Q1 2024 Limoneira Co Earnings Call

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Operator: Greetings and welcome to the Limoneira's first quarter 2024 financial results conference. At this time, all participants are in a, A brief question and answer session will follow the formal anyone should require operator assistance during Press star zero. As a reminder, this con, It is now my pleasure to introduce your host, John. Thank you. Good afternoon, everyone.

Greetings and welcome to the Lehman era first quarter 'twenty 'twenty, four and 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. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host John Mills with ICR. Thank you Sir you may begin.

Thank you good afternoon, everyone and thank you for joining us for <unk> first quarter fiscal year 2024 conference call on the call today are Harold Edwards, President and Chief Executive Officer, and Mark Hello Mountain Chief Financial Officer.

John Mills: And thank you for joining us for Limoneira's first quarter fiscal year 2024 conference call. On the call today are Harold Edwards, President and Chief Executive Officer, and Mark Palamountain, Chief Financial Officer. By now, everyone should have access to the first quarter fiscal year 2024 earnings release, which went out today at approximately 4 p.m. Eastern. 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 limoneira.com. This call is being webcast, and a replay will be available on Limoneira's website as well.

By now everyone should have access to the first quarter fiscal year 2024 earnings release, which went out today at approximately four 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 Lehman era Dot com.

This call is being webcast and a replay will be available on <unk> website as well.

John Mills: Before we begin, we'd like to remind everyone that these 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 10-Qs and 10-Ks filed with the SEC and those mentioned in the earnings, Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events, or otherwise.

When 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. So.

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.

Certain factors that could cause or contribute to such differences include risks detailed in the Companys 10, Qs and 10-Ks 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.

John Mills: 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 Limoneira's ongoing results of operations, particularly when comparing underlying results from period to period. We have 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 earnings per share to the most directly comparable GAAP financial measures is included in the company's press release, which has been posted to our 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.

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 luminaries ongoing results of operations, particularly when comparing underlying results from period to period.

We have 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 earnings per share to the most directly comparable GAAP financial measures are included in the company's press release, which has been posted to our web.

Site.

And with that it's my pleasure to turn the call over to the Companys, President and CEO, Mr. Harold Edwards.

Thanks, John and good afternoon, everyone. We're very encouraged.

Harold S. Edwards: We are very encouraged to see our strategic shift towards an asset-light business model reflected in our results, with agribusiness expenses decreasing by 5%, agribusiness operating losses improving by 84%, and our adjusted EBITDA improving by 39% in the seasonally soft first quarter of fiscal year 2024, compared to the prior year period. Results for the first quarter were impacted by increased rainfall in California that delayed the picking of lemons from the first quarter to the second quarter. However, we do not expect the rainfall to have any other impact on the overall harvest or the quality of the fruit.

<unk> to see our strategic shift towards an asset lighter business model reflected in our results with agribusiness expenses decreasing by 5% agribusiness operating loss, improving by 84% and our adjusted EBITDA improving by 39% in the seasonally soft first quarter.

After our fiscal year 2024 compared to the prior year period.

Results for the first quarter were impacted by increased rainfall in California that delayed the picking of lemons from the first quarter to the second quarter. However, we do not expect the rainfall to have any other impact on the overall harvest or the quality of the fruit additions.

Harold S. Edwards: Additionally, avocado harvests will begin in Q2 and run into Q3 due to the seasonality of California avocados and reduced import pressure from Mexico and Peru in the U.S. market during that period. We believe the U.S. market window from April to July provides a niche opportunity for California avocados to serve U.S. market demand during that time frame without significant pressure from other avocado production areas in the world, which are predominantly Mexico and Peru. Many of you have recently seen the media attention regarding avocados coming from Mexico and how the U.S. Ambassador Ken Salazar told producers in Michoacan, Mexico, the country's largest avocado-producing state, that the United States will not import fruit grown on illegal plantations that contribute to deforestation. To put this into perspective, approximately one-third of the avocados grown in Mexico come from this state and represent approximately 800 illegal orchards. This is the first time these orchards have been identified by authorities.

Additionally, our avocado harvest will begin in Q2 and run into Q3 due to the seasonality of California, avocados and reduced import pressure from Mexico, and Peru, and the U S market during that period.

We believe the U S market window from April to July provides a niche opportunity for California avocados to serve the U S market demand during that timeframe without significant pressure from other avocado production areas in the world, which are predominantly Mexico and Peru.

Many of you have recently seen the media attention regarding avocados coming from Mexico, and how the U S Ambassador Ken Salazar told producers in mutual it kind of in Mexico, the country's largest avocado producing state that the United States will not import fruit grown on illegal plantations that kantar.

<unk> to deforestation.

To put this into perspective, approximately one third of avocados grown in Mexico come from this state and represent approximately 800 illegal orchards. This is the first time. These orchards had been identified by authorities and the U S. Mexican and mutual icon agencies are now working on protocols chips work future.

