Q1 2023 Alico Inc Earnings Call
Welcome to <unk> first quarter 2023 earnings conference call.
At this time all participants are in a listen only mode.
As a reminder, today's conference is being recorded.
Earlier today, the company issued a press release announcing its results for the first quarter ended December 31 2022.
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 <unk>, Inc. Com.
This call is being webcast and a replay will be available on <unk> website as well.
Before we begin we would like to remind everyone that the prepared remarks today contain forward looking statements.
Such statements are subject to risks uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in these statements.
Factors that could cause or contribute to such differences include risk details in the company's quarterly reports on Form 10-Q.
Annual reports on Form 10-K.
Current reports on form 8-K, and any amendments thereto filed with the SEC and those mentioned in the earnings release.
The company undertakes no obligation to subs subsequently update or revise the forward looking statements made on today's call except as required by law.
During the call. The company will also discuss non-GAAP financial measures, including EBITDA and adjusted EBITDA.
For more details on these measures please refer to the company's press release issued earlier today.
With that I would like to turn the call over to the company's President and CEO , Mr. John Kiernan.
Thank you Rob and thank you everyone for joining us for what goes first quarter 2023 earnings call. This morning.
As we start fiscal year 2023 a.
<unk> continues to maintain a strong balance sheet, which will enable the company to navigate through the lingering impacts of hurricane yeah on our 2023 harvest season.
As a reminder, at the end of September 2022, Hurricane Ian struck southwestern Florida with 150 mile per hour winds.
The slow moving storm moved across the state and cause substantial fruit dropped at the majority of our growth for.
For fiscal year 2023.
We will see lower levels of revenue because we have less fruit available to sell.
Based upon our prior experiences with storms of this nature, we anticipate it may take up to two full seasons or more for our growth to recover to pre hurricane production levels.
The early and mid season harvest ended earlier with lower production volume than in the prior year due to the increased rate of fruit dropped as a result of hurricane E N.
We will start the Valencia harvest in mid February .
We maintain crop insurance and are working closely with our insurers and adjusters to determine the amount of insurance recover we may be entitled to if any which is measured at the completion of each harvest.
Although a small number of our groves were exposed to freezing temperatures in late December 2022.
In early January 2023.
Just upon the limited duration outdoors freezing temperatures or freeze protection protocols and our highly dedicated staff. Our gross we're able to avoid any meaningful impact from those freezing temperatures.
Yeah.
We continue to pursue strategic sales opportunities for our ranch land and the company has completed several sales of ranch land. During the first fiscal quarter ended December 31, 2022 and has closed the sale of another 200 acres of ranch land in January 2023.
We continue to engage with interested third parties on certain parcels of the ranch and at prices. We continue to believe are competitive.
We still have 19000 acres of ranch went remaining and we believe based on the recent activity that these remaining acres will realize attractive prices as well.
For the first quarter ended December 31, 2022, the company reported.
Reported net loss attributable to a weaker common stockholders of <unk>.
<unk> $3 $2 million as compared to net income attributable to a week on common stockholders of approximately $10 1 million for the first quarter ended December 31 2021.
The first quarter 2023 results were negatively impacted by the decreased revenue due to the increased fruit drop from the impacts of hurricane Ian on our early and mid season crop and the higher cost of sales, resulting from increased inventory costs and a higher percentage of <unk>.
<unk> realized in first quarter of 2020 through.
Versus the same period in the prior year.
During the first quarter ended December 31, 2022, the company negotiated an extension of a $70 million.
Working capital line of credit with Robert Agro Finance, Inc. Until November one 2025.
As a reminder, based upon the actions taken over the past several years most of our term debt is non amortizing and matures in November 2029.
In addition, our 25 million dollar revolving line of credit with Metlife extends into November 2029.
We believe that these credit facilities will provide sufficient liquidity, while the company manages through the impacts of Hurricane E N.
We continue to move forward as well with our environmental social and governance initiatives and most recently published our second sustainability report in December 2022, which is available on our website.
With that I'll turn the call over to our CFO pretty delvecchio to discuss our more detailed financial results.
Yeah.
Thank you John and good morning, everyone as our business is seasonal and the majority of our citrus crop is harvested in the second and third quarters of the fiscal year with the majority of our profit and cash flow is also recognized in the second and third quarters.
The results for the first quarter are not indicative of our full year results.
Total operating revenue for the quarter ended December 31, 2022 was $10 6 million compared to $15 3 million for the quarter ended December 31 2021.
Our citrus revenue was $10 3 million and $14 7 million for the quarters ended December 31, 2022, and 2021, respectively.
