Tejon Ranch Co

Greetings and welcome to the Tejon Ranch Company fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. If anyone wants to require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nick Ortiz, Senior Vice President of Corporate Communications. Please go ahead.

Good afternoon, and welcome to To Home Ranch Company's fourth quarter 2025 earnings call. My name is Nick Ortiz. Joining me today are Matt Walker, President and CEO, and Robert Velasquez, Senior Vice President and Chief Financial Officer. Today's press release, 10K, and this webcast are available on our Investor Relations website. A replay will be posted after we conclude. That site is ir.tohomeranch.com. Today's remarks may include forward-looking statements. These statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. These factors are detailed in our SEC filings, including our most recent forms 10Q and 10K. We assume no obligation to update any forward-looking statements. We may reference non-GAAP measures. These measures should be considered in addition to, not as a substitute for, GAAP results. Reconciliations to the most directly comparable GAAP measures and reasons why we use non-GAAP are included in today's filings and are posted on our website, again, ir.tohoneranch.com. After prepared remarks, we'll address questions. Shareholders were invited to submit questions by email in advance. With that, I'll turn the call over to Matt.

Good afternoon. I'm Matt Walker, President and CEO of Tohon Ranch Company. Thank you for joining us. But this, our second earnings call, will be used in the same format as last November. I'll share my perspective and turn it over to our CFO, Robert Velasquez, who will cover our financials, and then we'll answer questions. As we did last quarter, we'll be answering each shareholder question that is asked. So, moving on to this quarter, I'd like to talk about where we've been and where we're headed. For the quarter, our operating income was up compared to the fourth quarter of 2024, while our net income was down. Our net income reflects one-time proxy defense costs, but our overall operating performance was strong, which we'll explain as we go through our segments. For the year, our $49.6 million in revenue and $24.2 million in adjusted EBITDA both improved over 2024. Our company's economic driver remains our commercial real estate business. Commercial revenue was up $1 million for the quarter and $3.5 million for the year, led by two land sales, one of which was a hotel site and the second, a back-end payment on our Nestle transaction from 2025. In farming, we had one of the stronger years in recent memory, and this was supported by an on-bearing year for pistachios. Farming revenue was up 20% over the same quarter last year and up nearly 26% annually. I'm pleased to report that our farming revenues were the highest in a decade. Income from our joint ventures was down for the quarter and down for the year. While our industrial real estate JVs performed well, our travel center JV with TA Petro was impacted by reduced car and truck traffic on Interstate 5. This led to lower fuel sales and fuel margins, as well as lower sales on our travel centers and restaurants. On the positive side, we have seen encouraging signs from the outlets of Tejon. with December generating the highest retail sales of any month since we opened in 2014. There are many factors in play, but among them is the positive impact of the new Hard Rock Tejon Casino, which opened in mid-November. So far, the casino's impact has been extremely encouraging, and we look forward to further positive benefits from the casino in 2026. Last fall, I talked about commitments made by the Board with respect to corporate governance. Today, I'm pleased to report that our board is delivering on those commitments. First, as I hope you saw this morning, we filed an 8K announcing our proposal to provide shareholders with a right to call special meetings. We are proposing that our shareholders or groups of shareholders owning at least 25% of the outstanding shares can call for a special meeting. Our proposal is consistent with the majority of public companies, and we think it better aligns us with our shareholders. Shareholders will be able to vote on this proposal as part of their proxy ballot prior to the annual meeting in May. Second, I have spoken in the past about our board size and composition. We filed an 8K earlier this month announcing the decision by our board to reduce in size from 10 to 9. Also, the board decided that two board members in the event that they are elected this May would step down by May 2027, which would bring our board size down to 7. In addition, as part of our board size reduction, the board voted to eliminate our executive committee. These changes reinforce that our board is committed to positive governance change. Next, we will be holding our annual meeting on-site at the ranch on May 13th. We invite each of our shareholders to attend. We'll also provide an opportunity for our shareholders to attend virtually. It will be a good opportunity to see our assets up close. also a chance to spend time with our management team and board. Following the annual meeting, we'll be hosting tours of the ranch, including the Tejon Ranch Commerce Center, the Terra Vista apartment community, and the Hard Rock Tejon Casino. We hope you can join us. Registration information will be provided with your proxy statement. Last year, we completed a number of cost-saving measures. Looking ahead, I want to communicate that we're not done yet. We're continuing to streamline our operations and have targeted an additional million dollars of overhead savings by the end of 2027. When you add all of this up, our operating business is showing signs of positive momentum. However, I want to emphasize that cost improvement alone is not our only goal. As a company, we must put more of our assets to work, generating higher cash flow, producing more earnings, and increasing value for our shareholders. I've described my first year at the company as setting the table. This consisted of taking a close look at all aspects of the business, formulating a strategy, and then communicating that strategy to the market. This year, we are working on activating those plans. Right now is an exciting time for the company as we look to grow our revenue base and realize the benefits of our cost savings to drive more earnings growth. With all this as a backdrop, I would like to turn over the mic to our Chief Financial Officer, Robert Velasquez, correlate financials. Robert?

