Q2 2024 Alico Inc Earnings Call
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Operator: Good morning, welcome to the conference center. Which conference are you looking to attend? Thank you, Alico.
Speaker Change: Good morning, welcome to the Conference Center, which conference that you're looking to attend.
Participant: Inc., please.
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Participant: This is for Rachel Smith, and the company name is...
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Speaker Change: And the company name is <unk>.
Speaker Change: Era.
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Speaker Change: Alright enjoy your call. The conference is now being recorded already that comes with active land management.
Operator: Alright, enjoy your call. The conference is now being recorded.
John E. Kiernan: That comes with active land management. Last year, after evaluating the direct hit it took from Hurricane Ian in 2022, we made a difficult decision to transition our TRB Grove in Charlotte County from a proprietary citrus operation to a mix of third-party mining, vegetable, and fruit crop leasing activities. This year, we evaluated another struggling grove and have decided to also move beyond citrus there to realize its highest and best use.
Speaker Change: Last year after evaluating the direct hit it took from Hurricane Ian in 2022, we made a difficult decision to transition our TRP Grove in Charlotte County.
Speaker Change: From a proprietary citrus operation to a mix of third party mining vegetable and fruit crop leasing activities.
Speaker Change: This year, we evaluated another struggling growth and have decided to also move beyond citrus there to realize its highest and best use.
John E. Kiernan: In 2022, we entered into a purchase option agreement with a third party, E.R. Janna Industries, for the sale of approximately 899 acres of land at a price of approximately $11,500 per acre on our two-by-six grove located in Hendry County, Florida, which expires in January of 2025. It is expected that this option agreement will be exercised by the end of December 2024. It is understood that IANA plans to conduct sand mining operations on the land once regulatory approval has been obtained.
Speaker Change: 2022, we entered into a purchase option agreement with a third party E. R. Jonna industries for the sale of approximately 899 acres of land at a price of approximately $11500 per acre on our two by six Grove weight, located Hendry County, Florida.
John E. Kiernan: And Alico will have the right to lease back most of these acres, including 340 net citrus acres for de minimis lease payments. In April 2024, we entered into an agreement to sell another approximately 780 acres of land at the 2x6 Grove to a third party for approximately $7 million or $9,000 per acre. And that includes an option to purchase another 680 acres within 10 months from the closing date of the sale at the same price per acre.
Speaker Change: Yeah.
Speaker Change: Which expires in January of 2025.
Speaker Change: It is expected that this option agreement will be exercised by the end of December 2024.
Speaker Change: It is understood that yamana plans to conduct sand mining operations on the land once regulatory approval has been obtained.
Speaker Change: And we go we will have the right to lease back most of these acres, including 340 net citrus acres for de Minimis vis payments.
Speaker Change: In April 2024, we entered into an agreement to sell another approximately 780 acres of land at the two by six grow to a third party for approximately $7 million or $9000 per acre and.
Speaker Change: And that includes an option to purchase another 680 acres within 10 months from the closing date of the sale at the same price per acre.
John E. Kiernan: But Alico will continue to grow citrus on those 680 acres for the next harvest season. This new transaction, which is expected to close by the end of July 2024, illustrates our strategy of monetizing underperforming citrus groves on a case by case basis to redeploy capital to generate better returns for our shareholders. With that, I will turn the call over to Brad to discuss our more detailed financial results.
Speaker Change: But are we go Wow will continue to grow citrus on those 680 680 acres for the next harvest season.
Speaker Change: This new transaction, which is expected to close by the end of July 2024 illustrates our strategy of monetizing underperforming citrus grows on a case by case basis to redeploy capital to generate better returns for our shareholders.
Speaker Change: With that I will turn the call over to Brad to discuss our more detailed financial results.
Bradley Heine: 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, but the majority of our profit and cash flow is also recognized in the second and third quarters, the quarterly results for the second quarter are not indicative of our full-year results. The 14.9% decrease in revenue for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily due to a combination of the timing of the Valencia harvest, which started later than in the prior year to allow the fruit more time to mature, and an acceleration of the harvest in the prior year as a result of Hurricane Ian to try to mitigate the fruit drop.