Harold S. Edwards: The U.S., Mexican, and Michoacan agencies are now working on protocols to thwart future export efforts of the illegally farmed produce. Over the past four years, Mexico has supplied 88% of fresh avocado imports to the United States, and in 2023 alone, the United States imported nearly 2.5 billion pounds of Mexican avocados, according to the U.S. Department of Agriculture. We believe this may have an effect on imports and potentially increase the price of avocados. Turning to our recently announced decision to evaluate strategic alternatives for the overall business, over Limoneira's 130-year history, it has grown into one of the leading sustainable agribusiness companies in the world with over 11,000 acres of valuable land, real estate properties, and senior water rights. Over the past 18 months, we have developed a strategic roadmap intended to enhance near and long-term shareholder value.

Export efforts of the illegally farmed produce.

Over the past four years, Mexico is supplied 88% of fresh avocado imports to the U S and in 2023 alone in the United States imported nearly $2 5 billion pounds of Mexican avocados. According to the U S Department of Agriculture. We believe this may have an effect on imports and.

<unk> increased the price of avocados.

Turning to our recently announced decision to evaluate strategic alternatives for the overall business over <unk> 130 year history. It has grown into one of the leading sustainable agribusiness companies in the world with over 11000 acres of valuable lands real estate properties and senior water rights over the.

Past 18 months, we have developed a strategic roadmap intended to enhance near and long term shareholder value today, we consider ourselves to be in a strong financial position, having recently reduced our net debt position and right size the balance sheet through our ongoing strategic shift towards an asset light business model.

Harold S. Edwards: Today, we consider ourselves to be in a strong financial position, having recently reduced our net debt position and right-sized the balance sheet through our ongoing strategic shift towards an asset-lighter business model. As part of our exploration of strategic alternatives to maximize value, and due to the strong interest we have received, we have decided it is in the best interest of our stockholders to temporarily pause the sale of the two remaining non-strategic assets, as well as move away from pursuing a packinghouse in Chile and instead add value by focusing on expanding our avocado production over the next three years. The overall improvements we are making to our business are well aligned with our strategic asset lighter transition plan. We are working to pivot our business towards a model that will streamline our operation, sell non-strategic assets, improve the consistency of our earnings, increase EBITDA and dividends per share, reduce debt, right-size the balance sheet, and improve the return on invested capital. Debt less cash on hand as of January 31st, 2024 was $51.6 million, compared to $105 million at the end of fiscal year 2022. Even after the recent non-strategic asset sales, we continue to manage approximately 11,000 acres of land with approximately 21,000 acre feet of owned water usage and pumping rights.

As part of our exploration of strategic alternatives to maximize value and due to the strong interest. We've received we've decided it is in the best interest of our stockholders to temporarily pause the sale of the tumor remaining non strategic assets as well as move away from pursuing a packing house in Chile and <unk>.

<unk> add value by focusing on expanding our avocado production over the next three years.

Overall improvements, we are making to our business are well aligned with our strategic asset lighter transition plan.

We are working to pivot our business towards a model that will streamline our operations.

All non strategic assets improve the consistency of our earnings increase EBITDA and dividends per share reduce debt rightsize the balance sheet and improve the return on invested capital.

Debt less cash on hand as of January 31st 2024 was $51 6 million compared to $105 million at the end of fiscal year 2022.

Even after the recent non strategic asset sales, we continue to manage approximately 11000 acres of land with approximately 21000 acre feet of owned water usage and pumping rates in fiscal year 2024 on the operational side of our business you will continue to see our transition to an asset lighter business model.

Harold S. Edwards: In fiscal year 2024, on the operational side of our business, you will continue to see our transition to an asset-light business model and focus on the best use of our assets to enhance shareholder value. We have dramatically decreased interest expense, removed our pension obligation, are receiving quarterly payments from Yuma Mesa Irrigation and Drainage District for our fouling program, and we believe lemon pricing will be better this year compared to fiscal year 2023, positioning us well for strong improvement in fiscal year 2024. We also have a larger avocado crop this year compared to last. In addition to our operational improvements, our board and management team will continue to evaluate how to best leverage our expertise in farm management, packing, marketing, and distributing citrus combined with our valuable portfolio of agricultural lands, real estate properties, and water rights in order to enhance long-term shareholder value. And with that, I'll now turn the call over to Mark. Thank you, Harold, and good afternoon, everyone.

<unk> and focus on the best use of our assets to enhance shareholder value. We have dramatically decreased interest expense removed. Our pension obligation are receiving quarterly payments from Yuma Mesa irrigation and drainage district for our following program and we believe women pricing will be better this year compared to fiscal year two.

Thousand 23 positioning us well for strong improvement in fiscal year 2024, we also have a larger avocado crop this year versus last in addition to our operational improvements our board and management team will continue to evaluate how to best leverage our expertise in farm management packing marketing.

And distributing citrus combined with our valuable portfolio of agricultural lands real estate properties and water rights in order to enhance long term shareholder value and with that I'll now turn the call over to Mark. Thank you Harold and good afternoon, everyone. Before I begin I would remind you. It is best to view our business on an app.

Annual not quarterly basis due to the seasonal nature of our business historically, our first and fourth quarters are the seasonally softer quarters, while our second and third quarters are stronger.

