Q1 2024 Alico Inc Earnings Call
Welcome to Alex's first quarter 2024 earnings conference call.
Operator: Welcome to Alico's first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode, and as a reminder, today's conference is being recorded.
At this time all participants are in listen only mode and as a reminder, today's conference is being recorded.
Last night the company issued a press release announcing its results for the first quarter ended December 31st 2023.
Operator: Last night, the company issued a press release announcing its results for the first quarter ended December 31, 2023. If you have not had the chance to view the release, it is available on the investor relations portion of the company's website at www.alico.com. This call is being webcast, and a replay will be available on Alico's 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 risk, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in these statements. Important factors that could cause or contribute to such differences include risk details in the company's quarterly report on form 10-Q and annual reports on form 10-K. Current reports on form 8K, in any, are also filed with the SEC and those mentioned in the earnings release.
If you have not had the chance to view the release it is available on the Investor relations portion of the company's website at.
As a coach Inc. Dot com this.
This call is being webcast and replay will be available on Alex was let's say as well.
Before we begin we would.
I'd like to remind everyone that the prepared remarks today contain forward looking statements.
Such statements are subject to risks uncertainties and other factors may cause actual results to differ materially from those expressed or implied in these statements.
Important factors that could cause or contribute to such differences include risk detailed in the company's quarterly reports.
On Form 10-Q, and annual reports on Form 10-K.
Current reports form 8-K.
And any.
They're two filed with the SEC and those mentioned in the earnings release.
Operator: The company undertakes no obligation to subsequently update or revise the forward-looking statements made on today's call, except as required by the law. During this call, the company will also discuss non-GAAP financial measures, including adjusted EBITDA and net debt. 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 conference call over to the company's president and CEO, Mr. John Kiernan. Please go ahead.
The company undertakes no obligation to subsequently update our bias. So far is looking statements made on today's call except as required by the law.
During this call. The company will also discuss non G. A a P financial measures, including average of that adjusted EBITDA and net debt.
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 conference call over to the company's President and CEO Mr. John <unk>. Please go ahead.
John E. Kiernan: Thank you. Thank you. Thank you. Thank you, Kelsey.
Thank you Kelsey and thank you everyone for joining us for <unk> first quarter 2024 earnings call. This morning.
John E. Kiernan: And thank you, everyone, for joining us for Alico's first quarter 2024 earnings call this morning. As previously announced, on September 18th, 2023, Alico signed a contract with the state of Florida to sell the remaining 17,229 acres of the Alico Ranch and on December 21st, 2023, closed on the sale. $77.6 million in gross proceeds. A portion of the proceeds from this sale were used to repay the outstanding balance on our working capital line of credit and $19.1 million of MetLife variable rate term loans plus accrued interest.
As previously announced on September 18, 2023 also signed a contract with the state of Florida to sell the remaining 17229 acres of the weaker ranch and.
And on December 21, 2023.
On the sale for $77 $6 million in gross proceeds.
Portion of the proceeds from this sale were used to repay the outstanding balance on our working capital line of credit.
And 19.1 billion of variable rate term loans cost accrued interest.
John E. Kiernan: The remainder we retained in cash. Results from our early and mid-season harvest this season were disappointing, resulting in an inventory write-down of approximately $10.8 million in the first quarter of fiscal year 2024. We believe that early and mid-season box production was affected by the continued impacts of Hurricane Ian. However, we are cautiously optimistic that our Valencia crop, which we'll begin harvesting soon, will show a stronger rate of recovery. That harvest is expected to begin in another week or so. January 2024.
<unk>, we retained and cash.
Results from our early and mid season harvest. This season were disappointing, resulting in an inventory write down of approximately $10 $8 million in the first quarter of fiscal year 2024.
We believe that the early and mid season box production was affected by the continued impacts of Hurricane Ian.
We are cautiously optimistic that our Valencia crop, which will begin harvesting soon will show a stronger rate of recovery.
That harvest is expected to begin in another week or so.
Yeah.