Thank you, Matt, and good afternoon, everyone. I'll focus my remarks on our fourth quarter results, provide some additional detail on segment performance, and then briefly discuss liquidity. For the fourth quarter of 2025, net income attributable to common stockholders was $1.6 million, or $0.06 per diluted share, compared to $4.5 million, or $0.17 per diluted share, in the fourth quarter of 2024. Revenues and other income, including equity and earnings from unconsolidated joint ventures, increased 8% to $23.3 million compared to $21.6 million in the same quarter last year. Adjusted EBITDA for the quarter was $11.4 million, an increase of 9% compared to $10.5 million in the prior period. Turning briefly to segment performance, commercial and industrial real estate generated $4.2 million in revenue for the quarter, compared to $4.1 million in the prior year period. Operationally, the portfolio remains strong, with the industrial portfolio fully leased, the commercial portfolio approximately 98% leased, which includes the outlets at Tejon at 93% occupancy at year end. Equity and earnings from unconsolidated joint ventures totaled $2.1 million in the fourth quarter, compared to $3.3 million in the prior year period. reflecting lower earnings from the Travel Center joint venture. Farming revenues for the quarter were $12.2 million, an increase of 26% compared to $9.7 million in the fourth quarter of 2024, reflecting the impact of the pistachio harvest on bearing year cycle, as well as improved performance across other permanent crops. Adjusted farming EBITDA before fixed water obligations. increased to 4.4 million in the fourth quarter from 3.4 million in the same quarter last year, with margins improving modestly as higher crop production drove operating leverage. Mineral resources revenue totaled 2.4 million for the quarter, compared to 2.5 million in the prior year period, reflecting lower oil and natural gas production volumes and pricing. I'm pleased to introduce a new reporting segment and a milestone for the company. For the first time, we are reporting a segment dedicated to our multifamily revenues and expenses. As lease-up activity at Terra Vista at the home gained momentum, we evaluated whether the business warranted its own segment and concluded that it did. Here's where things stand. During the quarter, the company recognized $536,000 of multifamily revenue respecting leasing activity at Terra Vista at the home, which commenced leasing early in 2025. Phase 1 of the project, consisting of 228 units, was completed during the year, and the property continues to progress through the lease of phase. Turning briefly to our balance sheet, as of December 31, 2025, cash and marketable securities totaled approximately $24.9 million. Available capacity on our revolving light credit facility was approximately $66.1 million. Total liquidity was therefore approximately $91 million. We believe our liquidity position provides sufficient flexibility to continue advancing development initiatives while maintaining balance sheet discipline. With that overview, I'll turn it back to Matt.

Thanks, Robert. To close, our direction is clear. We're strengthening our core business, tightening our cost structure, and concentrating on leveraging our assets to generate recurring cash flow. At the same time, our board has made significant progress in governance and shareholder alignment. We remain committed to providing you, our shareholders, with clear communication and accountability. So with that, we will now respond to the questions that have been submitted. So please just give us a moment to get those pulled up.

All right. Thank you, Matt. We received 11 questions from investors before the deadline. We'll read each one as submitted as we did last quarter and identify the submitter. Before we begin, I just want to thank all of our investors who submitted questions for their engagement. Our first question, when will TRC management and its self-serving board finally respect and benefit all the shareholders as its prime goal rather than the selfish history of self-enrichment? When will management stop being a disgrace and finally unlock the assets of this company for the benefit of its owners, not its management, who for decades only sought the benefits for themselves? The question is from Samuel Koenig.

