Limoneira Co

Greetings, and welcome to Lima Nera's first quarter fiscal year 2022 financial results. 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.

Good afternoon, everyone, and thank you for joining us for Lehman Air's first quarter fiscal year 2022 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 first quarter fiscal year 2022 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 Limanera'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 can cause or contribute to such differences, including risk details in the company's 10Qs and 10Ks 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 will 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 Limonera's ongoing results of operations, particularly when comparing underlying results from period to period. We have provided as much detail as possible on any items that are discussed on an adjusted basis. Also, within the company's earnings release and in today's prepared remarks, we include adjusted EBITDA, which is a non-GAAP financial measure. The reconciliation of adjusted EBITDA, the most directly comparable GAAP financial measures, is included in the company's 10Q and press release, which have been posted on its 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. We achieved top-line growth in the first quarter, with revenue increasing 3% compared to the same period last year, driven by higher avocado volume and pricing and higher lemon sales. We expect these trends to continue throughout fiscal year 2022 and are raising our full-year avocado guidance. However, lemon demand and pricing were lower than we previously expected, and I will provide more details in a few moments. As we look out to the remaining nine months of this fiscal year, we are well positioned to achieve strong top and bottom line results compared to the same period last year. And our real estate development project, Harvest at Limonera, is performing so well that we are raising our expected cash flow from this project approximately 19% to $95 million. I will now discuss each of our business divisions' performance for the first quarter, starting with our agribusiness. For the first quarter of fiscal year 2022, total net revenue was $39.3 million compared to total net revenue of $38.3 million in the first quarter of the previous fiscal year. Agribusiness revenue was $38.1 million compared to $37.1 million in the fiscal quarter of last fiscal year. Agribusiness revenue for the first quarter of fiscal year 2022 includes $24.7 million in fresh lemon sales compared to $25 million of fresh lemon sales during the same period of fiscal year 2021. Approximately 1,207,000 cartons of U.S. packed fresh lemons were sold in aggregate during the first quarter of fiscal year 2022. at a $20.48 average price per carton compared to approximately 1,320,000 cartons sold at an $18.91 average price per carton during the first quarter of fiscal year 2021. Lemon revenues in the first quarter of fiscal year 2022 and 2021 included brokered fruit and other lemon sales of $3.9 million and $3.5 million respectively. The lemon industry is experiencing a surplus of inventory due to a number of factors, including overall tree crops throughout the California and Arizona growing regions being significantly larger this year compared to last year and unfavorable weather conditions on the East Coast combined with the Omicron variant negatively affecting demand for all markets, particularly our Asian markets. To put this in perspective, Asian markets are operating at about 50% of pre-COVID levels. We are beginning to experience improved demand domestically, but we expect lemon pricing to remain pressured this fiscal year due to current industry oversupply and the Asian export market continuing to be dramatically reduced due to Omicron. We believe lemon prices could improve if the Asian market comes back in the second half of this year if we continue to see a decrease in Omicron. We recognized $800,000 of avocado revenue in the first quarter of fiscal year 2022 compared to no avocado revenue in the same period last fiscal year. Approximately 365,000 pounds of avocados were sold in aggregate during the first quarter of fiscal year 2022 at a $2.10 average price per pound, and we are raising our expected avocado volume for the full year of 2022. We recognized $900,000 of orange revenue in the first quarter of fiscal year 2022 compared to $1.1 million in the same period of fiscal year 2021. 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. We have now completely sold phase one of this project and are now focused on the 554 lots for sale in phase two. Additionally, the joint venture, Limanera Lewis Community Builders LLC, of which Limanera owns 50%, has signed a letter of intent to purchase an additional 17 acres from Limanera to potentially develop an additional 200 residential units. We expect to receive a cash distribution of approximately $8 million by the end of fiscal year 2022 from this new transaction. We are raising our cash distribution expectations for harvest at Lima Nera from $80 million to $95 million to reflect the planned sale of the additional 17 acres and an appreciation in land value in our existing harvest at Lima Nera. We also believe there's an opportunity for even greater upside to our revised cash distributions due to the potential development of a medical campus in our East Area 2 development. We will provide more information on the medical campus later this year. Overall, we are pleased with our results in the current difficult market and are confident we will achieve higher revenue and stronger bottom line results for the remaining nine months of the year. This will be driven by the strength of our team and decisions we have made to expand our One World of Citrus with alliances such as Weilman Brothers and Elliott, combining our volumes, service, and expertise under the One World of Citrus program will enable us to provide a greater variety and service to our customers and improve third-party grower returns. And with that, I'll now turn the call over to Mark.