Limoneira Co

Greetings and welcome to the Limonera first quarter 2024 financial results conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Mills with ICR. Thank you, sir. You may begin.

Thank you. Good afternoon, everyone, and thank you for joining us for Lehman Air's first quarter fiscal year 2024 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 2024 earnings release, which went out today at approximately 4 p.m. Eastern time. If you've 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 could cause or contribute to such differences include risks detailed 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'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 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 included adjusted EBITDA and adjusted diluted earnings per share, which are non-GAAP financial measures. A reconciliation of adjusted EBITDA and adjusted diluted earnings per share 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 over to the company's president and CEO, Mr. Harold Edwards.

Thanks, John, and good afternoon, everyone. We are very encouraged to see our strategic shift towards an asset-lighter business model reflected in our results, with agribusiness expenses decreasing by 5%, agribusiness operating loss improving by 84%, and our adjusted EBITDA improving by 39% in the seasonally soft first quarter of fiscal year 2024 compared to the prior year period. Results for the first quarter were impacted by increased rainfall in California that delayed the picking of lemons from the first quarter to the second quarter. However, we do not expect the rainfall to have any other impact on the overall harvest or the quality of the fruit. Additionally, our avocado harvest will begin in Q2 and run into Q3 due to the seasonality of California avocados and reduced import pressure from Mexico and Peru in the U.S. market during that period. We believe the U.S. market window from April to July provides a niche opportunity for California avocados to serve the U.S. market demand during that timeframe without significant pressure from other avocado production areas in the world which are predominantly Mexico and Peru. Many of you have recently seen the media attention regarding avocados coming from Mexico and how the U.S. Ambassador Ken Salazar told producers in Michoacan, Mexico, the country's largest avocado-producing state, that the United States will not import fruit grown on illegal plantations that contribute to deforestation. To put this into perspective, approximately one-third of avocados grown in Mexico come from this state and represent approximately 800 illegal orchards. This is the first time these orchards have been identified by authorities. The US, Mexican, and Michoacan agencies are now working on protocols to thwart future export efforts of the illegally farmed produce. Over the past four years, Mexico has supplied 88% of fresh avocado imports to the US. And in 2023 alone, the United States imported nearly 2.5 billion pounds of Mexican avocados, according to the US Department of Agriculture. We believe this may have an effect on imports and potentially increase the price of avocados. Turning to our recently announced decision to evaluate strategic alternatives for the overall business, Over Limonero's 130-year history, it has grown into one of the leading sustainable agribusiness companies in the world, with over 11,000 acres of valuable lands, real estate properties, and senior water rights. Over the past 18 months, we have developed a strategic roadmap intended to enhance near and long-term shareholder value. Today, we consider ourselves to be in a strong financial position, having recently reduced our net debt position and right-sized the balance sheet through our ongoing strategic shift towards an asset lighter business model. As part of our exploration of strategic alternatives to maximize value and due to the strong interest we have received, we've decided it is in the best interest of our stockholders to temporarily pause the sale of the two remaining non-strategic assets as well as move away from pursuing a packing house in Chile. and instead add value by focusing on expanding our avocado production over the next three years. The overall improvements we are making to our business are well aligned with our strategic asset lighter transition plan. 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 January 31, 2024, was $51.6 million, compared to $105 million at the end of fiscal year 2022. Even after the recent non-strategic asset sales, we continue to manage approximately 11,000 acres of land with approximately 21,000 acre feet of owned water usage and pumping rights. 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, are receiving quarterly payments from Yuma 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 improvement in fiscal year 2024. We also have a larger avocado crop this year versus last. 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. And with that, I'll now turn the call over to Mark.