Brad: Thank you John and good morning, everyone as their 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 quarterly results for the second quarter are not indicative of our full year results.
Brad: The 14, 9% decrease in revenue for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to a combination of the timing of the Valencia harvests, which started later than in the prior year to allow the fruit more time to mature and an acceleration of the harvest in the prior year as.
Brad: As a result of hurricane and try to mitigate the fruit drops partially offset by an increase in growth management services revenue as a result of Citrus Grove management agreement, we entered into on October 32023, with an unaffiliated group of third parties to provide citrus Grove care, taking services for approximately 30.
Bradley Heine: Partially offset by an increase in Grove Management Services revenue as a result of the Citrus Grove Management Agreement we entered into on October 30, 2023, with an unaffiliated group of third parties to provide Citrus Grove caretaking services for approximately 3,300 acres owned by such parties.
Brad: 300 acres owned by such parties.
Brad: 0.7% increase in revenue for the six months ended March 31, 2024 as compared to the six months ended March 31, 2023 was primarily due to an increase in the price per pound solids for both the early and mid season and Valencia crops. As a result of more favorable pricing in one of our contracts with Tropicana and <unk>.
Bradley Heine: The 0.7% increase in revenue for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023, was primarily due to an increase in the price per pound solids for both the early and mid season and Valencia crops, as a result of more favorable pricing in one of our contracts with Tropicana, and an increase in Grove Management Services revenue as a result of the new Grove Owners Agreement, partially offset by a decrease in pound solids for the six months ended March 31, 2024, as compared to the prior year period. The 31.3% and 53.6% increase in operating expenses for the three and six months ended March 31, 2024, as compared to the three and six months ended March 31, 2023, was primarily driven by insurance proceeds, of $4.8 million for crop insurance claims received during the three months ended March 31, 2023, which was recorded as a reduction of operating expenses, and a combination of the inventory adjustments recorded at September 30, 2022 on the ending inventory balance as a result of the impact of Hurricane Ian, which effectively lowered the inventory to be expensed in fiscal year 2023 and the $4.8 million of proceeds from crop insurance claims received in the prior year period respectively.
Brad: Kris and growth management services revenue as a result of the new Grove owners agreement, partially offset by a decrease in pound solids for the six months ended March 31, 2024 as compared to the prior year period.
Brad: The 31, 3% and 53, 6% increase in operating expenses for the three and six months ended March 31, 2024 as compared to the three and six months ended March 31, 2023 was primarily driven by insurance proceeds.
Brad: $4 8 million for crop insurance claims received during the three months ended March 31, 2023, which was recorded as a reduction of operating expenses.
Brad: And a combination of the inventory adjustments recorded at September 32022 on the ending inventory balance as a result of the impact of hurricane is which effectively lowered the inventory to be expensed in fiscal year 2023, and the $4 8 million of proceeds from crop insurance claims received in the prior year period, respectively.
Bradley Heine: General and administrative expenses increased <unk> 4 million for the six months ended March 31, 2024 compared to the six months ended March 31, 2023, primarily due to increased employee costs.
Bradley Heine: General and administrative expenses increased $0.4 million for the six months ended March 31, 2024 compared to the six months ended March 31, 2023, primarily due to increased employee costs. Other income expense net for the six months ended March 31, 2024, increased $72.6 million compared to the six months ended March 31, 2023, primarily due to a gain of $74.9 million on the sale of 17,229 acres of the Alico Ranch to the state of Florida during the six months ended March 31, 2024.
Bradley Heine: Other income expense net for the six months ended March 31, 2024 increased $72 6 million compared to the six months ended March 31, 2023, primarily due to a gain of $74 9 million on the sale of 17229 acres the illegal ranch to the state of Florida. During the six months ended March 31.
Bradley Heine: 2024.
Bradley Heine: By comparison, for the six months ended March 31, 2023, we recognized gains on the sale of property and equipment of approximately $4.8 million relating to the sale of 888 acres in the aggregate from the Alico Ranch to several third parties. For the second fiscal quarter ended March 31, 2024, we reported a net loss attributable to Alico Commons shareholders of $15.8 million, compared to a net loss of $7.8 million for the second fiscal quarter ended March 31, 2023, driven by the timing of revenue in the current quarter and insurance proceeds of $4.8 million for crop claims received during the three months ended March 31, 2023.