In January 2024, the company received funding from the Citrus research and field trial Foundation to support our use of oxy tetracycline to combat the effective greening and the citrus trees.
John E. Kiernan: The company received funding from the Citrus Research and Field Trial Foundation to support our use of oxytetracycline to combat the effect of greening in the citrus trees. Last year, beginning in January 2023, over 35% of our producing trees were treated with an OTC trunk injection with the expectation that it would improve fruit quality and decrease the rate of fruit drop. Last month, we published our 2023 Annual Sustainability Report highlighting our approach to sustainability and progress with our environmental, social, and governance priorities. We believe that our balance sheet remains one of our greatest strengths as we continue to operate in a challenging citrus industry.
Last year, beginning in January 2023 over 35% of our producing trees were treated with an OTC truck injection.
With the expectation that it would improve fruit quality and decrease the rate of free drop.
We expect that the full extent of the benefits of these prior year OTC treatments will not be measurable until the fall of 2023 24 harvest is completed.
Also last month, we published our 2023 annual sustainability report highlighting our approach to sustainability and progress with our environmental social and government governance priorities.
We believe that our balance sheet remains one of our greatest strengths as we continue to operate in a challenging citrus industry.
John E. Kiernan: Because of the sale of the remaining acreage of Alico Ranch, we have been able to reduce our total debt by $44 million and our net debt by almost $62 million, representing a decrease of 34% in our total debt and a decrease of 48% in our net debt in each case from September 30th, 2023 to December 31st, 2023. And even more importantly, we have the full $95 million available of undrawn credit, which We believe that these credit facilities provide Alico with ample liquidity while the company continues to recover from the impact of recent weather events. With that, I will turn the call over to Brad to discuss our more detailed financial results. Thank you, John. Good morning, everyone.
Because of the sale of the remaining acreage of weaker ranch, we have been able to reduce our total debt by $44 million and our net debt by almost $62 million.
Representing a decrease of 34% and our total debt and a decrease of 48% and our net debt in each case from September 32023 to December 31 2023.
Even more importantly, we have the full $95 million available Undrawn credit, which is comprised of approximately $70 million on our working capital line, which matures in November 2025, as well as $25 million of Undrawn credit on our revolving line of credit which matures.
November of 2029.
We believe that these credit facilities provide a we go with ample liquidity, while the company continues to recover from the impact of recent weather events.
With that I will turn the call over to Brad to discuss our more detailed financial results.
Thank you John good morning, everyone.
Brad: Like to remind everyone that 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. Quarterly results for the first quarter are not indicative of our full year results. The $3.3 million increase in revenue for the three months ended December 31, 2023, as compared to the three months ended December 31, 2022, was primarily due to a 24.9% increase in pound solids, driven by a 30.1% increase in processed box production as we begin to recover from the effects of Hurricane, Our fruit production for the three months ended December 31, 2022 was adversely impacted by the fruit drop caused as a result of the impact of Hurricane Ian in September 22.
I'd like to remind everyone that our business is seasonal and the majority of our citrus crop is harvested in the second and third quarters in 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.
The $3 3 million increase in revenue for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022 was primarily due to a 24, 9% increase in pound solids, driven by a 31% increase in process box production as we begin to recover from the effects of hurricane.
Yeah.
Our food production for the three months ended December 31, 2022 was adversely impacted by the fruit drop caused as a result of the impact of Hurricane in September 'twenty two.
Brad: And although Hurricane initially impacted the fiscal year 2023 harvest, we expect it to take another season or more for the groves to recover to pre-hurricane production. In addition, there was an increase in the price per pound solid of 3.4 percent for the three months ended December 31, 2023, compared to the same period in the prior year, as a result of more favorable pricing in one of our contracts with Tropicana. Total operating expenses were $28.2 million and $14.4 million for the fiscal first quarters ended December 31, 2023 and 2022, respectively. The increase in operating expenses primarily relates to the $10.8 million adjustment to reduce our inventory to its net realizable value as a result of significantly lower than anticipated box production from our early and mid-season crop due to the ongoing effects of Hurricane Ian, as well as an increase in harvest and haul costs driven by our increased box production and approximately $1.3 million we received in the quarter ended December 31, 2022, which was the last installment of the Florida Citrus Block Grant Program for the 2017 storm, Hurricane Irma.