Okay. I understand the question, Samuel, and I understand the sentiment and the frustration behind it. I've been at the company for just over a year now, and in that time, I had scrutinized our operations, looking for opportunities to grow our revenue base and reduce our cost. We've been able to reduce our workforce by 20%. We've cut millions from our overhead. We've also taken a much more proactive approach with our shareholders. We've held an investor day last October, now hosting earnings calls like the one we're having right now. And those include a format where individual shareholders like yourself can engage in a direct dialogue with management. We provided additional financial disclosures like the ones that Robert just mentioned, plus investment scorecards and hurdle metrics to better explain our business to shareholders. These are all examples of the company's new approach. You alluded to accountability with executive compensation. Right now, we're in the process of finalizing our proxy statement. When it's released, I think you'll see how our existing compensation structure is responsive to the company's financial performance and how it addresses the accountability issue in a meaningful way. And in addition, we've been working on a revised compensation plan, which will be covered in the upcoming proxy that further aligns us with shareholders and increasingly ties our performance to share price improvement. Moreover, I personally made adjustments to my comp to further align myself with shareholders. Furthermore, a few weeks ago, as we discussed just a few seconds ago, our board shared its plan for governance reform. We reduced the board size. We eliminated the executive committee. Today, we announced a proposal for a shareholder meeting rights. Our board is on top of that. We have increased representation from our shareholder base compared to where we were a few years ago. I think you should know that our board isn't monolithic, and our board members have diverse opinions, and they aren't afraid to share them. So these are just a few of the things that we're working on between management and the board to enact change for the better. Taken in aggregate, we've made a positive difference in the last year. I can't speak to all the things that you mentioned before I joined the company, but what I can tell you in the answer to your question is I do think that we're on our way to demonstrating accountability and creating value for our shareholders. Next question.

Next question. As California continues to tighten regulations on traditional rodenticides, including the 2021 restrictions on second-generation anticoagulants, How is Tahoe Ranch approaching wildlife-friendly or non-lethal rodent control methods across its almond, pistachio, and cattle operations? And is this an area where you see potential for innovation or outside partnership as proof of your broader sustainability and environmental stewardship commitments? The question is from Eli Simo.

So one of the things that I've grown to appreciate on the ranch in my first year here is how interconnected the various businesses are and how important it is to take a long-term view of the ranch and its stewardship. The ranch really is a special place, and it requires active management. Our team's been doing this for nearly 200 years. The vast majority of the ranch is also part of the Tejon Ranch Conservancy, and that means we've got numerous rules and restrictions that are designed to protect the ranch and the wildlife that calls the ranch home. And I can see some of that wildlife outside of my window as we speak. Your question gets to how we balance our farming business with our game management business. We take our responsibility to grow crops seriously and to do so in a sustainable manner, just as we're committed to safely operate a high-quality hunting program and one that respects the stewardship of our wildlife resources. We approach pesticide and wildlife management with an integrated framework. We emphasize prevention and habitat management over reliance on any single tool or chemical approach. And all of that, so if the regulatory environment evolves, we're then well-positioned to adapt because that philosophy is already embedded in how we operate and everything that we do here.

We have two questions from the same investor. I'm going to read them both before we respond, Matt. The first question is this. As of year-end, we have roughly $300 million of invested capital in Mountain Village and Centennial combined. These assets generate no income, and between the associated water costs, land management, and continual development planning, they continue to impede our ability to generate acceptable returns on invested capital. How are you going to grow returns on invested capital to an acceptable level over the next few years while we continue to hold on to these assets? Even with no additional investment, these projects would need to go from generating losses. to contributing over $20 million of annual income simply to earn a minimal ROIC? This is the next question. We would greatly appreciate hearing how the company will be able to significantly increase ROIC, returns on invested capital, and earnings over the next five years while we continue to have $300 million of capital tied up in these projects. Both questions are from Justin Lebo.

Thanks for your questions, Justin. As Nick said, let me take those together. They're important topics, and I want to recognize that there are varying opinions on this. Let me share our perspective and build on what I've said and what I've written in the past. Our master plan communities have been an important component of our overall business plans for several decades. You're right, they've required a significant capital investment. My goal is to move our communities into active implementation so that they can begin to generate cash flow and a return on our invested capital, as you noted. The reality is that this is going to take a few more years. There are many examples of public companies who are operating in this master plan community space from Florida to Texas to right here in California. Each of them has had to go through some degree of upfront effort to complete their approvals, to complete their design, and to finish their infrastructure before they can start producing revenue. And all of that takes time and capital. We're no different, and we've consistently communicated that to the market. Fortunately, we have other businesses that also generate cash, and we hope to increase that while our community development ramps up. When you look at the other companies developing MPCs, you can see that there's a significant cash flow that's generated, which achieves an attractive ROIC. And we'd expect that our master plan communities can generate significantly more than the $20 million of annual income that you mentioned. Also, our business plan is to utilize third-party joint venture equities, so that should help a little bit too. On Mountain Village, we started the capital raising process. And on Centennial, first and foremost, our approach is to complete a re-entitlement effort, which will result in significant value creation and preserve the value of our investment to date. As we mentioned in our press release, that project is advancing through the re-entitlement process and will soon be entering a more public stage, and we expect to be in front of Los Angeles County later this year. All right.

