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Stock-Based Compensation

9 Months Ended

Jul. 31, 2024

Stock-Based Compensation

Stock-Based Compensation

6.	Stock-Based Compensation

In April 2011, our shareholders approved the Calavo Growers, Inc. 2011 Management Incentive Plan (the “2011 Plan”). All directors, officers, employees and consultants (including prospective directors, officers, employees and consultants) of Calavo and its subsidiaries are eligible to receive awards under the 2011 Plan. Shares were issuable under the 2011 Plan through December 2020. On April 21, 2021, the shareholders of Calavo approved the Calavo Growers, Inc. 2020 Equity Incentive Plan (the “2020 Plan”). This is a five-year plan with up to 1,500,000 shares that are issuable pursuant to awards that may be made through December 9, 2025.

Restricted Stock Awards (RSAs)

The total recognized stock-based compensation expense for restricted stock awards was $0.2 million for the three months ended July 31, 2023. The total recognized stock-based compensation expense for restricted stock awards was less than $0.1 million and $1.9 million for the nine months ended July 31, 2024 and 2023, respectively. As of July 31, 2024, there was no unrecognized stock-based compensation costs related to non-vested RSAs. All RSAs are vested as of July 31, 2024.

Restricted Stock Units (RSUs) and Performance Restricted Stock Units (PRSUs)

On November 1, 2023, each of our eight directors were granted 4,929 RSUs (for a total of 39,432 RSUs) at a price of $24.35 that will vest November 1, 2024.

The total recognized stock-based compensation expense for RSUs was $0.4 million for the three months ended July 31, 2024 and 2023, respectively. The total recognized stock-based compensation expense for RSUs was $1.2 million and $1.3 million for the nine months ended July 31, 2024 and 2023, respectively. As of July 31, 2024, there was $0.8 million of unrecognized stock-based compensation costs related to non-vested RSUs, which the Company expects to recognize over a weighted-average period of 0.6 years.

A summary of RSU activity, related to our 2020 Plan, is as follows (in thousands, except for per share amounts):


		Number of Shares		Weighted-Average			Aggregate
		Represented		Grant Price			Intrinsic Value
Outstanding at April 30, 2024		68		$	28.98
Granted		2		$	25.84
Vested		(4)		$	37.81
Forfeited		(1)		$	34.51
Outstanding at July 31, 2024		65		$	28.31		$	1,545


		Number of Shares		Weighted-Average			Aggregate
		Represented		Grant Price			Intrinsic Value
Outstanding at October 31, 2023		51		$	35.36
Granted		41		$	24.42
Vested		(21)		$	34.85
Forfeited		(6)		$	35.00
Outstanding at July 31, 2024		65		$	28.31		$	1,545

At the end of each reporting period, the Company will adjust compensation expense for the PRSUs based on its best estimate of attainment of the specified performance targets. The cumulative effect on current and prior periods of a change in the estimated number of PRSUs that are expected to be earned will be recognized as an adjustment in the period of the adjustment. As of July 31, 2024, the Company still believes that it is not probable that any of the PRSUs for the 2023 and 2022 three-year cumulative performance grant will vest.

Stock Options

In June 2024, our Board of Directors approved the grant of 10,000 options of our common stock to a new member of our Board of Directors. Such grant vests in equal increments over a five-year period and has an exercise price of $25.84 per share. Vested options have an exercise period of five years from the vesting date. The market price of our common stock at the grant date was $25.84. The estimated fair market value of such option grant was approximately $0.1 million, which will be recognized over the remaining service period of 60 months. The total recognized stock-based compensation expense for these options were insignificant for the three and nine months ended July 31, 2024.

Stock options are granted with exercise prices of not less than the fair market value at grant date, generally vest over one to five years and generally expire two to five years after the vest date. We settle stock option exercises with newly issued shares of common stock. We measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest. We measure the fair value of our stock-based compensation awards on the date of grant.

The value of each option award is estimated using a lattice-based option valuation model. We primarily consider the following assumptions when using these models: (1) expected volatility, (2) expected dividends, (3) expected life and (4) risk-free interest rate. Such models also consider the intrinsic value in the estimation of fair value of the option award.

We measure the fair value of our stock option awards on the date of grant. The following assumptions were used in the estimated grant date fair value calculations for stock options granted in the third quarter of fiscal 2024:



Risk-free interest rate		4.47%
Expected volatility		43.00%
Dividend yield		1.55%
Expected life (years)		5.0

A summary of stock option activity, related to our 2011 and 2020 Plans, is as follows (in thousands, except for weighted-average exercise price):


				Weighted-Average			Aggregate
				Exercise			Intrinsic
		Number of Shares		Price			Value
Outstanding at April 30, 2024		525		$	25.44
Granted		10		$	25.84
Outstanding at July 31, 2024		535		$	25.44		$	—
Vested and Exercisable at July 31, 2024		219		$	26.48		$	—


				Weighted-Average			Aggregate
				Exercise			Intrinsic
		Number of Shares		Price			Value
Outstanding at October 31, 2023		525		$	25.44
Granted		10		$	25.84
Outstanding at July 31, 2024		535		$	25.44		$	—
Vested and Exercisable at July 31, 2024		219		$	26.48		$	—

The total stock-based compensation expense for options was less than $0.1 million and $0.7 million for the three months ended July 31, 2024 and 2023, respectively. The total stock-based compensation expense for options was $0.6 million and $0.8 million for the nine months ended July 31, 2024 and 2023, respectively. As of July 31, 2024, there was $0.1 million of unrecognized stock-based compensation costs related to non-vested options, which the Company expects to recognize over a weighted-average remaining period of 3.6 years.