And although hurricane initially impacted the fiscal year 2023 harvest, we expect it to take another season or more for the growth to recover to pre hurricane production levels.
In addition, there was an increase in the price per pound solid three 4% for the three months ended December 31, 2023 compared to the same period in the prior year as a result of more favorable pricing in one of our contracts with Tropicana.
Total operating expenses were $28 2 million and $14 4 million for the fiscal first quarters ended December 31, 2023, and 2022, respectively. The increase in operating expenses, primarily relates to the $10 8 million adjustment to reduce our inventory to its net realizable value as a result of <unk>.
Significantly lower than anticipated box production from our early and mid season crop due to the ongoing effects of hurricane Irma as well as an increase in harvest and haul costs driven by our increased box production and approximately $1 3 million. We received in the quarter ended December 31, 2022, which was the last installment of the <unk>.
Florida Citrus block Grant program for the 2017 storm Hurricane Irma.
General and administrative expenses for the three months ended December 31, 2023, and 2022 or $3 3 million and $2 $5 million respectively. The increase was primarily due to an increase in salary and wages of <unk> 6 million and consulting fees principally related to real estate entitlement activities of <unk> three.
Brad: General and administrative expenses for the three months ended December 31, 2023 and 2022 were $3.3 million and $2.5 million, respectively. The increase was primarily due to an increase in salary and wages of $0.6 million and consulting fees principally related to real estate entitlement activities of $0.3 million. Other income expense net for the three months ended December 31, 2023 and 2022 was $75.5 million and $2 million, respectively.
Yes.
Other income expense net for the three months ended December 31, 2023, and 2022 was $75 5 million and $2 million respectively. The increase was primarily due to the sale of 17229 acres of the illegal ranch to the state of Florida.
John E. Kiernan: The increase is primarily due to the sale of 17,229 acres of the Alico Ranch to the state of Florida. For the first fiscal quarter ended December 31, 2023, the company reported net income attributable to common, Trivial to Alico common stockholders of $42.9 million compared to a net loss of $3.2 million for the first fiscal quarter ended December 31, 2022, driven by the aforementioned sale of the Alico Ranch. I will now pass the call back to John. Thanks, Brad. Although the first part of our harvest season was off to a slow start, which we believe was because of Hurricane Ian, we remain cautiously optimistic that our upcoming Valencia harvest will show stronger improvement from the effects of Hurricane Andy. WECO has over 125 years of experience as a leader in Florida agriculture and land management.
For the first fiscal quarter ended December 31, 2023, the company reported net income attributable to common.
Trivial to illegal common stockholders of $42 9 million compared to a net loss of $3 2 million for the first fiscal quarter ended December 31, 2022, driven by the aforementioned sale of illegal ranch I will now pass the call back to John.
Thanks, Brad.
Although the first part of a harvest season was off to a slow start which we believe was because of hurricane Ian.
We remain cautiously optimistic that our upcoming Valencia harvest will show stronger improvement from the effects of Hurricane Ian.
<unk> has over 125 years of experience as a leader in Florida agricultural land management.
John E. Kiernan: Since 2017, we've planted over 2.2 million new trees, and we remain committed to the Florida citrus industry for the long term. We plan to apply the OTC therapy to substantially all of our producing trees in fiscal year 2024, and believe that this treatment, combined with the recent tree plantings that are maturing and consistent caretaking practices, should support a significant increase in fruit harvested next season. In addition, Alico is continuing to evaluate all of our properties to determine their highest and best use to create long-term value for our shareholders. We strive to provide our investors with the benefits and stability of conventional agricultural investment with the enhanced optionality that comes through active land management. And with that, we'll now open the line to questions from industry analysts. Kelsey?
Since 2017, we planted over $2 2 million new trees.