Mark Palamountain: Before I begin, I would remind you it is best to view our business on an annual, not quarterly, basis due to the seasonal nature of our business. Historically, our first and fourth quarters are the seasonally softer quarters, while our second and third quarters are stronger. For the first quarter of fiscal year 2024, total net revenue increased 5% to $39.7 million compared to $37.9 million in the first quarter of the previous fiscal year. Agribusiness revenue was $38.3 million compared to $36.5 million in the first quarter of last year. Other operations revenue was $1.4 million in the first quarter of fiscal years 2024 and 2023. Agribusiness revenue for the first quarter of fiscal year 2024 included $23.9 million in fresh lemon sales, compared to $24.7 million during the same period of fiscal year 2023. Approximately 1,137,000 cartons of fresh lemons were sold during the first quarter of fiscal year 2024 at a $21.06 average price per carton, compared to 1,308,000 cartons sold at an $18.88 average price per carton during the first quarter of fiscal year 2023.

For the first quarter of fiscal year 2024, total net revenue increased 5% to $39 $7 million compared to total net revenue of 37 $9 million in the first quarter of the previous fiscal year.

Agribusiness revenue was $38 $3 million compared to $36 $5 million in the first quarter last year.

Other operations revenue was $1 $4 million in the first quarter of fiscal years 2024 and 2023.

Agribusiness revenue for the first quarter of fiscal year 2024 includes $23 $9 million in fresh lemon sales compared to $24 7 million during the same period of fiscal year 2023.

Approximately 1.137 million cartons of fresh lemons were sold during the first quarter of fiscal year 2024 at a $21 <unk> average price per carton compared to 1.308 million cartons sold at an $18 88 set average price per carton during the.

The first quarter of fiscal year 2023.

The company sold less cartons of fresh revenues or express lemons in the first quarter of fiscal year 2024, due to lower harvest in that period caused by the significant rainfall as California has received.

Brokered lemons and other lemon sales were $2 $9 million and $1 $4 million in the first quarter of fiscal years, 2024, and 2023, respectively.

The company recognized no avocado revenue in the first quarter of fiscal year, 2024, or 2023 due to the timing of harvests.

Mark Palamountain: The company sold fewer cartons of fresh lemons in the first quarter of fiscal year 2024 due to a lower harvest in that period caused by the significant rainfall California has received. Brokered lemons and other lemon sales were $2.9 million and $1.4 million in the first quarter of fiscal years 2024 and 2023, respectively. The company recognized no avocado revenue in the first quarter of fiscal year 2024 or 2023 due to the timing of harvest. The company recognized $1.1 million of orange revenue in the first quarter of fiscal year 2024 compared to $1.2 million in the first quarter of fiscal year 2023. Approximately 80,000 cartons of oranges were sold during the first quarter of fiscal year 2024 at a $14.26 average price per carton, compared to 64,000 cartons sold at an $18 average price per carton during the first quarter of fiscal year 2023.

The company recognized $1 $1 million of Orange revenue in the first quarter of fiscal year 2024, compared to $1 $2 million in the first quarter of fiscal year 2023.

Proximately 80000 cartons of oranges were sold during the first quarter of fiscal year 2024 at a $14 26 average price per carton compared to 64000 cartons sold at an $18 average price per carton during the first quarter of fiscal year 2023.

A reminder, the company Opportunistically has by salary range, but its for orders with our retail and foodservice customers to complement our lemon sales.

Specialty citrus and other crop revenue was $1 1 million in the first quarter of fiscal year 2024, compared to $1 $2 million in the first quarter of fiscal year 2023.

Foreign management revenues were $2 million in the first quarter of fiscal year 2024, primarily due to the northern properties farming management and operation services. There were no farm management revenues in the first quarter of fiscal year 2023.

Total costs and expenses for the first quarter of fiscal year, 2024, or 47 $5 million compared to $12 million in the first quarter of last year. The increase of $35 $4 million was primarily due to the gain on the sale of the northern properties in the first quarter of fiscal year 2023.

Mark Palamountain: As a reminder, the company opportunistically has buy-sell arrangements for oranges with our retail and food service customers to complement our lemon sales. Specialty citrus and other crop revenue was $1.1 million in the first quarter of fiscal year 2024 compared to $1.2 million in the first quarter of fiscal year 2023. Farm management revenues were $2 million in the first quarter of fiscal year 2024, primarily due to the Northern Properties Farming Management and Operations Services. There were no farm management revenues in the first quarter of fiscal year 2023.

Partially offset by decreases in agribusiness costs, and expenses and selling general and administrative expenses AG.

Agribusiness costs and expenses declined 5% to $39 $1 million for the first quarter of fiscal year 2024, compared to $41 $2 million in the first quarter of last year.

Operating loss for the first quarter of fiscal year, 2024 was $7 7 million.

Compared to operating income of $25 $9 million in the first quarter of the previous fiscal year, primarily related to the gain on the sale of the northern properties in the first quarter of fiscal year 2023.

Agribusiness operating loss improved 84% for the first quarter of fiscal year 2024, compared to the same period in the prior year, primarily related to the ongoing execution of the strategic roadmap and the elimination of unprofitable operations.

