Limoneira Co

Greetings and welcome to the Lee Manera's Third 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 your host, John Mills with ICR. Thank you. You may begin.

Thank you. Good afternoon, everyone, and thank you for joining us for Lee Manera's Third 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 third quarter fiscal year 2026 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 details 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 and greater understanding of Limonera'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, in 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 direct and comparable GAAP financial measures are included in the company's press release, which has been posted to our 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. During the third quarter, we continued to make progress on our value creation strategy of growing long-term agricultural income, which includes streamlining operations, expanding avocado production, optimizing lemon packing with recently announced Sunkist partnership, and expanding our organic recycling facility. In addition, we have identified real estate development and non-strategic land assets and water rights of over $200 million. The third quarter results came in below our expectations due to lighter than anticipated lemon sales volume. However, adjusted EBITDA exceeded prior year third quarter results. The quarter benefited from higher total agribusiness operating income driven by stronger than expected avocado volume and progress toward our targeted $10 million in annual selling, general, and administrative expense savings. We now expect to achieve the lower end of our lemon volume guidance as a result of higher lemon imports hitting the US market. However, we are again raising our avocado volume guidance for fiscal year 2026. Looking ahead, we expect to produce more than 10 million pounds of avocados in fiscal year 2027, an increase of approximately 30% over fiscal year 2026. This growth is driven by the 400 acres of avocados we planted in 2023 and 2024, which are expected to set a crop this year and contribute to volume in fiscal year 2027. We also have an additional 400 non-bearing acres that are expected to begin bearing over the next two to four years. As a reminder, California avocados command premium pricing due to the superior quality. and our strategic location provides logistical advantages to the highest per capita consumption markets in the United States. Turning to the monetization of non-strategic assets, we expect the sale of Windfall Farms for $15 million to close on September 14th, 2026, which is the most recent step in our ongoing strategy to monetize non-strategic assets, strengthen our balance sheet, reduce debt and redeploy capital into higher return opportunities across our core agribusiness and real estate platforms. As we enter the fiscal fourth quarter, we expect another quarter of positive adjusted EBITDA and additional asset monetization events. Regarding our water rights monetization, we've 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. We expect a monetization event from our Class III Colorado River water rights in 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. Looking into fiscal year 2027, we are well positioned to achieve meaningfully stronger EBITDA. This includes the benefit from our recently signed 50-50 organic recycling joint venture with Ackerman to create a potential high return facility with the capacity to process up to 295,000 tons of organic waste annually. It's expected to generate significant shared earnings when the facility becomes operational in the second half of fiscal year 2027. A dramatic increase in our avocado volume from the additional acreage that was planted in 2023 and 2024, realizing the full benefit from our current cost savings initiatives, optimizing lemon packing with our transition to Sunkist, and an additional $4 million in anticipated operating improvement due to windfall farm management, improved lemon storage margins, and improved lemon logistics. Turning to our real estate development project, Harvest at Limonera, we continue to expect future proceeds from Harvest, Limonera Lewis Community Builders II, and East Area II to total $155 million over the next five fiscal years. Home sales for phase two continue to be robust, with two to seven homes per week being sold. Phase 3 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 fiscal year 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 Linco 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 fourth quarter of fiscal year 2026, we believe we are very well positioned to achieve positive adjusted EBITDA and monetize one of our water assets in the quarter and continue building the foundation for sustained profitability. We've transformed our cost structure, focused our revenue streams, optimized our asset base and positioned ourselves for sustainable EBITDA growth. I believe the items just discussed have us very well positioned to unlock the tremendous asset value at Limonera. Now let me turn the call over to Greg for the financial details and then we'll take your questions.