Bradley Heine: By comparison for the six months ended March 31, 2023, we recognized gains on the sale of property and equipment of approximately $4 8 million relating to the sale of 888 acres in the aggregate from the elite Gill ranch to several third parties.
Bradley Heine: For the second fiscal quarter ended March 31, 2024, we reported a net loss attributable to leeco common share shareholders of $15 8 million compared to a net loss of $7 8 million for the second fiscal quarter ended March 31, 2023, driven by the timing of revenue in the current quarter and insurance.
Bradley Heine: Proceeds of $4 8 million for crop claims received during the three months ended March 31 2023.
Bradley Heine: For the six months ended March 31, 2024, we reported net income attributable to <unk> common stockholders of $27 1 million compared to a loss attributed to <unk> common stockholders of $10 9 million driven by the gain of $74 9 million on the sale of the remaining 17229 acres of.
Bradley Heine: For the six months ended March 31, 2024, we reported net income attributed to Alico common stockholders of $27.1 million compared to a loss attributed to Alico common stockholders of $10.9 million, driven by the gain of $74.9 million on the sale of the remaining 17,229 acres of the Alico ranch on December 21, 2023, partially offset by the inventory readjustments recorded at September 30, 2022 on the ending inventory balance as a result of A $12.2 million increase in the tax provision for the six months ended March 31, 2024, and $4.8 million in proceeds from crop insurance claims recognized in the prior year. I will now pass the call back to John.
Bradley Heine: <unk> Ranch on December 21, 2023, partially offset by the inventory readjustments recorded at September 32022 on the ending inventory balance as a result of the impact of Hurricane Dorian, which effectively lowered the inventory to be expense in fiscal year 2023, a $12 2 million increase in the tax <unk>.
Bradley Heine: <unk> for the six months ended March 31, 2024, and $4 8 million of proceeds from crop insurance claims recognized in the prior year I will now pass the call back to John.
John: Thank you Barry.
Bradley Heine: Although the harvest season was disappointing, which we believe is a result of the continuing recovery from Hurricane Ian.
John E. Kiernan: Although the harvest season was disappointing, which we believe is a result of the continuing recovery from Hurricane Ian, Alico has a strong balance sheet and is continuing to make investments in its groves, which we believe will help us turn the corner next season, as we will be another year removed from the hurricane. WECO has over 125 years of experience as a leader in Florida agriculture and land management.
John E. Kiernan: <unk> has a strong balance sheet and it's continuing to make investments in its grows which we believe will help us turn the corner next season.
John E. Kiernan: As well as we will be another year removed from the hurricane.
John E. Kiernan: Rico 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. 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 we believe that these treatments, 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.
John E. Kiernan: Since 2017, we planted over 2.2 million new trees.
John E. Kiernan: We remain committed to the Florida citrus industry for the long term.
John E. Kiernan: We plan to apply the OTC therapy to substantially all of our producing trees in fiscal year 2024, and we believe that these treatments combined with the recent tree plantings that are maturing and consistent caretaking practices should support a significant increase in fruit harvest the next season.
John E. Kiernan: In addition.
John E. Kiernan: <unk> is continuing to evaluate all of our properties to determine their highest and best use to create long term value for our shareholders.
John E. Kiernan: 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 will now open the line to questions from industry analysts. Jenny
John E. Kiernan: 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.
John E. Kiernan: And with that we will now open the line up to questions from industry analysts Jenny.
John E. Kiernan: Yeah.
Operator: Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star followed by the 1 on your touchtone phone. You will hear a three-tone prompt acknowledging your request. All questions will be taken in the order received, so if you wish to cancel your request, please press the star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any key. Your question comes from the line of Jerry Sweeney from Ross Capital. Please ask your question.
Jenny: Thank you ladies and gentlemen, we will now begin the question and answer session and you have a question.
Gerard J. Sweeney: The star followed by the one on you touched on Cowen you will hear three telecom technology northwest questions will be taken in the order received should you wish to cancel your request. Please press the star followed by the tail. If you are using a speakerphone. Please Mr handset before pressing any teeth.
