Q3 2024 Alico Inc Earnings Call

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Speaker Change: Welcome to Alico's third quarter 2024 conference call. At this time all participants are in a listen-only mode. As a reminder, today's conference is being recorded.

Speaker Change: Last night, the company issued a press release announcing its results for the third quarter ended June 30, 2024. If you do not have a chance to review the release, it is available on the Investor Relations website.

Speaker Change: the website at www.alicoinc.com. This call is being webcast in a replay

Speaker Change: will be available on Alico's website as well. Before we begin, we would like to remind everyone that prepared remarks

Speaker Change: Today contain four looking statements. Such statements are subject to risk, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied in these statements. Important factors that could cause or contribute to such difference.

Speaker Change: Such differences include risk details in companies' quarterly reports on Form 10-Q , annual results on Form 10-K , current reports on Form 8-K, and those amendments thereto.

Speaker Change: files with the SEC and those mentioned in the earnings release.

Speaker Change: The company undertakes no obligation to subsequently update or revise the four looking statements made on today's call except as required by law.

Speaker Change: During the call, the company may also discuss non-GAAP financial measures, including EBITDA, adjusted EBITDA, and net debt.

Speaker Change: For more details on the measures, please refer to the company's press release issued yesterday. With that, I would like to turn the call over to the company's President and CEO , Mr. John Kiernan.

John Kiernan: Thank you, Brittany. And thank you, everyone, for joining us for Alico's third quarter 2024 earnings call this morning.

Speaker Change: We've managed our costs aggressively over the past year, but the lower revenue base was out of our control for the second year in a row.

Speaker Change: Alico received $1.8 million of grant money from the Florida Citrus Research and Field Trial Foundation in January 2024.

Speaker Change: We remain cautiously optimistic that being another year removed from the hurricane, along with a combination of a second round of injections,

Speaker Change: This change will enable us to apply the OTC treatment in calendar year 2025 to the trees that we started treating back in 2023, which will be a relief to Alico and the Florida citrus industry overall.

Speaker Change: Third, as Alico's production recovers next season, we will sell our fruit at higher prices. As we previously announced, the company and Tropicana have extended our relationship for another three years.

Aleco: With our new contract to supply Tropicana with fruit, Alico will realize significantly higher prices per pound solid, which better reflect current market pricing.

Aleco: with price increases in the second and third years. This new contract covers production of approximately 65 percent of our acres. The remainder of our acres are covered by a contract with Tropicana which expires at the end of the 2024-25 season but which also has higher pricing than the expiring contracts.

Aleco: As the Atlantic hurricane season becomes more active over the next few months, Alico is prepared and focused on managing its world-class citrus operations just as it has for more than 125 years.

Aleco: One of our greatest competitive advantages as we face potential weather uncertainties is our balance sheet liquidity.

Aleco: Our relationships with our vendors remain strong.

Speaker Change: We have approximately $94.8 million of undrawn capacity under a combination of a revolving line of credit, which matures in November of 2029.

Speaker Change: and a working capital lineup credit, which matures in November of 2025, to provide ample liquidity as our trees continue to recover from Hurricane Ian.

Speaker Change: Our $70 million of term debt does not amortize and is not due for repayment until 2029.

Speaker Change: We have access, we have steady access to workers and contractors and our employee base is stable.

Speaker Change: Outside of our Citrus operations, Alico continues to invest resources as it evaluates the long-term highest and best use of our real estate assets.

Unknown Speaker: of our real estate asset. George will continue to serve Alico as a director of the company.

Speaker Change: To be clear, Alico will continue to conduct our regular citrus operations at nearly all of our groves for years to come.

Speaker Change: We will continue evaluating all of our properties to explore creative solutions to enhance and extract value.

Speaker Change: We seek to provide our investors with the benefits and stability of a conventional agricultural investment.

Speaker Change: with the optionality that comes with active land management.

Speaker Change: 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 proprietary citrus operations to a mix of third-party mining, vegetable and fruit crop leasing activities.

Speaker Change: This year we evaluated another grove and it decided to also move beyond citrus there to realize its highest and best use.

Speaker Change: with a third party, E.R. Yonah Industries, for the sale of approximately 899 acres of land at a price of approximately $11,500 per acre on our 2x6 grove located in Henry County, 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: 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, and Alico will continue to grow citrus on those 680 acres for the next harvest season.

Speaker Change: This previously announced transaction, which closed at the end of June 2024, illustrates our strategy of monetizing citrus groves on a case-by-case basis to redeploy capital to generate better returns for our shareholders.

Speaker Change: In addition to our citrus operations, Alico has been pursuing a diversified real estate strategy since early 2022, which began with a comprehensive analysis of our land holdings portfolio. That process encouraged us to begin the entitlement process for a 4,500 acre grove in Collier County.

Speaker Change: In May, we recruited Mitch Hutchcraft to lead our real estate activities to accelerate the entitlement activities at Corkscrew, as well as develop a comprehensive analysis of highest and best use for remaining properties and create a roadmap to execute these strategic initiatives.

Speaker Change: I'm also pleased to announce that as part of our succession planning process

Speaker Change: Current Board Member Adam Putnam has been selected to be appointed Chairman of the Board of Alico following our next Annual General Meeting, which will be held in 2025.