And we remain committed to the Florida citrus industry for the long term.
We plan to apply the OTC therapy to substantially all of our producing trees in fiscal two year 2024, and believe that this treatment can.
And bind with the recent tree plantings that are maturing and consistent caretaking practices should support a significant increase in fruit harvested next season.
In addition, our ratio is continuing to evaluate all of our properties to determine their highest and best use to create long term value for our shareholders.
We strive to provide our investors with the benefits and stability of conventional agricultural investment.
With the enhanced Optionality that comes through active land management.
And with that we'll now open the line up to questions from industry analysts Kelsey.
Thank you.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request, and your questions will be answered in the order that they are received. Should you wish to decline the polling process, please press the star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys.
Ladies and gentlemen, we will now begin the question answer session should you have a question. Please press the star followed by the one on your touch on shock.
You will then hear three tuna prompt acknowledging your request and your questions will be pulled in the order that they are received.
Should you wish to decline from the polling process. Please press the star followed by the two.
And if you are using a speaker phone please lift the handset before pressing into Q1.
Operator: One moment, please, for your first question. And your first question comes from Gary Sweeney from Roth Capital. Please go ahead.
One moment. Please for your first question.
And your first question comes from Gerry Sweeney from Roth Capital. Please go ahead.
Good morning, John and Brad Thanks for taking my call.
Gary Sweeney: Good morning, John and Brad. Thanks for taking my call. Hi Jerry.
Hi, Gerry good morning.
Gary Sweeney: I wanted to talk about the harvest. Obviously, you know, you said in the past at the Harvester Rebound, but maybe a little bit below my expectations, totally understandable with this ag, but curious. Is this It just wanted to talk about maybe the actual trees and orchards. We've talked in the past that there was no structural damage to the trees. Is this just a longer rebound? Well, a rebound that's going to take two years, or is there any concern that there may have been some structural damage to the trees? that would reduce their health.
I wanted to talk about the harvest obviously.
You said in the past it could take up to two years.
Mr rebound so.
But.
Maybe a little bit below my expectations, which totally understandable.
But just curious is this just wanted to talk about maybe the.
The actual trees and orchard, we've talked in the past that there was no structural damage to the trees.
It's just a longer rebound well a rebound and it's going to take two years or is there any concern that there may have been some structural damage from the trees from the hurricane that would reduce.
John E. Kiernan: Thanks, Jerry. That's a great question. As we reported back in 2022, you know, we lost relatively few trees compared to our entire portfolio. It's clear that 150 miles per hour winds for the sustained amount of hours that affected a majority of our groves definitely stressed the trees out, and we think that is directly attributable to why they have not rebounded from the effects of that storm as quickly as they did from the previous storm back in 2017 when Hurricane Irma hit.
Output.
Thanks, Jerry that's a great question.
As we reported back in 2022.
We lost relatively few trees and compare it to our entire portfolio.
Yeah.
It's clear that 150 mile an hour winds for the sustained amount of hours that affected a majority of our growth.
Definitely stress the trees out and.
And we think that is directly attributable to why they have not rebounded from the effects of that storm as quickly as they did in our previous storm back in 2017, when Hurricane Irma hit.
John E. Kiernan: We don't think that there's any permanent damage to the trees. We just think the trees are taking a little bit longer to come back. We did warn that it could take up to two years, back in 2022. We think our peers are suffering as well, that they're not seeing a robust rebound as quickly as we did previously, but we do not think that there is permanent structural damage to the trees themselves.
We don't think that this permanent damage to the trees. We just think the trees are taking a little bit longer to come back we did flag that it could take up to two years.
Back in 2022.
We think our peers are suffering as well that they're not seeing a robust rebound as quickly as we did previously.
But we do not think that there is permanent structural damage to the trees themselves.
Got it and then you talked about OTC in.