Mark Palamountain: Total cost and expenses for the first quarter of fiscal year 2024 were $47.5 million, compared to $12 million in the first quarter of last year. The increase of $35.4 million was primarily due to the gain on the sale of the northern properties in the first quarter of fiscal year 2023, partially offset by decreases in agribusiness costs and expenses and selling general administrative expenses. Agribusiness costs and expenses declined 5% to $39.1 million for the first quarter of fiscal year 2024, compared to $41.2 million in the first quarter of last year. Operating loss for the first quarter of fiscal year 2024 was $7.7 million compared to operating income of $25.9 million in the first quarter of the previous fiscal year.

Net loss applicable to common stock after preferred dividends for the first quarter of fiscal year 2024 was $3 7 million compared to net income applicable to common stock of $15 $5 million in the first quarter of fiscal year 2023.

Net loss per diluted share for the first quarter of fiscal year 2024 was 21.

Compared to net income per diluted share of <unk> 84 for the same period fiscal year 2023 adjusted.

Adjusted net loss per diluted EPS for the first quarter of fiscal year, 2024 was $3 2 million compared to $9 3 million in the same period fiscal year 2023.

Adjusted net loss per diluted share for the first quarter of fiscal year 2024 was 18th.

Compared to adjusted net loss per diluted share of 53.

For the first quarter of fiscal year 2023.

Mark Palamountain: Primarily related to the gain on the sale of the northern properties in the first quarter of fiscal year 2023. Agribusiness Operating Loss improved 84% for the first quarter of fiscal year 2024 compared to the same period in the prior year, primarily related to the ongoing execution of the strategic roadmap and the elimination of unprofitable operations. Net loss applicable to common stock after preferred dividends for the first quarter of fiscal year 2024 was $3.7 million compared to net income applicable to common stock of $15.5 million in the first quarter of fiscal year 2023. Net loss per diluted share for the first quarter of fiscal year 2024 was $0.21 compared to net income per diluted share of $0.84 for the same period in fiscal year 2023. Adjusted net loss for diluted EPS for the first quarter of fiscal year 2024 was $3.2 million compared to $9.3 million in the same period of fiscal year 2023.

Reconciliation of net loss attributable to Lehman Luminaire company to adjusted net loss for diluted EPS is provided at the end of our earnings release.

Adjusted EBITDA was a loss of $4 $8 million in the first quarter of fiscal year 2024, compared to a loss of seven $9 million in the same period of fiscal year 2023.

The $3 $1 million improvement as a result of the actions. We took last year to include exiting unprofitable farming operations entities.

Selling our northern properties to perform farm management services and entering a water following program in Yuma, Arizona, which have put us in a much stronger financial position this year.

A reconciliation of net loss attributable to Luminaire company to adjusted EBITDA has also provided at the end of our earnings release.

Turning now to our balance sheet and liquidity at the beginning of last year, we sold our northern properties resulted in a total net proceeds of $98 $4 million. The proceeds were used to pay down all our domestic debt, except the AG West farm credit $40 million non revolving line of credit, which has a fixed interest rate of three point.

Five 7% until July one 2025.

Long term debt as of January 31, 2024 was $51 4 million compared to $46 million at the end of fiscal year 2023.

Mark Palamountain: Adjusted net loss per diluted share for the first quarter of fiscal year 2024 was $0.18 compared to adjusted net loss per diluted share of $0.53 for the first quarter of fiscal year 2023. A reconciliation of net loss attributable to Limoneira Company to adjusted net loss for diluted EPS is provided at the end of this earnings release. Adjusted EBITDA was a loss of $4.8 million in the first quarter of fiscal year 2024 compared to a loss of $7.9 million in the same period of fiscal year 2023.

Debt levels as of January 31, 2024 minus $500000 of cash on hand resulted in a net debt position of $51 6 million at quarter end.

Now I'd like to turn the call back over to Harold to discuss our fiscal year 2020 for outlook and longer term growth pipeline.

Thanks, Mark for fiscal year 2024, we continue to expect fresh lemon volumes to be in the range of 5 million to $5 5 million cartons and avocado volumes to be in the range of 7 million to 8 million pounds for fiscal year 2024.

We have 700 acres of non bearing lemons and avocados estimated to become full bearing over the next four to five years, which we expect will enable strong organic growth in the coming years. Additionally, we plan to expand our plantings of avocados over the next three years and also expect to have a steady increase in third party.

Mark Palamountain: The $3.1 million improvement is a result of the actions we took last year to include exiting unprofitable farming operations in Cadiz, selling our northern properties to perform farm management services, and entering a water following program in Yuma, Arizona, which have put us in a much stronger financial position this year. A reconciliation of net loss attributable to Limoneira Company to adjusted EBITDA is also provided at the end of our earnings release. Turning now to our balance sheet and liquidity, at the beginning of last year, we sold our northern properties, which resulted in a total net proceeds of $98.4 million. The proceeds were used to pay down all our domestic debt, except the Ag West Farm Credit $40 million non-revolving line of credit, which has a fixed interest rate of 3.57% until July 1st, 2025. Long-term debt as of January 31, 2024 was $51.4 million, compared to $40.6 million at the end of fiscal year 2023. Debt levels as of January 31, 2024, minus $500,000 of cash on hand, resulted in a net debt position of $51.6 million at quarter end.