Speaker Change: Adam will succeed George Brokaw, who has served as chairman since February 2022, and as a director since November 2013. George will continue to serve Alico as a director of the company.

Speaker Change: Adam has served as the Chief Executive Officer of Ducks Unlimited, a U.S. not-for-profit organization dedicated to conservation of wetlands and associated upwind habitats for waterfowl, other wildlife, and people since April of 2019.

Adam: Prior to joining Ducks Unlimited, he served as Florida's Commissioner of Agriculture from 2011 to 2019, where he focused on fostering the growth of Florida agriculture and protecting the state's water supply, among other issues.

Speaker Change: With his public policy and public service experience, Adam brings to the board expertise in understanding and navigating physical and transition risks and opportunities of climate change.

Speaker Change: together with his knowledge of sustainability, water supply, and agricultural operations within Florida's regulatory environment.

Speaker Change: However, due to the timing of the current year harvest, more of the citrus crop was harvested in the first and second quarters of this fiscal year. As such, the quarterly results for the third quarter are not indicative of our full year results.

Speaker Change: The early and mid-season and Valencia harvests are complete, and for the nine months ended June 30, 2024, pound solids produced were up 17% and 7.6%

Speaker Change: compared to the prior year respectively, while pound solids per box were down 4% and 3.1% respectively.

Speaker Change: Additionally, we realized an increase in the price per pound solids of 3.8% and 4.1%, respectively, in the nine months ended June 30, 2024, compared to the same period in the prior fiscal year, as a result of more favorable pricing in one of our contracts with Tropicana.

Speaker Change: Our average realized blended price per pound solid for the 9 months into June 30, 2024 increased 3.9% as compared to the same period in the prior year.

Speaker Change: As a result of our signing of the new contract with Tropicana, the company expects that our prices per pound solid will increase more significantly next year.

Speaker Change: General administrative expenses decreased $0.1 million for the nine months ended June 30, 2024, compared to the nine months ended June 30, 2023, primarily due to lower depreciation, legal, and insurance costs, partially offset by increased employee costs.

Speaker Change: Other expenses net for the nine months ended June 30, 2024 increased $75.2 million compared to the nine months ended June 30, 2023.

Speaker Change: primarily due to the sale of 17,229 acres of Alico Ranch to the state of Florida and the sale of 798 acres of citrus land during the nine months ended June 30, 2024.

Speaker Change: By comparison, for the nine months ended June 30, 2023, we recognized gains on sales of property and equipment approximately $7.4 million related to the sale of 1,436 acres in the aggregate from the Alico Ranch to several third parties.

Speaker Change: For the three and nine months ended June 30, 2024, the company reported a net loss attributed.

Speaker Change: attributable to Alico Common Stockholders of $2 million and Net Income attributable to Alico Common Stockholders of $25.1 million, respectively.

Speaker Change: compared to net income attributable to Alico common stockholders of $11.8 million and $0.9 million for the three and nine months ended June 30, 2023, respectively.

Speaker Change: The decrease in our net income attributable to Alico common stockholders for the three months ended June 30, 2024 was driven by hurricane...

Speaker Change: and insurance proceeds of $17.5 million received during the three months ended June 30, 2023.

Speaker Change: which were recorded as a reduction of operating expenses. Partially offsetting this is a gain of $4.4 million from the sale of citrus land in the three months ended June 30, 2024.

Speaker Change: The increase in our net income attributable to Alico common stockholders for the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023 was driven by a gain of $74.9 million on the sale of the remaining 17,229 acres of the Alico ranch on December 21, 2023 and a gain of $4.4 million from the sale of citrus land on June 28, 2024, partially offset by 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.

Speaker Change: as well as $21.4 million of insurance proceeds and a $9.4 million increase in the tax provision for the nine months ended June 30, 2024.

Speaker Change: For the three and nine months ended June 30, 2024, the company had a loss of $0.27 and earnings of $3.29 per diluted common share, respectively, compared to earnings of $1.56 and $0.12 per diluted common share for the three and nine months ended June 30, 2023, respectively.

Speaker Change: I will now pass the call back to John . Thanks, Brad.

Speaker Change: Although the harvesting 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 grove.

John Kiernan: which groves, which we believe will help us grow next season as we will be another year removed from the hurricane.

WECO: WECO has over 125 years of experience as a weeder in Florida agriculture and land management.

Speaker Change: Since 2017, we have planted over 2.2 million new trees.

Speaker Change: We remain committed to the Florida citrus industry for the long term.

Speaker Change: 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.

Speaker Change: We strive to provide our investors with the benefits and stability of a conventional agricultural investment with the enhanced optionality that comes through active land management.

Speaker Change: And with that, we'll now open the line up to questions from industry analysts. Brittany?

Speaker Change: Thank you. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1 if you would like to ask a question. And we will pause for just a moment to allow questions to queue.

Speaker Change: And once again that is star and one and we'll pause for just an additional moment.

Speaker Change: And it appears we have no questions on the line today. I will turn the program back over to Mr. Kiernan.

Mr. Kiernan: I just want to say thank you to everyone for joining our call today and for your continued support of Alico.

Mr. Kiernan: We look forward to speaking with you about our year-end results in November .

Mr. Kiernan: Operator.

Speaker Change: This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation. Have a great day.

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