Limoneira Co

Greetings and welcome to the Limonera First Quarter 2025 Financial Results Conference Call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. It is now my pleasure to introduce your host, John Knowles with ICR. Thank you, sir. You may begin.

Good afternoon, everyone, and thank you for joining us for Limonera's First Quarter Fiscal Year 2025 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer of and Mark Pallamountain, Executive Vice President and Chief Financial Officer. By now, everyone should have access to the first quarter fiscal year 2025 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 risk detail in the company's Form 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 of and greater understanding of Luminaire'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 and in today's prepared remarks, we include adjusted EBITDA and adjusted diluted earnings per share, 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 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. Limonera is unlocking significant shareholder value through transformative land-use conversion and water monetization, while growing long-term avocado and citrus returns. The benefits of optimizing our revenue mix and transitioning to an asset lighter model are evident in our first quarter financial results, where we achieved improved operating expenses efficiency and enhanced bottom line performance, despite a temporary oversupplied lemon market impacting our top line. Our multifaceted approach, an asset lighter business model, land and water monetization, expansion of avocado production, and growing our citrus business through multiple channels, including quick serve restaurants, has enhanced our long-term operational and financial outlook. This quarter's results validate our longstanding commitment to a balanced portfolio that can withstand temporary market volatility in the lemon market. During the first quarter, agribusiness operating loss improved 17 percent, agribusiness costs and expenses decreased 14 percent, and lastly, our total operating loss improved over 30 percent compared to last year. This quarter, we recorded avocado revenue, which we didn't have in the comparable period last year due to the timing of the harvest. The contribution from avocados, along with our sale of water pumping rights for a gain of $1.5 million, partially offset the year-over-year decline we experienced in lemon revenues. This resulted in softer overall top line performance. Despite facing temporary downward pricing pressure in our lemon business, We successfully expanded our market reach by increasing the volume of U.S.-packed fresh lemon cartons through new customer acquisitions and deeper penetration into the quick-serve restaurant and food service channel. Looking ahead, we anticipate our lemon business will strengthen in the second half of the year as we achieve more substantial market share and benefit from the seasonal pricing improvements typically seen during summer months. as well as a recent freeze in Spain that is expected to shift imports away from the United States and improve pricing. Overall, we are benefiting from our decision to review strategic alternatives, as this is enabling us to improve our overall utilization of our assets to enhance long-term shareholder value. We continue to monetize our land and water portfolio through strategic developments and entitlements. accelerate California avocado leadership by scaling our position as one of the country's largest avocado growers, and expand citrus operations by growing integrated services across growing, packing, marketing, and distribution to drive higher margins. Since announcing our exploration of strategic alternatives, we have successfully monetized our water rights alongside certain real estate assets, and we anticipate further land use conversion and water monetization opportunities to materialize in fiscal year 2025. In addition, we are gaining valuable insights from this process that are sharpening our focus on key value drivers for sustainable shareholder value while enabling us to implement improvements across our entire operation. For example, we've refined our approach to farm management services. Building on our century-long heritage of agricultural innovation, we're positioning ourselves as the industry's premier technology and expertise partner. This allows us to deliver specialized value-added services to both farm management companies and independent farms alike. Our recent FAA approval for drone spray application in California exemplifies our commitment to advanced solutions, offering one of many ways we're bringing precision, cost efficiency, and sustainability to our partners. This capability is just the latest addition to our suite of cutting edge technologies, agronomic consulting expertise, and specialized field services that span California and Arizona. By positioning ourselves as an essential resource that enhances rather than competes with farm management providers, we anticipate broader market penetration, more diversified revenue streams, and stronger, more collaborative relationships throughout the agricultural ecosystem positioning us for growth in this promising segment. We also made the strategic decision to dramatically expand our avocado production. Avocado pricing is currently averaging over $2 a pound, which is very strong. And looking ahead, we continue to see a strong EBITDA outlook that is underpinned by plans to expand avocado production by 1,000 acres through fiscal year 2027 to capitalize on robust consumer demand trends. The ongoing discussions about potential new tariff legislation could create favorable conditions for our business as our avocados are grown in California. Should these tariffs be implemented on imported avocados, we anticipate a positive impact on domestic pricing and market dynamics that would benefit our operations for the foreseeable future. Turning to our residential joint venture with the Lewis Group of Companies for the Harvest Real Estate Development Project. This continues to perform very well, and we expect to receive $165 million in proceeds over the next six fiscal years. In addition, during the first quarter of fiscal year 2025, we received approval from the Federal Emergency Management Agency, or FEMA, to revise a flood zone map area effective May 15, 2025, that significantly reduces the number of property owners that are required to pay flood insurance within East Area 1, East Area 2, and other real estate within the flood zone area west of Santa Paula Creek. Within East Area 1, approximately 1,100 existing and future residents will not be subject to mandatory flood insurance due to the revised flood zone map. It has been a time of intensive process as we have been working with various public agencies since 2020 to correct the FEMA flood zone insurance rate map. Revising the flood zone map is expected to improve future interest in residential and commercial real estate in these zones as it removes the concern of flooding and the cost of mandatory flood insurance. Even after the recent non-strategic asset sales over the past year and a half, we continue to manage approximately 10,500 acres of land with approximately 21,000 acre feet of owned water usage and pumping rights representing tremendous long-term value growth opportunities from our assets. You can see by the year-over-year improvement in agribusiness operating results during the first quarter, our transition to an asset lighter business model and focus on the best use of our assets to enhance stockholder value is having a positive effect. We're building significant momentum in fiscal year 2025. as demonstrated by our January announcement of three separate water right monetization transactions, with additional water monetization opportunities expected to materialize later this year. We anticipate further growth through enhanced sourcing of third-party lemons, expansion of avocado production, alongside the continued monetization of our real estate assets. Our compelling portfolio of agricultural and real estate assets, together with our valuable water resources and strong balance sheets, create multiple pathways to build lasting shareholder value. And with that, I'll now turn the call over to Mark.