Grower fruit.

Turning to our real estate projects harvest at Lehman era, the <unk> Lewis community builders to an east area too we have increased our expected total proceeds by 14% to $131 million over nine fiscal years. The increase was primarily due to increased slot.

<unk> based on our 121 lot sales in October of 2023.

And with that I'd like to hand, the call back over to the operator.

Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the starkey.

One moment, please while we poll for question.

Okay.

Our first question comes from Ben.

Yes.

Stephens Inc. Please proceed with your question.

Yeah.

Hey, good evening, Thanks for taking my question.

Hey, Ben.

I wanted to ask first.

First on the decision to pause the sale of the non.

Non core assets in the midst of the strategic review.

Any other decisions are made around the Chile packing health.

<unk>.

Is the strategic review is still ongoing and this is a discovery as a part of the strategic review.

Or does the fee splits strategic review and.

These are the final conclusion for growth here.

Harold S. Edwards: Now I'd like to turn the call back over to Harold to discuss our fiscal year 2024 outlook and longer-term growth pipeline. Thanks, Mark. For fiscal year 2024, we continue to expect fresh lemon volumes to be in the range of 5 million to 5.5 million cartons, and avocado volumes to be in the range of 7 million to 8 million pounds. We have 700 acres of non-bearing lemons and avocados, estimated to become full-bearing over the next four to five years, which we expect will enable strong organic growth in the coming years. Additionally, we plan to expand our plantings of avocados over the next three years and also expect to have a steady increase in third-party grower fruit.

No. The strategic review is probably still in the early innings of the process are we.

Just felt that are keeping the windfall.

In Paso Robles, our vineyard, there and then the production assets in Chile as part of the overall portfolio would be an important part of the entire strategic review, so rather than appealing them off prematurely. We thought we would keep those assets around as part of the ongoing discovery.

Got it okay that makes sense that makes sense.

Second question is related to the timing shift and the harvest of lemons based on the weather that you got in the first quarter can you quantify the impact of that whether its volume or EBITDA or however, you think is.

Most clear quantified the shift and that from <unk> to <unk> and shuttered all shifted to <unk>.

Harold S. Edwards: Turning to our real estate projects, Harvest at Limoneira, the Limoneira-Lewis Community Builders II, and East Area II, we have increased our expected total proceeds by 14% to $131 million over nine fiscal years. The increase is primarily due to increased lot prices based on our 121 lot sales in October of 2023. And with that, I'd like to hand the call back over to the operator. Thank you. We will now be conducting a question. If you would like to ask a question, please press star 1. Cremation Tombs. You may press star 2 if you would like to remove them.

Yes, that's a great question. So really we had a few weeks of consistent range that as you know you can't get into the Orchard for about three or four days.

<unk> the fruit because you get different things like oils flooding, so to summarize and quantify it's about 200 to 300000 cartons that will shift from Q1 into Q2, and probably a little bit of that into Q3, as we balance out the harvest the crop is looking great.

The quality has been there our utilizations have been good so far.

Well.

Being able to move those out and still have that same volume and maintain our guidance from five to $5 5 million cartons.

Okay, great and so there's no impact on sizing and by extension then the impact utilization that you anticipate from the purely just the timing of which quarter it falls into.

unknown: Speaker Equipment. It may be necessary. Our first question comes from Ben. Hey, good evening.

Yeah, Yeah, exactly its not 2019, where we saw those 11th turned into great roots and then they all had to get throw it away. So so far so good now and the weather windows opening up and it looks like we're supposed to get some good weather. The next few weeks. So we're we're feeling good about it.

Benjamin Shelton Bienvenu: Thanks for taking my question. Hey, Ben. I want to ask first about the decision to pause the sale of the non-core assets in the. Any other decisions you made around the Chile Packing House? Is the strategic review still ongoing? And is this a discovery as part of the strategic review? Or does this cease the strategic review, and these are the final conclusions? No, the strategic review is probably still in the early innings of the process.

Okay Awesome I'll get back in the queue. Thanks.

Thanks, Dan.

Our next question comes from Ben <unk>.

Lake Street Capital. Please proceed with your question.

Alright, thanks for taking my questions.

Circle back on the strategic review and the two assets not being for sale.

Can you clarify that between this decision and the decision to increase avocado production. It sounds like even more than you had already expected are these are these too.

Harold S. Edwards: We just felt that keeping the windfall assets in Paso Robles, our vineyard there, and then the production assets in Chile as part of the overall portfolio would be an important part of the entire strategic review. So rather than peeling them off prematurely, we thought we'd keep those assets around as part of the ongoing discovery.

Decisions.

Related or are they mutually exclusive.

Yes, theyre mutually exclusive ban it at this point when we're looking at our one world of Citrus model, we felt it would be prudent to keep it and production assets as part of the overall exploration our decision to push pause and not move forward with investing into a Chilean packinghouse.

