Limoneira Co

Greetings and welcome to Lehman Arras First Quarter 2026 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 Mills with ICR. Thank you. You may begin.

Great. Thank you. Good afternoon, everyone, and thank you for joining us for Lehman Arras First Quarter Fiscal Year 2026 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer, and Greg Hamm, Chief Financial Officer. By now, everyone should have access to the first quarter fiscal year 2026 earnings release, which went out today after the market closed. 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 include risks detailed 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'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 include adjusted EBITDA and adjusted diluted EPS, 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 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. Our first quarter results reflect the strategic transformation we've been executing to position Limonera for sustainable long-term value creation. While the cadence of lemon sales will shift during our return to Sunkist, and due to our return to Sunkist, with the first and second quarters expected to have lower sales and the third and fourth quarters higher, we're pleased that fresh utilization improved in the first quarter. Even though we incurred some specific costs, which we believe are non-recurring during this transition quarter, the strategic foundation we've built is now delivering measurable results, and we remain firmly on track to achieve our fiscal 2026 objectives including our annual volume guidance for lemons and avocados. I would like to add a little more color on the specific costs reflected in our first quarter results. We experienced $2.5 million in specific expenses, which consisted of $1 million in packing house repairs that we recovered from insurance proceeds in the second quarter. half a million dollars in costs related to the closing of our Chilean farming operations and one million dollars in foreign exchange fluctuation on the receivables from the sale of the Chilean farming assets. Adjusted net loss was a 48 cent loss per diluted share and includes approximately six cents per share of loss related to the packinghouse repairs and closing the Chilean farming operations. Additionally, we are expecting another $1.4 million of insurance proceeds in the second quarter. Looking beyond these items, our underlying business performance demonstrates the strength of our strategic repositioning. Our Sunkist partnership is functioning as planned, our Avocado operations continue to expand, and our asset monetization initiatives are progressing on schedule. The strategic initiatives we began implementing were driven by a clear assessment of market realities. We took decisive action to reduce our exposure to volatile lemon pricing while building sustainable competitive advantages. In the fourth quarter of fiscal year 2025, we accelerated this work by reducing future costs to position us for stronger fiscal year 2026 results. In fiscal year 2026, we expect the enhancements we are making to our cost structure will generate $10 million in selling, general, and administrative savings compared to the fiscal year 2025. Importantly, Sunkist provides enhanced customer access to premium accounts and major U.S. retailers through a full category citrus offering. This positions us to deliver comprehensive solutions for retail buyers while removing pricing pressure from the marketplace and strengthening both our packing margins and grower-partner relationships. Another key initiative involved expanding our avocado production. Today, we have 1,600 acres planted with only 800 acres currently bearing fruit. The additional 800 acres will begin bearing fruit over the next two to four years, representing a near 100 percent increase in our avocado production capacity. California avocados command premium pricing due to superior quality, and our strategic location provides logistical advantages to the highest per capita consumption markets in the Western United States. Our strategic initiatives extend well beyond agriculture. We have our planned 50-50 organic recycling joint venture with Agramen that we expect to process 300,000 tons of organic waste annually and contribute to EBITDA when the facility becomes operational in fiscal year 2027. We also have our real estate development project, Harvest at Limanera, We continue to expect future proceeds from Harvest, Lima Nera Lewis Community Builders II, and East Area II to total $155 million over the next five fiscal years. Phase three of the project consists of approximately 550 home lots and 300 apartments, plus we have 35 acres of East Area II medical pavilion development that we believe could begin to be monetized in fiscal year 2026. Additionally, we have Limco Del Mar, our 221-acre agricultural infill property in the city of Ventura, California, which represents a strategic asset with potential for residential development and significant long-term value creation. We are also unlocking value by divesting non-strategic assets and monetizing our water rights to fuel this transformation and strengthen our balance sheets. We are now advancing the monetization of our Windfall Farms vineyard in Paso Robles and our Argentina agricultural assets with Windfall Farms completion targeted by the end of fiscal year 2026. Our water monetization strategy is also progressing well. Following last year's $1.7 million realization from Santa Paula Basin water rights sales, we are actively working to realize meaningful value from our Class III Colorado River water rights. and Santa Paula Basin conserve pumping rights. These water assets represent high-value, non-operational resources that we can convert to cash while maintaining our agricultural operations. The proof points are clear. Our cost structure is dramatically improved, our customer access enhanced, our product mix is optimized, and our asset base is being monetized. These are strategic initiatives that we believe will drive financial results throughout fiscal year 2026. In summary, our first quarter fiscal year 2026 results reflect a company in transition, absorbing specific costs while building the foundation for sustained profitability. The strategic initiatives we've implemented are now delivering tangible financial benefits. We anticipate you will see these improvements on a sequential basis this year as we expect our second quarter to show improvement compared to the first quarter and our third and fourth quarters being the strongest period of the year. We've transformed our cost structure, focused our revenue streams, optimized our asset base, and positioned ourselves for sustainable EBITDA growth. The Lehman era of today is a fundamentally stronger company, more focused and better positioned for long-term value creation. We look forward to demonstrating continued progress throughout fiscal year 2026. Now I'd like to officially introduce Greg Hamm as our new Chief Financial Officer. I've had the privilege to work with Greg for over 22 years at Lima Nera since he was hired in 2004. He previously served as our vice president and corporate controller since 2008. Greg succeeds Mark Palamountain, who served as our chief financial officer since 2018 and was instrumental in our strategic transformation. As part of our commitment to succession planning, we identified Greg as a candidate for chief financial officer and we have worked closely with him over the years to prepare him for this role. Now let me turn it over to Greg for the financial details, and then we'll take your questions.