavo Growers, Inc. merger, expected in the third fiscal quarter of 2026, subject to regulatory and shareholder approvals.
• Integration of Calavo and Mission Produce businesses post-merger.
• Continued defense against multiple ongoing legal proceedings, including class action lawsuits related to wage and hour laws and false advertising, and a negligence claim related to a fatality accident.
• Monitoring and evaluating new developments regarding the Supreme Court's ruling on tariffs and potential impacts on the business.
• Repayment of loans outstanding due to shareholders in the Blueberries business by the end of fiscal 2026.
• Execution of approximately $40 million in capital expenditures for fiscal 2026, primarily for avocado orchard development in Guatemala and blueberry plant cultivation in Peru.
• Evaluation of the impact of new accounting standards (ASU 2025-11, ASU 2024-03, ASU 2023-09) on financial disclosures.

Key Dates

Recommendation

The company reported a net loss and a significant decline in sales, primarily due to lower avocado prices and substantial one-time transaction costs related to the Calavo merger. While the gross profit margin improved and Adjusted EBITDA increased, the short-term financial performance is weak. The Calavo merger presents a strategic opportunity for diversification and market expansion, but it also introduces significant integration risks and financial uncertainties. The adoption of a shareholder rights plan indicates potential governance concerns regarding activist investors. Given the mixed financial results, the strategic but risky merger, and ongoing legal and regulatory uncertainties, a "hold" recommendation is appropriate as investors await clearer execution on the merger and stabilization of financial performance.

Keywords

Avocados, Produce, Farming, Distribution, Merger, Acquisition, Calavo Growers, Shareholder Rights Plan, Tariffs, Supply Chain, Agriculture, International Farming, Marketing, Food Industry, Blueberries, Financial Results