Harold S. Edwards: Okay, that makes sense. My second question is related to timing the harvest of lemons based on the weather that you got in the first quarter. Can you quantify the impact of that, whether it's volume or EBITDA or whatever? Is it most clear to quantify the shift in that from 1Q to 2Q and should it all shift? Yeah, that's a great question. So really, we had a few weeks of consistent rains, and as you know, you can't get into the orchards for about three or four days and touch the fruit because you get different things like oil spotting.

Yes.

It was really just driven by our desire to not necessarily deploying more any more capital into Chile at this point, but still to maintain the supply chain that will come out of Chile by providing agency marketing and sales services for that fruit.

As well as the sales.

Sales and marketing and packing services.

For the fruit that we that we can continue to produce in Chile. So our operations will remain intact, but as the supply chain grows as our younger trees mature and produce more fruit and then our grow our partners down there produce more fruit, we will continue to work with that those supplies, but more on an agency.

Harold S. Edwards: So if you summarize and quantify, it's about 200 to 300,000 cartons that will shift from Q1 into Q2 and probably a little bit of that into Q3 as we balance out the harvest. The crop is looking great. The quality has been there, our utilization has been good, so we'll be able to move those out and still have that same volume and maintain our guidance from five to five and a half million cartons. Great. And so there's no impact on sizing and, by extension, any impact on utilization that you anticipate from this. It's purely just the timing of in which quarter it falls.

<unk> and not necessarily packing them with our own packinghouse. So thats the main decision there.

And as far as the decisions to not divest those assets but.

And accelerate the increased plantings of avocados, that's really just more driven by the opportunistic realization that there.

Harold S. Edwards: Yeah, yeah, exactly. It's not 2019 where we saw those 11ths turn into grapefruits, and then they all had to get thrown away. So, so far, so good now, and the weather windows are opening up, and it looks like we're supposed to get some good weather the next few weeks. So it's, we're, we're feeling good about it. Awesome. I'll get back in the queue.

There's this great little niche for California avocados.

We continue to believe that it's a great use of our land has lemons have become less profitable and more oversupplied we.

We see the opportunity to convert some of our lemon land into avocado production in Ventura County, accelerating that increase in avocados, but then also balancing that out with the.

Operator: Thanks. Thanks, Ben. Our next question comes from Ben. All right, thanks for taking my questions. I want to circle back on the strategic review and the two assets not being for sale. Can you clarify that between this decision and the decision to increase avocado production, it sounds like even more than you'd already expected? Are these two decisions, you know, related, or are they mutually exclusive?

With our agency business and also our services, our packing marketing and selling to our grower partners, which should keep our lemon citrus supply chain growing while at the same time growing our own avocado production.

Okay. Okay. Thank you and then.

Couple of questions on the avocado planning specifically one I'm wondering if you can help.

Quantify the magnitude of the additional plantings are expecting over some some some timeframe that you have visibility into and then I think you've just answered my other part of this question, which is looking at the new acres into we monero or just redeploying existing existing acreage into avocado.

Harold S. Edwards: Yeah, they're mutually exclusive, Ben. At this point, when we're looking at our one world of citrus model, we felt it would be prudent to keep it in production assets as part of the overall exploration. Our decision to push pause and not move forward with investing in a Chilean packinghouse is really just driven by our desire to not necessarily deploy more capital into Chile at this point but still maintain the supply chain that will come out of Chile by providing agency marketing and sales services for that fruit, as well as the sales, marketing, and packing services for the fruit that we continue to produce in Chile. So our operations will remain intact, but as the supply chain grows, as our younger trees So that's the main decision here.

Yeah. So it really is just a redeployment of the existing acreage. So that they are really simple way to think about it is in Ventura County, We farm about 3000 acres that historically have been 2000 acres of lemons in 1000 acres of avocados, it's not quite exactly that way.

But it's close to that and what Youll see over the next five years is the pivot away from.

About a thousand acres of avocados going to 2000 acres of avocados, and 1000 acres or sorry, 2000 acres of lemons going to 1000 acres of lemons.

Got it got it okay. Thank you.

Very good.

And just one more thing on that so as we look at it in the pivot out of the Chilean packing house with which is part of our Investor day in our growth model to get us to $25 million, just sort of tee it up and getting to 2000 acres of avocados.

Harold S. Edwards: And as far as the decisions to not divest those assets but accelerate the increased plantings of avocados, that's really just more driven by the opportunistic realization that there's this great little niche for California avocados. We continue to believe that it's a great use of our land. As lemons have become less profitable and more oversupplied, we see the opportunity to convert some of our lemon land into avocado production in Ventura County, accelerating that increase in avocados, but then also balancing that out with our agency business and also our services of packing, marketing, and selling to our grower partners, which should keep our lemons and our citrus supply chain growing while at the same time growing our own avocado production. Okay, okay. Thank you.

And down to 1000, the lemons quantifying that at today's economics, and pricing gets us to about $40 million to $50 million of EBITDA Forbearing. So we just wanted to make sure that that was communicated in the pivot that the the operating profit per acre is about three to four times what it is in lemons today and so that's really the reason behind that.

Plus Ventura County is really the only place you can grow avocados in California significantly any more due to the challenges further south in San Diego and et cetera.