So next question, have there ever been any outbound efforts or inbound inquiries to monetize the Mountain Village, Centennial, or the land held under the conservation agreement? What is the status and what you're thinking about this? This is a question from David Ross.

Thanks. Thanks, David. As we mentioned before and in my answer to the previous question, there have been outbound capital raising efforts in the past related to Mountain Village. As I've mentioned in my letter last fall and in my previous remarks today, we're in the process right now of capital raising for that project. As it relates to inbound inquiries, we're always happy to chat with anyone who has an interest in our business, including our land. As I just previously mentioned, Centennial's in a little bit different position given its ongoing re-entitlement status. All right.

Our next question is, given the large amount of investments the company has made in the Mountain and Centennial over the last 30 years, wouldn't the highest and best use of capital be to monetize these assets and focus on the grapevine and TRCC? How do you justify the alternative? This is a question from Paul Ross.

Hi, Paul. I don't look at Mountain Village and Centennial as being mutually exclusive with Grapevine and TRCC. The Commerce Center is already a huge focus for us, and I think you can see from our notable investment at Terra Vista, we're committed economically and strategically to TRCC. We're also committed to expanding and developing out TRCC, and we plan to do so. The same goes with Grapevine. I've tried to state the case for Mountain Village and Centennial. What I would add is that with respect to any of the company's assets, the ones I've spoken about or the ones I haven't, we need to maintain flexibility so that we can adapt to market conditions and any opportunities that might arise. so that we're deploying our capital on a go-forward basis in the most advantageous way possible. I've tried to be clear that capital allocation is one of the most important things that we do here at Tejon Ranch Company.

All right. Are you satisfied with the pacing and absorption of the apartments? Will you expand into Phase 2 or bring in a partner? This is a question from Stuart Ross.

Stuart, I appreciate the question. Yes, we are pleased with our current lease up at Terra Vista, and I'm happy to say that we are now 70% leased. We're approaching our one-year anniversary, which is exciting. We brought on Graystar to manage the apartment, so we're benefiting from the horsepower of the nation's largest multifamily owner and manager. So they're leveraging their platform in LA and Northern LA County to expand into Kern County. We've also done a good job with programming and events and things like that. And our tenants really enjoy living there and we hope to have them for years to come. On phase two, yes, the plan is to expand into our second phase. It really, for us, comes down to a capital allocation and prioritization decision. there are a number of ways that we can proceed. Fortunately, the amenity complex from phase one is already in place, so there are efficiencies that would come in developing that second phase.

So next question. As of the end of this year, the company is close to $600 million of invested capital on its own balance sheet. While our joint ventures, fully owned commercial real estate assets, and mineral rights segments generate roughly $20 million of annual recurring profits Our total annual net operating profit after taxes has never exceeded $3.5 million in any of the past three years. To achieve a sustainable return on invested capital of just 5%, a reasonably low expectation for a shareholder, you would need to either grow total net operating profit to over $30 million per year or remove a substantial amount of capital from the business. How will you be able to achieve this over the next few years? This is a question from David Spear.

Thanks, David. Let me see if I can provide some additional thoughts on top of what I already said earlier on this topic. You're absolutely right. Big picture, we need to take more of our company's balance sheet, and we need to convert those assets into cash flow production. And this needs to happen as quickly as possible. And believe me, I feel the urgency. Beyond our master plan communities, and I think this is what you were getting at, is we need to increase our cash flow from all of our non-NPC assets as well. So there are a number of ways that we can address this. First, we need to drive bottom line improvements across our existing operating assets through active asset management. We're doing all sorts of things. We're renegotiating contracts. We're looking for lower cost alternatives. We're finding better ways to be more efficient across our different segments. Second, we need to continue to advance our business plan, as I mentioned before, particularly at TRCC, where we've got a consistent track record of producing high-yielding commercial real estate assets, particularly in the industrial sector. This is a priority for us and we are working hard to move forward and it's critical that we do this and it's a critical way for us to increase our cash flow. Third, we need to think outside of our commercial real estate box and we need to leverage our key differentiating asset and that's our 270,000 acres of land and we need to monetize that land. Our team's hustling. You'd be surprised at who's interested in utilizing our land. Overall, it's a balanced approach, and it's going to take a combination of singles and doubles and more than that to move the cash flow needle to where it needs to be, whether you're talking about EBITDA or NOPAT or net income.

