Q1 2025 Limoneira Co Earnings Call
Speaker Change: Greetings, welcome to the Limoneira, first quarter of 2025, financial results conference [inaudible]
Speaker Change: At this time, all participants are on the listen on the note. A brief question and answer session will follow the formal presentation.
Speaker Change: Isn't that my pleasure to introduce your host, John Mills with ICO.
Thank you sir, you may begin [inaudible]
Speaker Change: Good afternoon, everyone, and thank you for joining us for Limoneira's first quarter fiscal year 2025 conference call. On the call today are Harold Edwards, President and Chief Executive Officer, and Mark Palamountain, Executive Vice President and Chief Financial
Speaker Change: By now, everyone should have access to the first quarter fiscal year 2025 earnings release which went out today at approximately 4 p.m. eastern time.
Speaker Change: 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
Speaker Change: 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.
Speaker Change: We've provided as much detail as possible on any items that are discussed on adjusted basis also within the company's earnings release and in today's prepared remarks. We include adjusted EBITDA and adjusted diluted earnings per share, which are non-GAAP financial measures a reconciliation of adjusted EBITDA and adjusted diluted EPS to the most direct.
Speaker Change: The comparable GAAP financial measures are included in the company's press release, which has been posted to its website.
And with that it is my pleasure to turn the call over to company's President and CEO, Mr. Harold Edwards.
Harold Edwards: Thanks, John and good afternoon, everyone.
Harold Edwards: Luminaire is unlocking significant shareholder value through transformative land use conversion and water monetization, while growing long term avocado and citrus returns the.
Harold Edwards: The benefits of optimizing our revenue mix and transitioning to an asset lighter model are evident in our first quarter financial results, where we achieved improved operating expenses efficiency and enhanced bottom line performance. Despite a temporary oversupply lemon market impacting our topline.
Harold Edwards: Our multifaceted approach and asset light business model land and water monetization expansion of avocado production and growing our citrus business through multiple channels, including quick serve restaurants has enhanced our long term operational and financial outlook. This quarters results validate our long standing commitment.
Harold Edwards: Two a balanced portfolio that can withstand temporary market volatility in the lemon market.
Harold Edwards: During the first quarter agribusiness operating loss improved 17% agribusiness costs and expenses decreased 14% and lastly, our total operating loss improved over 30% compared to last year.
Harold Edwards: This quarter, we recorded avocado revenue, which we didn't have in the comparable period last year due to the timing of the harvest.
Harold Edwards: The contribution from avocados, along with our sale of water pumping rights for a gain of $1.5 million, partially offset the year over year decline. We experienced 11 revenues. This resulted in softer overall top line performance.
Despite facing temporary downward pricing pressure in our lemon business, we successfully expanded our market reach by increasing the volume of U S pack fresh lemon cartons through new customer acquisitions and deeper penetration into the quick serve restaurant and foodservice channel looks.
Harold Edwards: Looking ahead, we anticipate our lemon business will strengthen in the second half of the year as we achieve more substantial market share and benefit from the seasonal pricing improvements typically seen during summer months as well as a recent freeze in Spain that is expected to shift imports away from the United States and improved pricing.
Harold Edwards: Overall, we are benefiting from our decision to review strategic alternatives is this is enabling us to improve our overall utilization of our assets to enhance long term shareholder value.
Harold Edwards: We continue to monetize our land and water portfolio through strategic developments entitlements accelerate California, avocado leadership by scaling our position as one of the country's largest avocado growers and expand citrus operations by growing integrated services across growing packing marketing and distribution.
Harold Edwards: To drive higher margins.
Harold Edwards: Since announcing our exploration of strategic alternatives, we are successfully monetized our water rights alongside certain real estate assets and we anticipate further land use conversion and water monetization opportunities to materialize in fiscal year 2025 in.
Harold Edwards: In addition, we are gaining valuable insights from this process that are sharpening our focus on key value drivers for sustainable shareholder value, while enabling us to implement improvements across our entire operation.
Harold Edwards: For example, we've refined our approach to farm management services building on our century long heritage of agricultural innovation, we're positioning ourselves as the industry's premier technology and expertise partner.
Harold Edwards: This allows us to deliver specialized value added services to both farm management companies and independent farms alike.
Harold Edwards: Our recent F. A approval up for drone spray application in California exemplifies our commitment to advanced solutions offering one of many ways, we're bringing precision cost efficiency and sustainability to our partners.
Harold Edwards: This capability is just the latest addition to our suite of cutting edge technologies, agronomic consulting expertise and specialized field services that span, California and Arizona.
Harold Edwards: By positioning ourselves as an essential resource that enhances rather than competes with farm management providers, we anticipate broader market penetration more diversified revenue streams and stronger more collaborative relationships throughout the agricultural ecosystem.
<unk> us for growth in this promising segment.
Harold Edwards: We also made the strategic decision to dramatically expand our avocado production.