Got it that's helpful context, thanks Mark.

Want to talk about that's probably a good place to leave it I'll jump back in queue.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Our next question comes from Raj Sharma with B Riley Securities. Please proceed with your question.

Hi, thank.

Harold S. Edwards: And then a couple of questions on the avocado planting specifically. One, I'm wondering if you can help to quantify the magnitude of the additional plantings you're expecting, you know, over some, some, some timeframe that you have visibility into. And then I think you've just answered my other part of this question, which is going to be new acres into Limoneira or just redeploying existing, existing acreage into avocado. Yeah, so it really is just a redeployment of the existing acreage. So the really simple way to think about it is that in Ventura County, we farm about 3,000 acres that historically have been 2,000 acres of lemons and 1,000 acres of avocados. It's not quite exactly that way, but it's close to that.

Thank you for taking my questions.

I wanted to understand in the Grand scheme of things. It is a strategic review that's ongoing.

What does that really entail.

Is that a mandate to sell the company or figure out what parts of the company you want to sell but also just related to.

What we just heard the 2000 acres of lemons going into 1000 avocados going into two so did I hear that.

Your 25 year operating profit.

Could be significantly higher.

Yes, you did hear correctly, yes, we believe that that will significantly enhance the growth of EBITDA just given the per acre profitability of avocados versus lemons currently and as we look into our crystal balls at the future. We believe that that will be very beneficial as well.

Mark Palamountain: And what you'll see over the next five years is the pivot away from about 1,000 acres of avocados going to 2,000 acres of avocados and 1,000 acres, or sorry, 2,000 acres of lemons going to 2,000 acres of lemons. Ben, just one more thing on that. So as we look at it in the pivot out of the Chilean packing house, which was part of our investor day and our growth model to get us to $25 million, just to sort of tie it up, getting to 2,000 acres of avocados and down to 1,000 acres of lemons, quantifying that today's economics and pricing gets us to about $40 to $50 million of EBITDA full bearing. So we just wanted to make sure that that was communicated in the pivot And so that's really the reason behind the pivot, plus Ventura County is really the only place you can grow avocados in California significantly anymore due to the challenges further south in San Diego and et cetera. That's a helpful context statement.

But maybe just take a step back on the first part of your question Raj, which was where are we with the with the process of exploration of strategic alternatives. So the process.

Initially has begun.

With a robust.

Deep dive into.

Valuations into the assets of the company, so our land assets and our water assets.

And really understanding sort of from a highest and best use of Fairpoint and our fair market value of the existing assets that the company has.

Giving ourselves and our directors a better understanding of Directionally, what the asset value of the company might look like and we're nearing completion of that all.

All of that while we've been very pleased to have been receiving.

Significant levels of inbound interest from various types of.

Operator: Thanks, Mark. There's more to talk about, but that's probably a good place to leave it.

Of groups that would be interested in some or all of the assets.

You've had strategic interest you've had.

Operator: I'll jump back. As a reminder, if you would like to ask a question, please press star 1. Our next question comes from Raj Sharma with B Riley. Thank you for taking my questions. I wanted to understand, you know, in the grand scheme of things, there's a strategic review that's ongoing. A. What does that really entail? Is there a mandate to sell the company or figure out what parts of the company you want to sell?

Financial interest you had interest from.

Sovereign wealth pension funds insurance companies, but also large multinational citrus interest and as well as avocado interest and even real estate development and water interest. So there's been there's been a whole spectrum of interest and it's all been inbound. So now the next the next phase in the prop.

Harold S. Edwards: But also, just related to what we just heard, the 2,000 acres of lemons going to 1,000 and avocados going to two. So did I hear that right? Your five-year operating profit could be significantly higher. You heard correctly, yes, we believe that that will significantly enhance the growth of EBITDA just given the per-acre profitability of avocados versus lemons currently. And as we look into our crystal balls of the future, we believe that that will be very beneficial as well. But maybe to take a step back on the first part of your question, Raj, which was where we are with the process of exploring strategic alternatives? So the process initially has begun with a robust, very deep dive into valuations of the assets of the company.

This will be to take inventory of these valuations and then look look around the room and and the board will agree to take action to decide to move forward with the next part of the process, which would be the outbound exploration, where we'd be working closely with our legal advisers and our bankers.

To reach out to potential potentially interested parties some of which you have made it may have expressed interest on an inbound basis, but many of which haven't expressed any interest, but we think there might be part of our story that they might be interested in once that whole process is complete we will see what.

What sort of opportunities that presented themselves at which point then the board will make.

The decision to move forward with the process to explore the potential sale of some or all of the company or to continue down the path of the strategic plan that it has in place right. Now so it's exciting time a lot. We're all really busy in a lot of things going on but.

Harold S. Edwards: So our land assets and our water assets, and really understanding sort of the highest and best use and a fair market value of the existing assets that the company has, giving ourselves and our directors a better understanding of directionally what the asset value of the company might look like, and we're nearing completion of that. All the while, we've been very pleased to have been receiving significant levels of inbound interest from various types of groups that would be interested in some or all of the assets. You've had strategic interest, you've had financial interest, you've had interest from sovereign wealth, pension funds, insurance companies, but also large multinational citrus interests, as well as avocado interests, and even real estate development and water interests.

