Limoneira Co

Greetings and welcome to Lehman Air's second quarter 2026 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. It is now my pleasure to introduce you to our host, John Mills with ICR. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us for Lehman Air's second 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 second quarter fiscal year 2026 earnings release, which went out today at approximately 4.05 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'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'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 included 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's my pleasure to turn the call over to the company's president and CEO, Mr. Harold Edwards.

Thanks, John, and good afternoon, everyone. Our second quarter results demonstrate continued execution of our strategic transformation to position Limonera for long-term value creation. Our second quarter includes $23.8 million of non-cash charges comprised of $9.3 million of impairment on the Windfall Farms property, $7.8 million loss on asset disposals primarily related to our Yuma, Arizona lemon orchards, $5.1 million of net accumulated foreign exchange losses, and $1.6 million in allowance on foreign receivables. We exceeded expectations for revenue and adjusted EBITDA in the second quarter, reinforcing our confidence in the strategic decisions we are implementing. The fundamentals of our business are strengthening as we track towards our targeted $10 million in annual selling, general, and administrative savings, excluding the second quarter allowance on foreign receivables, and benefiting from improved operational efficiency through our Sunkist partnership. Our avocado production capacity continues to expand, and we increased our full-year avocado volume guidance, reflecting the strength of our growing operations. These enhancements lead us to a high level of confidence in achieving positive adjusted EBITDA in the third and fourth quarters of this year. It's important to remember that Sunkist provides enhanced customer access to premium food service accounts and major U.S. retailers through a full category citrus offerings. This positions us to deliver comprehensive solutions for both food service and retail buyers while removing pricing pressure from the marketplace and strengthening both our packing margins and grower-partner relationships. Considering we are now seeing lemon pricing above $20 per carton and continued high levels of fresh utilization, we are very confident in improved performance this year as a lemon grower. Another key initiative involved expanding our avocado production. Today we have 1,700 acres planted with only 800 acres currently bearing fruit. An additional 800 acres will begin bearing fruit over the next two to four years, representing a near 100% increase in our avocado production capacity. Included are 400 acres of avocados we planted in 2023 and 2024 that are expected to set a crop this year and be additive to volume in fiscal year 2027. 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. Beyond our core agricultural business, we continue to unlock value from our diversified asset base. During the second quarter, we completed two strategic initiatives. Our 50-50 organic recycling joint venture with Ackerman to create a potential high return platform with the ability to process up to 295,000 tons of organic waste annually and expected to generate substantial shared earnings when the facility becomes operational in fiscal year 2027. In addition, we executed an agreement for the partial sale of our Paso Robles, California vineyard for $16 million which Greg will provide more details on in a moment. We've also taken decisive steps in Arizona, ceasing citrus farming operations on 600 acres of lemons to focus on water monetization by farming low water use crops, which we anticipate will make this asset significantly more profitable. Our water monetization strategy is advancing on track and we expect a monetization event from our class three Colorado River water rights in fiscal year 2026. Additionally, our Santa Paula Basin conserved pumping rights represent high-value non-operational resources that we can convert to cash while maintaining our agricultural operations. We also have our real estate development project, Harvest at Lima Nera. 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. Home sales for phase two continued to be robust with two to seven homes per week being sold. Phase three of the project consists of approximately 500 home lots and we believe we will go to market with this phase in fiscal year 2027. In addition, we have 300 apartments approved and expect to break ground on this portion of the project in the second half of 2027. Part of our real estate development is a 25-acre East Area 2 medical pavilion project that we believe could begin to be monetized in fiscal year 2026. Additionally, we have Limco Del Mar, our 221-acre agricultural infill property, which represents a strategic asset with potential for residential development and significant long-term value creation. In summary, as we enter the second half of fiscal year 2026, We believe we are very well positioned to achieve positive adjusted EBITDA and continue building the foundation for sustained profitability. Looking at the remainder of this year and into 2027, we expect to benefit from the Agramin joint venture that we expect will contribute to earnings in 2027, further expansion of avocado acres to be planted in 2027, $10 million in savings from our SG&A improvements in 2026, increased cash flow from harvest at Lima Nera, continued improvement in our Sunkist relationship, and expected monetization of water rights. We've transformed our cost structure, focused our revenue streams, optimized our asset base, and positioned ourselves for sustainable EBITDA growth, and the items I just discussed have us very well positioned to unlock the tremendous asset value at Lima Nera. Now let me turn it over to Greg for the financial details, and then we'll take your questions.