A decrease in revenue for the three months ended December 31, 2020 to compare it to the three months ended December 31, 2021 was primarily due to a decrease in growth management services and a decrease in revenue generated from the early and mid season harvest with such decrease in harvest revenues being in large part because of the.
<unk> fruit drop caused by the impact of hurricane in.
The decrease in gross management services.
Primarily due to.
A primary group of third party Grove owners, who are affiliated with each other to whom the company was providing care taking management services deciding to exit the citrus business at the beginning of the three months ended June 32022.
This decision to exit the citrus business eliminated the need for Caretaking management services.
As a result, caretaking management services and the accompanying reimbursement of caretaking expenses decreased during the three months ended December 31, 2022, when compared to the same period in the prior year.
The decrease in the early and mid season fruit harvest did for the three months ended December 31 2022.
It was primarily driven by a decrease in pounds solid per box and the decrease in box production.
The company decided to accelerate the harvesting of the early and mid season crop to maximize the box production and avoid additional fruit drop as a result of the impact of hurricane in on the early and mid season harvest.
The pound solids per box decreased four 5% and our process box production decreased to seven.
2.7% as compared to the same period in the prior year.
As John noted earlier the company will complete the harvesting earlier in the current fiscal year as compared to the prior fiscal year for its early and mid season fruit and anticipates an overall decrease in the number of box is harvested and revenues generated from the early and mid season fruit for the 2023 harvest as compared to the 2020 to harvest.
Although hurricane impacted the early and mid season harvest there does not appear to be long term damage to the citrus trees.
Total operating expenses were $14 3 million and $13 4 million for the three months ended December 31, 2022, and 2021, respectively.
The increase in operating expenses for the three months ended December 31, 2022 as compared to the three months ended December 31 2021.
Primarily relates to the increased cost of sales per box realized in the three months ended December 31st 2022 as compared to the same period in the prior year.
The company experienced significant cost increases in fertilizer herbicide and fuel and maintaining its grows.
These cost increases coupled with the timing of the harvest.
And the expected lower box production for its early and mid season harvest resulted in a higher cost of sales per box for the three months ended December 31, 2022 as compared to the same period in the prior year.
In addition, the company incurred additional costs related to the cleanup and repairs as a result of hurricane in.
Yeah.
General and administrative expenses for the three months ended December 31, 2022 totaled approximately $2 5 million compared to approximately $2 6 million for the three months ended December 31 2021.
The decrease was primarily due to a onetime incentive offered to employees. During the three months ended December 31 2021.
In addition, the company realized a reduction in stock compensation expense based upon a reduction in our restricted stock awarded to certain executives senior managers and employees and a reduction in other administrative cost.
Partially offsetting these decreases was an increase in professional fees.
Yeah.
Other income net for the three months ended December 31, 2022, and 2021 was approximately $2 million and approximately 7.7 7.6 million respectively.
The decrease to other income net was primarily due to the timing on the gains of sales of real estate property and equipment and assets held for sale.
During the quarter ended December 31, 2022, the company sold approximately 609 acres in the aggregate from the illegal ranch to several third parties and recognized gains of approximately $3 million 189000 by comparison for the three months ended December 31 2021.
The company recognized gains of approximately $8 million 445000 relating to the sale of real estate property and equipment and assets held for sale.
In addition, the company recognized an increase in interest expense of approximately 247000 for the three months ended December 31, 2022 as compared to the three months ended December 31, 2021, as a result in an increase in the overall interest rates on its variable term debt and working capital.
Line of credit and incremental borrowings under the working capital line of credit.
During the first quarter ended December 31, 2022, we received the last installment of the Florida Citrus Block Grant program.
From the 2000, and 2017 storm Hurricane Irma of approximately $1 3 million as compared to approximately $1 million for the first quarter ended December 31 2021.
The company received a total of approximately 26 point site $26 9 million commence.
Commencing in fiscal year 2019 through December 31, 2022 under the Florida Citrus recovery Block Grant program.
For the fiscal quarter ended December 31, 2022, and December 31, 2021, we reported a net loss attributable to illegal common stockholders of approximately $3 2 million.
And income attributable to it.
Co common stockholders of approximately $10 1 million respectively.
Our adjusted EBITDA was approximately a net loss of $3 4 million for the first quarter ended December 31 2022.
As compared to a positive $2 3 million for the same period in the prior fiscal year.
We continue to maintain a strong balance sheet, our working capital of approximately $27 3 million at December 31, 2022.