John E. Kiernan: And then you talked about OTC and, you know, I think administering it to the rest of your orchards. I believe about 35% of your crop has been treated. Now, given your results on the early and mids, can you see a difference between, and I know the harvest is down the shore, obviously, but I was just curious if you're seeing a difference in production where the OTC was administered to the early and mids as opposed to those that have not been treated yet? Another great question.
Yes.
I think administering it to the rest of your orchards.
We have about 35% of your crop has been treated with it.
Now <unk>.
Given the results on the or the early you see early in bids can you see a difference between and I know that the harvest is down this year, obviously, but I was just curious if youre seeing a difference in the end.
And the production where the OTC was administered.
To your to the earlier bids as opposed to trees that were have not been treated yet.
Another great question obviously.
John E. Kiernan: Obviously, last year was the first year we kind of piloted the treatment once it was approved by the FDA last January. We definitely saw noticeable improvement from our control groups for the early-mids. In this past harvest season, we're just, having a little trouble quantifying it, but... We applied about three times as many applications to our Valencia trees, last season as we did so early mid so we have a much larger sample size to compare against the control group so, We'd like to reserve until the end of this harvest season, you know, a full evaluation to quantify kind of what the improvement was, but it is visible and noticeable, cautiously optimistic, got it got it oh that's fair um and then uh final question you know obviously contracts i think some of the, of one of the, at least, larger percentage of some of your fruit is coming up for contract renewal this year.
Last year was the first year, we piloted the treatment once it was approved by the FDA last January.
We definitely saw.
Noticeable improvement from our control groups for the early mids.
And this past harvest season, we're just.
Having a little trouble quantifying it but.
We apply it about three times.
As many applications to our Valencia.
Trees last season, as we did to the early mid so we'd have a much larger sample size to compare versus the control group. So we.
We'd like to reserve until the end of this harvest season.
A full evaluation to quantify kind of what the improvement was but it is it is visible and noticeable.
Cautiously optimistic.
Got it.
Got it got it no that's fair.
And then final question.
Obviously contracts I think.
Some of the at.
At least.
Larger percentage of some of your fruit is coming up for contract renewal. This year, just any comments on that front door or around.
John E. Kiernan: Just any comments, were around, what you're looking at or timing or when we should hear from you and Network. So, it is early days, you know, we are basically putting out the bid for the replacement for the current contract that expires at the end of the season for three quarters of our acre, so it is material, but we anticipate that no later than when we release the third quarter Q in August. I'll keep my fingers crossed; we may have some better news to report that maybe we can get it done by May. But right now, we really have no details that we can share other than we're actively in the bid process. Got it. And that contract would be for next year's Harvard, not this year. Correct. That would start in November or December.
What you're looking at or timing or when we should hear what.
That would be completed.
So it is early days.
We are basically putting out to bid.
The replacement for the current contract that expires at the end of the season for I think it's three quarters of our acres. So it is material.
But we anticipate that no later.
Then when we released the.
The third quarter queue in August I'll keep my fingers crossed we may have some better news to report that maybe we'd get it done by May.
But right now we really have no details that we can share other than we're actively in the bid process.
Got it and that contract would be for next year's harvest.
This should correct.
That will start in November December.
Gary Sweeney: Got it. Okay. Thanks. Thank you for taking the time to answer my questions. I appreciate it. Thank you, Jerry. Thank you very much. Thank you. And there are no further questions at this time. Mr. Kiernan, you can proceed. I just want to thank everyone for joining our call today and for your continued support of Alico. We look forward to speaking with you all about our second quarter results in May. Have a good day. Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and, as a reminder, please disconnect your line. Have a great day. All set, Kelsey.
Got it okay. Thanks, Thank you for taking my.
Questions I appreciate it.
I appreciate that Gerry Thank you very much.
Thank you.
And there are no further questions at this time Mr. Kevin you can proceed.
I just want to thank everyone for joining our call today and for your continued support of a week ago.
We look forward to speaking with you all about our second quarter results in May.
Good day.
Okay.
Ladies and gentlemen, this concludes your conference call for today, we thank you very much for participating and ask you. Please disconnect your lines have a great day.
I'll set Kelsey.