Okay. Our next question. Given that the Tone Ranch property is in proximity to Los Angeles, will the company consider holding an investor day at the company headquarters rather than in New York, as was done previously? This question is from Richard Rudgley.

Good question, Richard. I think you're on to something. I've got some good news to report on this front, which we talked about a little bit before. There really isn't any substitute to seeing Tahoe Ranch firsthand. There's a lot to see, and even for the people who have toured over the past couple years with us, I think there's reason to come out. As I mentioned earlier, we're pleased to share that our upcoming annual meeting will be on May 13th. It's going to be right here at the ranch. It'll be a hybrid format, so shareholders can participate in person or remotely. We're going to have a lot of the same components that we did for last October's Investor Day in New York. So we'll be giving a presentation about the company. We'll take your questions, just as we did in New York. But since we're on site, we'll also be hosting property tours of the ranch. Our goal is to make it immersive and informative, and it'll be a great way for shareholders to interface with our management team while also getting a close-up look at some of our recent additions. And these would include our Terra Vista apartments and our new neighbors at the Hard Rock Tejon Casino, which ought to be packed no matter when it is that we happen to go. And good for them, as I've mentioned before. We're going to be sending out details on the event shortly, so we'll be taking reservations for our tours, so stay tuned. And then as it applies to a dedicated investor day, we'll start planning for that after our annual meeting. So your feedback, Richard, is noted and appreciated.

So how much – oh, sorry, next question. How much is estimated to be needed to fund the development of Centennial? as well as separately to hone Mountain Village? And will a shareholder rights offering be considered as a way to fund some of this so as to limit dilution of future profits? This is a question from Bob Edwards.

Thanks, Bob. We have not disclosed publicly the future all-in-development cost of Mountain Village or Centennial. While I can appreciate the desire for you to see that, It's something that we would intend to share closer to groundbreaking. As with any large-scale master plan community, construction is phased, and we recycle the cash flow on the front end and minimize how much equity is required. And as I noted earlier in the call, we would plan to use third-party joint venture equity as opposed to a rights offering to avoid dilution of our shareholders.

Okay. This is our 11th and final question. What level of confidence do you have that Los Angeles County will approve the centennial development, and what timeline do you project for potential approval? This is a question from Stephen Chess.

Hi, Stephen. Good question. I've touched on centennial some already, but let me answer your question with some more detail. First off, we're not going to prejudge any regulatory outcome and we want to be respectful of the process before it proceeds. But we'll say this, our confidence in advancing Centennial to approval is high. It's important to note that our relationship with LA County remains genuinely strong throughout this entire process. We've built a longstanding partnership with the county, which has been extremely productive. The challenge at this stage isn't really the county. It's the pace of any legal process that may unfold. And that's a distinction that's worth noting. So as it relates to Centennial, we've been working hard to prepare a comprehensive plan, which we believe addresses the court's previously identified issues. What's encouraging is that the list of open issues continues to narrow. We've been through a lot on this project. It includes the Antelope Valley regional area planning process, which identified the site for economic development and growth. We worked on the general plan. There's been new case law on fire protections, you name it. We've consistently taken the approach that we should show up engage, and then move through the process, just like we've successfully done at TRCC, at Mountain Village, and at Grapevine, which are all today fully entitled and fully litigated. This year at Centennial, we'll be moving into a more public phase of environmental review. And as I mentioned before, we hope to be in front of LA County and the Board of Supervisors later this year. Centennial does shine a spotlight on something broader, and that's California's need to modernize its environmental review framework. We're active in those conversations at the state level, and we think there's real momentum at last to enact positive reform. But we're not waiting for a policy miracle. We've demonstrated that we know how to get through a CEQA process. We've done it multiple times, and we are confident that we will get Centennial approved. So if that's all, I'd like to thank everyone for providing your questions. As I mentioned earlier, we also look forward to our upcoming annual meeting in May right here at the ranch, and we hope you will join us here. So, thank you very much and have a good day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.