Represents a 361367 to one and a 1.91 to one ratio at December 31, 2022 at December 31 2021, respectively.
And our debt to equity ratio.
0.51 to one and.
0.5 O to one at December 31, 2022, and December 31, 2021, respectively, I will now pass the call back to John .
Thanks Perry.
While the Florida citrus industry has faced challenges with respect to box production over the last couple of harvest seasons, we remain confident that the approximately 1.9 million new trees planted since 2017 within our groves will yield increased production as we recover from the impact of Hurricane Ian.
We believe that we have the most productive citrus grows in Florida.
We are continuing to work with land planning mine use planning professionals to frame our strategy that optimizes, the long term potential values for our real assets.
Our legal wants to provide investors with the benefits and stability of conventional agricultural investment.
With the enhanced Optionality that comes with active land management.
And with that we'll now open the line up to questions from industry analysts Rob.
Thank you.
If you'd like to ask a question at this time. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
You May press star two if he would like to move your question from the queue.
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Thank you and our first question is from the line of Gerry Sweeney with Roth Capital. Please proceed with your questions.
Taking my call.
Morning, Jerry.
Just a question, obviously youre going to be hunkered down here for the next couple of quarters, but.
Wanted to see if maybe you could provide a little bit of.
Maybe detailed or or or calendar in terms of <unk>.
A win I know crop insurance is after harvest, but you know.
Is that sort of the July August timeframe or a little bit later.
And then two you know visibility on.
Quality tree fruit production as we move out at next year into next year into the next phase in 'twenty three 'twenty four making sure there's no damage to treat et cetera.
Sure I'll take I'll take the second part and Perry will address the timing of actually the receipt of the crop insurance.
That happens right.
If if crop insurance does happen and as you correctly pointed out will be measuring the amount of damages from hurricanes and against prior periods.
So we have to wait for this current season to end. So we can have a measurement peer.
Period.
Relative to the trees and the damage, we don't think that Theres, a long term damage to our trees.
Just based on looking at them every day, we are obviously harvesting Ah our Valencia is coming up right now.
And once that season is over we'll be spending a lot of time basically.
Looking at the productive trees.
Trees themselves.
Determining where we replant.
From a maintenance perspective, so that we can.
Optimize the full production coming off all of the acres that we do own.
And by the <unk>.
<unk> mid summer, we should have a very good view on kind of where.
We think over the next season or two a week of production will be coming out obviously, we take from from past practice.
We've taken internal estimate and kind of the.
Late August early September timeframe that helps us do our budgeting.
But we're watching it very very carefully in the interim.
<unk> news is we really don't see any permanent long term damage to the trees themselves and as we pointed out with $1 9 million trees planted since.
2017, that's very good news for us because we believe that represents.
The source of the future production for us.
You want to talk a little bit about the timing of crop insurance.
Thanks, John and thanks for the questions here as it relates to the crop insurance as John mentioned, we have to wait for each of the harvest to be completed we just completed the early and mid season harvest and.
And we are working with the adjusters now.
Historically, we've always received in the for the freeze event and then for armor, we received the crop insurance within the same year with the event, it's not guarantee the insurance company has their own process they need to work through.
But based upon the last two.
You know events with the insurance companies, we'd be seen within the same crop year.
Got it.
Switching gears.
Ranch land sales 19000 acres sounds like there's still some acres not only last quarter, but the beginning of this quarter and if my memory serves correct.
<unk> other sales have been increasing over time I think some of it is.
All the land that has been encumbered for different reasons that's.
That's been transacted transact it out.
Just curious as to why demand too it's best that you can talk to that.
The value or the indications you're seeing for your for the available land.
Sure.
Take that.
Hum.
Buyer interest remains high we're seeing primarily cash buyers.
Don't seem like they're financing dependent which is good news I think they're being as selective as they have been in past years.
It is a competitive negotiation process for each transaction that we have and we are seeing.
Smaller parcels being negotiated as opposed to three or four or 5000 acre deals we're seeing things in the hundreds in the low 1000 acre parcels right now.
But what the actual price per acre is continuing to hold.
In the high fours low fives per acre.
Which is what we consider very encouraging for hopefully.
Future realized value for us.
Got it great.
That's it for me I appreciate it thanks for the update.
Thanks Jerry.
Thank you.
At this time I will turn the like to turn the call back over to Mr. Kiernan for closing remarks.
I just want to say, thank you to everyone for joining our call today as well as for your continued support of a week ago.
We look forward to speaking with you all about our second quarter results coming up in May I hope everyone has a great day.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Okay.
Okay.