The possibilities and the potential looks looks pretty exciting for us at this point.

That's great too along the theme.

Along the same vein youre reallocating the.

Lemon acreage into avocado acreage can you comment on where do you see.

Obviously.

The California avocado premium.

Or do you see that pricing and where do you see a Mexican.

Lightning.

You know in the next year or two years.

Given what's going on.

Yeah, I wish I wish I had.

I had that crystal ball, but I will tell you. This that we believe that there is a wonderful niche that Ventura County in California can serve in the market window of avocado availability from May to July when the market is not.

Harold S. Edwards: So there's been a whole spectrum of interest, and it's all been inbound. So now the next phase in the process will be to take inventory of these valuations and then look around the room, and the board will agree to, or they'll take action to decide to move forward with the next part of the process, which would be the outbound exploration, where we'd be working closely with our legal advisors and our bankers to reach out to potentially interested parties, some of which may have expressed interest on an inbound basis, but many of which have Once that whole process is complete, we'll see what sort of opportunities have presented themselves, at which point the board will make the decision to move forward with the process to explore the potential sale of some or all of the company or to continue down the path of the strategic plan that it has in place right now. So it's an exciting time. We're all really busy, and there are a lot of things going on, but the possibilities look, and the potential looks pretty exciting for us at this point. That's, that's great.

As crowded with Mexican supplies or Peruvian supplies and because we're within 600 miles of are a very very strong customer base. We believe we have a significant logistical advantage to the market, but also can deliver very fresh fruit that.

That our customer base wants and and we believe that there'll be a nice little premium that can be enjoyed.

During that timeframe. So what I think is going to happen is that the seasonal window for harvesting and selling is going to truncate from may to July but the values for those.

California, Avocados, we believe will be significant and I think sustainable because there won't be the strong pressure from the imported fruit.

Come in and make the market that much more crowded so that's our that's our thesis for the for the transition and we believe it's sustainable.

Harold S. Edwards: So along the same vein, you're reallocating the lemon acreage into avocado acreage. Can you comment on where you see, you know, obviously, there is the California Avocado Premium. Where do you see that pricing? And where do you see Mexicans?

California as an industry is only going to produce 208 million pounds. This year and just for context. The U S. It's going to consume over 3 billion pounds. So it's it's a it's a real niche it's a small niche, but we believe it's a sustainably very profitable niche and one that we believe we will have a great opportunity.

Harold S. Edwards: Pricing, you know, in the next year, two years, given what's going on. Yeah, I wish I wish I had that crystal ball, but I will tell you this: we believe that there is a wonderful niche that Ventura County and California can serve in the market window of avocado availability from May to July, when the market is not as crowded with Mexican supplies or Peruvian supplies. And and because we're within 600 miles of our very, very strong customer base, we believe we have a significant logistical advantage to the market, but also can deliver very fresh fruit that our customer base wants. And we believe that there'll be a nice little premium that can be enjoyed during that timeframe.

For our shareholders shareholders to participate in and right now we've seen avocado prices. There are about $1 50, a pound up from about $1 20, just since post Super Bowl so typically.

The U S consumes about 50 to 60 million pounds, a week when you see a drop below that is when you start to see those prices creep up and coming into April may we think we might have that opportunity.

Great. Thank you for answering my questions and I'll take it offline. Thank you.

It's Raj.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Okay.

Yes.

Yes.

It appears that there are no further questions at this time I would now like to turn the floor back over to Howard Edwards for closing comments.

Harold S. Edwards: So what I think is going to happen is that the seasonal window for harvesting and selling is going to truncate from May to July. But the values for those of California avocados will be significant and, I think sustainable because there won't be the strong pressure from the imported fruit to really come in and make the market that much more crowded. So that's our thesis for the transition, and we believe it's sustainable. California is an industry that is only going to produce 208 million pounds this year. And just for context, the US is going to consume over 3 billion pounds. So it's a it's a real niche. It's a small niche, but we believe it's a sustainably very profitable niche and one that we will have a great opportunity for our shareholders shareholders to participate in. And right now, we've seen avocado prices there are about $1.50 a pound, up from about $1.20 just since after the Super Bowl. Typically, the US consumes about 50 to 60 million pounds of meat a week.

Very much I'd like to thank you all for your questions and your interest in leaving Ara have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Yeah.

Yeah.

Yes.

Okay.

Yes.

Harold S. Edwards: When you see a drop below that, that's when you start to see those prices creep up, and coming into April and May, we think we might have that opportunity. Great. Thank you for answering my questions. I'll take it offline. Thank you. Big trash.

Okay.

Okay.

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Operator: As a reminder, if you would like to ask a question, just click on the star. It appears that there are no further questions. I would now like to turn the floor back over to Howard. Thank you very much. I'd like to thank you all for your questions and your interest in Limoneira. Have a great day! This concludes today's call. You may disconnect your line, www.globalonenessproject.org www.larryweaver.com www.globalonenessproject.org www.larryweaver.com,,,,,,,,,,,,,

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