Limoneira Co

Greetings and welcome to Lehman Air's fourth quarter fiscal year 2023 financial results 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, Doug. Good afternoon, everyone, and thank you for joining us for Lehman Air's fourth quarter fiscal year 2023 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 2023 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 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 would 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 10Qs and 10Ks, file of 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 statement herein. whether a result of new information, future events, or otherwise. Please note that during the call today, 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 Lehman Air'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 and adjusted diluted EPS, which are non-GAAP financial measures. A reconciliation of adjusted EBITDA and adjusted diluted EPS to the most directly comparable GAAP financial measures are included in the company's press release, which has been posted to our website. And with that, it's my pleasure to turn the call to the company's president and CEO, Mr. Harold Edwards.

Thanks, John, and good afternoon, everyone. I am pleased with our performance in fiscal year 2023 as we achieved our full-year avocado and revised lemon volume guidance despite harsh weather conditions and softer lemon pricing throughout most of the year. Additionally, our company's strategic shift towards an asset lighter business model progressed this year and is reflected in our latest results with brokered lemons and other lemon sales growing year over year for the second quarter in a row in the fourth quarter and our farm management revenue reaching close to $10 million this fiscal year compared to no revenue last year. We made progress monetizing or eliminating certain non-strategic assets with the sale of our northern properties for $98 million in net cash proceeds, entering a water following program in Yuma, Arizona for expected annual proceeds of $1.3 million and exiting our unprofitable farming operations in Cadiz. All of these actions have positioned our company to be in a stronger financial position with our balance sheet right size and our net debt position at the lowest level since becoming a publicly traded company. Heading into fiscal year 2024, we are committed to advancing our strategic shift and believe the actions taken this past year have set us up to improve margins in fiscal year 2024. We also anticipate selling the remaining two identified non-strategic assets this next fiscal year for an expected $50 million in proceeds. While rising interest rates this past year caused a temporary slowdown in our Harvest at Lima Nera project, we are encouraged to have seen sales pick back up at the end of the year with the remaining 121 residential units in phase one of the project selling out at a 40% premium to lot sales at the inception of the project. We have adjusted our cash flow projections to account for increased sales prices and now expect a 14% increase in total proceeds to $131 million spread out over nine fiscal years with approximately $8 million received in fiscal year 2022 and $3 million expected in fiscal year 2024. Also in fiscal fourth quarter, the overall lemon market has shown improvement with prices being higher for all grades and sizes. This is caused by the supply and demand curve being out of balance. On the supply side, the availability of fruit has been reduced. Californian and South American supply on the trees in combination with remaining volume and storage is much lower than at the same time last year. Weather events like flooding in Chile are having an impact on the quantity and quality of the lemon crop. Closer to the USA, in Mexico, excessive heat in July impacted the grade and size of the fruit. Add good demand to this situation and prices should go up. We believe all these factors position us very well for expected higher lemon pricing in fiscal year 2024. The overall improvements we are making to our business are well aligned with our strategic asset lighter transition plan that we expect to be completed in this next fiscal year. We are working to pivot our business towards a model that will streamline our operations, sell non-strategic assets, improve the consistency of our earnings, increase EBITDA and dividends per share, reduce debt, right-size the balance sheet, and improve the return on invested capital. Debt less cash on hand as of October 31st, 2023 was $37.4 million compared to $105 million at the end of fiscal year 2022. The benefits of all these improvements will begin to be fully realized in fiscal year 2024. Even after the recent non-strategic asset sales, we continue to manage approximately 11,100 acres of land with approximately 21,000 acre feet of owned water usage and pumping rights. This year, we announced that we entered into a second following program with Yuma Mesa Irrigation and Drainage District and the United States Bureau of Reclamation that supersedes the initial program and will commit to follow owned land through at least calendar year 2025. We expect to receive approximately $1.3 million annually paid in quarterly installments for following approximately 600 acres out of our 1,300 acres of farmland in Yuma, Arizona. Yuma Mesa Irrigation and Drainage District will refrain from diverting Colorado River water that otherwise would have been used to irrigate fallowed lands so that the saved water may be retained in Lake Mead as Colorado River System Conservation Water. This will result in increasing the supply and elevation of Lake Mead and helping to avoid water shortages in Arizona and the lower basin. In fiscal year 2024, on the operational side of our business, you will continue to see our transition to an asset lighter business model and focus on the best use of our assets to enhance shareholder value. We have dramatically decreased interest expense, removed our pension obligation, we'll be receiving quarterly payments from UM Mesa Irrigation and Drainage District for our following program, And we believe lemon pricing will be better this year compared to fiscal year 2023, positioning us well for strong improvements in fiscal year 2024. In addition to our operational improvements, our board and management team will continue to evaluate how to best leverage our expertise in farm management, packing, marketing, and distributing citrus combined with our valuable portfolio of agricultural lands, real estate properties, and water rights in order to enhance long-term shareholder value. This has led our board towards an additional process to explore potential strategic alternatives aimed at maximizing value for stockholders, including but not limited to a sale of all or parts of the company, merger, and other potential strategic transactions. And with that, I'll now turn the call over to Mark.