Gerard J. Sweeney: Your question comes from the line of Gerry Sweeney from Roth Capital. Please ask your question.
Gerard J. Sweeney: Hey guys, thanks for taking my call. I apologize for sort of multi-tasking; I have another call going on in the background, so if I asked a question that was... already sort of covered in remarks. I apologize.
Gerard J. Sweeney: Hey, guys. Thanks for taking my call.
Gerard J. Sweeney: I apologize sort of multitasking, you have another call going on in the background. So.
Gerard J. Sweeney: If I ask a question that was.
John E. Kiernan: But John, you touched briefly on the OTC side. I just want to get a little bit better, maybe, understanding of the impact on the trees. Did it help the fruit? Did it improve the quality of the fruit? And generally speaking, my high-level understanding is improvement can continue not just in year one but in years two and three. So if you could maybe give a little bit more commentary on that, that would be great. Thank you, Jerry. Thanks. That's a great question.
Gerard J. Sweeney: Already covered and in robotics, I apologize, but John you touched briefly on the OTC side.
John E. Kiernan: I wanted to get a lot.
John E. Kiernan: A bit better maybe understanding of the impact on the trees.
John E. Kiernan: Did it help to fruit did it help the quality of fruit and generally speaking.
John E. Kiernan: A high level understanding is.
John E. Kiernan: Improvement continue not just in year, one but year.
John E. Kiernan: Year to year year, three so if you could maybe give a little bit more comp commentary on that that would be great.
John E. Kiernan: Obviously, OTC is an important part of our strategy going forward for citrus operations. This was the first year we harvested fruit that had been treated with OTC, which we applied beginning in January 2023. We did see a material and substantial improvement in production against control groups in each of our groves. So we got more fruit, which was great. It certainly met our expectations.
Speaker Change: Thank you Jerry Thanks, that's a great question.
John E. Kiernan: Obviously OTC is an important part of our strategy going forward for our citrus operations.
John E. Kiernan: This was the first year, we harvested fruit that had been treated with OTC, which we applied in beginning of January 2023.
John E. Kiernan:
John E. Kiernan: We did see against control groups in each of our growth.
John E. Kiernan: Material and substantial improvement in production, so we got more fruit.
John E. Kiernan: Which was was great and certainly met our expectations. It was just coming from a low base.
John E. Kiernan: It was just coming from a low base, so it did not look spectacular this year, but we were encouraged by that. We did not see the first year improvements in quality, so we didn't get a lot more juice because of that, but we did actually, you know, recognize when we started this therapy that it was probably going to be a multi-year sequential improvement program. So we've already started basically doing the trunk injections.
John E. Kiernan: So it did not look spectacular this year, but we were encouraged by that we did not see this first year improvements in quality.
John E. Kiernan: So we can get a lot more juice because of that.
John E. Kiernan: But we did actually.
John E. Kiernan: Recognize when we started this therapy that it was going to be probably a multiyear sequential improvement program. So we've already started.
John E. Kiernan: <unk> doing the trunk injections.
John E. Kiernan: And again, I think we said nearly all of our producing trees for the next harvest season are underway with this OTC treatment. So we're even more optimistic that the second year we should get additional benefits and results from that.
John E. Kiernan: And again I think we said nearly all of our producing trees.
John E. Kiernan: For the next harvest season are underway with this this OTC treatment. So we're even more optimistic that the second year, we should get additional benefits and results from that.
Speaker Change: Got it.
John E. Kiernan: And.
John E. Kiernan: And, I believe you're working on a renewal for your citrus program with one of your off takers. Could you provide an update on that front, if you're available to do so? Yeah, so we have sold nearly all of our fruit in the recent years to Tropicana under multi-year contracts. We've got a couple significant contracts that are expiring now that the season, the harvest season has concluded. We're in the process of renewing negotiations.
John E. Kiernan: I believe youre working on.
John E. Kiernan: The renewal for years.
John E. Kiernan: Interest program with one of your.
John E. Kiernan: Off takers could you provide an update on that box.
Speaker Change: If youre available too.
