Limoneira Co

Greetings, and welcome to the Luminara Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Mills with ICR. Thank you. You may begin.

Great. Thank you. Good afternoon, everyone, and thank you for joining us for Luminara's Fourth Quarter Fiscal Year 2021 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer, and Mark Palamountain, Chief Financial Officer. By now, everyone should have access to the fourth quarter fiscal year 2021 earnings release, which went out today at approximately 4 p.m. Eastern time. If you have not had a chance to view the release, it's available on the investor relations portion of the company's website at limanera.com. This call is being webcast and a replay will be available on Luminaria's website as well. Before we begin, we'd like to remind everyone that prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the company's control and could cause its future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risk details in the company's 10 Qs and 10 Ks filed with the SEC and those mentioned in the earnings release. Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether a result of new information, future events, or otherwise. Please note that during today's call, we'll be discussing non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of Lima Nera's ongoing results of operations, particularly when comparing underlying results from period to period. We've provided as much detail as possible on any items that are discussed on an adjusted basis. Also, within the company's earnings release, in today's prepared remarks, we include adjusted EBITDA, which is a non-GAAP financial measure. A reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measures is included in the company's 10-K and press release, which have been posted to the website. And with that, it is my pleasure to turn the call over to the company's president and CEO, Mr. Harold Edwards.

Thanks, John, and good afternoon, everyone. I'm very proud of the way our team was able to successfully manage through a challenging year due to COVID-19 and its effects on logistics and channels of revenue. Even with these challenges, we achieved strong fresh lemon utilization in fiscal year 2021 and our brokered fruit business more than doubled in fiscal year 2021 compared to fiscal 2020, enabling us to improve revenue and EBITDA year over year. Our outside third-party grower returns were extremely competitive this past year as well, which should help us with additional outside grower recruiting in the upcoming year. We aren't back to our pre-COVID growth trajectory, but we are getting closer and believe the momentum in our business and expanding brokerage business will attract more third-party growers. During our seasonally slower fourth quarter of fiscal year 2021, revenue increased 12% compared to the same period last year. These results were driven by higher lemon prices and very strong brokered fruit revenue, which more than doubled compared to last year. Lemon pricing improved in the back half of fiscal year 2021, and we expect this trend to continue throughout fiscal year 2022. We achieved our solid top line results, even as the widely publicized global logistical delays continue to affect the entire agricultural industry and reduce exports to Asia. Specifically, due to these shipping delays and spoilage occurring in the fourth quarter of fiscal year 2021, we expect to receive insurance compensation in the first quarter of calendar 2022. We are excited about how we are positioned for revenue and earnings growth in fiscal year 2022, And our real estate development project, Harvest at Lima Nera, continues to perform very well. And I will provide an update on this project in a few moments. I'll now discuss each of our business division's performances for the fourth quarter, starting with agribusiness. For the fourth quarter of fiscal year 2021, total net revenue was $33.5 million, compared to total net revenue of $29.8 million, and agribusiness revenue was $32.3 million compared to $28.6 million in the fourth quarter of last fiscal year. Agribusiness revenue for the fourth quarter of fiscal year 2021 includes $7.8 million in fresh lemon sales compared to $13.4 million of fresh lemon sales during the same period of fiscal year 2020. The reduced lemon revenue was due to decreased volume of fresh lemons primarily related to the timing of harvest and sales year over year, but also caused by logistical delays affecting our industry. Average price per carton increased to $20 per carton compared to $19.23 per carton during the fourth quarter of fiscal year 2020. The continuation of shipping delays and congested ports throughout the world caused a loss on a portion of our shipments, and the balance had to be placed in different channels. We expect to receive insurance compensation in the fourth quarter of calendar 2022 related to the fourth quarter fruit spoilage. Throughout fiscal year 2021, we made great strides in expanding our One World of Citrus initiative and improving our long-term growth opportunities. We continue to focus on expanding our retail sales opportunities as well as strengthening our food service relationships as many restaurants began to open again after COVID-19. We made a strategic decision to dramatically expand our brokered fruit business, which offset seasonally slower domestic volumes in the fourth quarter, providing supplemental fruit for our global customers. We generated $17.4 million of brokered fruit revenue in the fourth quarter of fiscal year 2021, compared to $8.1 million in the same period last year. Approximately 941,000 cartons of brokered fruit were sold during the fourth quarter of fiscal year 2021 at an average of $18.44 average price per carton compared to approximately 449,000 cartons sold at an $18.13 average price per carton during the fourth quarter of fiscal year 2020. Brokered fruit revenue is primarily comprised of packed fruit for resale, where we are the principal in the transaction. Turning now to our real estate development division. Harvest at Lima Nera continues to perform very well and has now closed 586 lots since inception, including 30 new lot closings in the fourth quarter of fiscal year 2021. We have now completely sold phase one of this project and are now focused on the 554 lots for sale in phase two. We expect to begin receiving cash distributions this year from Harvest at Lima Nera and fully expect to generate $80 million of cash distributions over the next five years. In addition, we believe there is upside to our stated cash distributions due to the potential increased number of sellable lots entitled in harvest at Limonera, increased values of remaining sellable lots in the project, and the opportunity of the recently announced medical campus in our East Area 2 development. In July of 2021, we entered into a non-binding letter of intent to sell approximately 25 acres of our East Area 2 property in five stage purchases to an investment company for the purpose of constructing a medical campus consisting of medical office buildings and an acute care hospital. Completion of the transaction is subject to the execution of a purchase and sale agreement and resolution of certain contingencies. This potential transaction isn't included in our projected $80 million of cash proceeds, and we will provide an update on expected amounts of cash distributions later this year. Many of you have recently read about the recent rainfall throughout California and Arizona, which is reducing pressure felt by the existing statewide drought. The much needed early season rainfall not only helps to replenish groundwater basins, but also has dramatically positive impacts on tree health and vitality, as well as fruit sizing. The past few years have been challenging for our industry. We have taken this period of time to become closer with our customers and enhancing our operations through technical improvements, such as implementing a real-time digital information system we call farm-to-table via tablet initiative. This is increasing efficiency across our supply chain by monitoring daily tree health and fruit growth, predicting right time to harvest fruit, identifying labor and distribution needs, and matching harvests, fruit grades, and sizes to global demand. This creates greater yields and quality improves efficiency within harvest and packing teams, and sales teams can improve fresh utilization. We also continue to build upon our 129 years of stewardship of both our natural and human resources by employing sustainable practices in all aspects of operation. With over 15,400 acres of rich agricultural land and water assets throughout California, Arizona, Chile, and Argentina, We are well positioned for long-term growth through our one world of citrus mantra of meeting our customers' year-round global demand for citrus. And with that, I'll now turn the call over to Mark.