John E. Kiernan: Yeah. So we have sold over the most recent years nearly all of our fruit to Tropicana under multiyear contracts. We've got a couple of significant contracts that are expiring now that the season. The harvest season has concluded.
John E. Kiernan: We're in the process of renewing.
John E. Kiernan: Negotiations.
John E. Kiernan: We've approached all of the processors in the state, and we hope we are going to get a multi-year agreement that is at or better than current market prices today. So we think that should be higher prices for us over the next several years on those new contracts. Obviously, we think that will lift the average price that we would sell against the contracts that we are still going to have in place next year as well.
John E. Kiernan: We've approached all of the processes and the state and we hopefully are going to get a multiyear agreement that is at or better than current market pricing. Today. So we think that should be higher prices for us over the next several years on those new contracts, obviously, we think that will with the.
John E. Kiernan: The average price that we would sell against the contracts that we are still going to have in place next year as well.
John E. Kiernan: So we are cautiously optimistic that we should close those very soon. We just don't have anything to report at this time that's finalized and formal yet. And then, final question, on the debt side, I think you've been targeting $75 to $80 million of net debt by year-end. I think you're sitting around in that range right now. Does that sort of change your perspective on the balance sheet, at least in the near term? To offset that, obviously, you do have some real estate sales that are coming up, but can you comment on that?
John E. Kiernan: So we are cautiously optimistic that we should close those very soon.
John E. Kiernan: We just don't have anything to report at this time, that's finalized and formal yet.
John E. Kiernan: Got you and then final question on the debt side I think you had been targeting.
John E. Kiernan: $5 million to $80 million of net debt by year end I think of sitting around.
John E. Kiernan: In that range right now.
John E. Kiernan: Does that sort of change your perspective on the balance sheet at least in the near term.
John E. Kiernan: All setting that obviously you do have some real estate sales that are coming up but can you comment on that.
John E. Kiernan: Hey, Jerry this is Brad thanks, yes.
Bradley Heine: Hey, Jerry, this is Brad. Thanks. So on that front, first, I'd want to stress that, you know, we do not see any liquidity concerns at all coming from any of these transactions. As we noted, we have over $95 million in lines of credit available to us and the pending land sales. That being said, as a result of the impairments, it is difficult for us to forecast exactly what our net debt position will be, and we would not expect it to be in that same range. Unfortunately, we just can't provide updated guidance as we still need to see how everything shakes out. I appreciate it, guys. Thanks.
Bradley Heine: Yes, so on that front first I'd want to stress that we do not see any liquidity concerns there at all coming from any of these transactions. As we noted we have over 95 about $95 million in lines of credits available to us and the pending land sales.
Bradley Heine: That being said as a result of the impairment it is difficult for us to forecast exactly what our net debt position will be and we would not expect it to be in that same range. Unfortunately, we just can't provide an updated guidance as we need to see how everything shakes out still.
Gerard J. Sweeney: I appreciate it guys, thanks, and I apologize if I was a little disorganized here, but I appreciate it. Jory, thanks for your support.
Speaker Change: Gotcha, Alright, I appreciate it guys thanks and.
Gerard J. Sweeney: Apologize if I was a little disorganized here, but I appreciate it.
Gerard J. Sweeney: Jerry Thanks for your support.
Mr. Kannan: Thank you we have reached the end of today's question and answer session I would like to turn the call back over to Mr. Kannan for closing remarks.
Operator: Thank you. We have reached the end of today's question and answer session. I would like to turn the call back over to Mr. Kiernan for closing remarks. Thank you, Jenny, and thank you, everyone, for joining our call.
Kiernan: Thank you Jenny and thank you everyone for joining our call today and also for your continued support of a week ago. We.
John E. Kiernan: Thank you, Jenny, and thank you everyone for joining our call today and also for your continued support of Alico. We look forward to speaking with you about our third quarter results in August.
Kiernan: We look forward to speaking with you about our third quarter results in August.
John E. Kiernan: Yeah.
John E. Kiernan: Yes.
Speaker Change: Thank you. This concludes today's conference you may disconnect your lines at this time.
Operator: 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.
Operator: Thank you for your participation and have a great day.
Operator: Okay.
Operator: Okay.