Harold Edwards: The Caddo pricing is currently averaging over $2, a pound, which is very strong and looking ahead. We continue to see a strong EBITDA outlook. It is underpinned by plans to expand avocado production by 1000 acres through fiscal year 2027 to capitalize on robust consumer demand trends.
Harold Edwards: Ongoing discussions about potential new tariff legislation could create favorable conditions for our business as our avocados are grown in California.
Should these tariffs be implemented on imported avocados, we anticipate a positive impact on domestic pricing and market dynamics that would benefit our operations for the foreseeable future.
Harold Edwards: Turning to our residential joint venture with the Lewis group of companies for the harvest real estate development project.
This continues to perform very well and we expect to receive $165 million in proceeds over the next six fiscal years.
Harold Edwards: In addition, during the first quarter of fiscal year 2025, we received approval from the federal Emergency management agency or FEMA to revise our flood zone map area effective may 15, 2025 that significantly reduces the number of property owners that are required to pay flood insurance within E stereo.
Harold Edwards: One east area, two and other real estate within the flood zone area West of Santa Paula Creek.
Harold Edwards: With any serial won approximately 1100 existing and future residents will not be subject to mandatory flood insurance due to the revised flood zone Matt.
It has been a time of intensive process as we have been working with various public agencies since 'twenty 'twenty to correct, a FEMA flood zone insurance rate map revising the floods zone map is expected to improve future interest in residential and commercial real estate in these zones as it removes the concern of flooding and the cost of.
Harold Edwards: Tori flood insurance.
Even after the recent nonstrategic asset sales over the past year and a half we continue to manage approximately 10500 acres of land with approximately 21000 acre feet of owned water usage and pumping rights, representing tremendous long term value growth opportunities from our assets.
Harold Edwards: You can see by the year over year improvement in agribusiness operating results during the first quarter, our transition to an asset lighter business model and focus on the best use of our assets to enhance stockholder value is having a positive effect.
We're building significant momentum in fiscal year 2025, as demonstrated by our January announcement of three separate water right monetization transactions with additional water monetization opportunities expected to materialize. Later this year, we anticipate further growth through enhanced sourcing and third party lemons expansion of avocado production.
Harold Edwards: <unk> alongside the continued monetization of our real estate assets are compelling portfolio of agricultural and real estate assets together with our valuable water resources and strong balance sheet create multiple pathways to build lasting shareholder value.
Mark Palamountain: And with that I'll now turn the call over to Mark.
Mark Palamountain: Thank you Harold and good afternoon, everyone 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.
Mark Palamountain: 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 2025, total net revenue was $34 $3 million compared to total net revenue of $39 $7 million in the first quarter of the previous fiscal year <unk>.
<unk> business revenue was $32 $9 million compared to $38 $3 million in the first quarter last year.
Mark Palamountain: Other operations revenue was $1 $5 million in the first quarter of fiscal year 2025, compared to one $4 million in the first quarter last year the.
Mark Palamountain: The decline in agribusiness revenue year over year stems, partially from a temporarily oversupplied lemon market, which has placed downward pressure on prices. We anticipate these challenging market conditions to persist through Q2, but with relief expected in the second half of the year due to the reasons Harold outlined.
Our strategic investments in growing our citrus business through multiple channels are expanding avocado market presence and the monetization of our assets have partially offset these challenges this quarter.
Mark Palamountain: This market pressure validates our ongoing revenue diversification strategy beyond raw commodity lemons positioning us to better withstand cyclical market fluctuations.
Mark Palamountain: Agribusiness revenue for the first quarter of fiscal year 2025 includes $21.2 million in fresh packed lemon sales compared to $23 $9 million during the same period of fiscal year 2024.
Mark Palamountain: Proximately 1.147 million cartons of U S pack fresh lemons were sold during the first quarter of fiscal year 'twenty five at an $18.44 average price per carton compared to 1.137 million cartons sold at a $21.06 average price per carton during the first quarter.
Mark Palamountain: Our fiscal year 'twenty 'twenty four.
Mark Palamountain: Brokered lemons and other lemon sales were $2.2 million and $2 $9 million in the first quarter of fiscal years, 2025, and 2024, respectively.
Mark Palamountain: The company recognized $162000 of avocado revenue in the first quarter of fiscal year 'twenty five compared to no avocado revenue in the same period of fiscal year 2024, due to the timing of harvest.
Mark Palamountain: Approximately 73000 pounds of avocados were sold in aggregate during the first quarter of fiscal year 2025 at an impressive $2 and 25 average price per pound.
The company recognized $1.6 million of Orange revenues in the first quarter of fiscal year 2025, compared to $1 $1 million in the first quarter of fiscal year 'twenty 'twenty four.
Mark Palamountain: Approximately 75000 cartons of oranges were sold during the first quarter of fiscal year 2025 at a 20 dollar in 91 average price per carton compared to approximately 80000 cartons sold at a $14 26 and average price per carton during the first quarter of fiscal year 2024.
Mark Palamountain: As a reminder, the company Opportunistically has buy sell arrangements for Orange orders with our retail and foodservice customers to complement our lemon sales.
Mark Palamountain: Specialty citrus and wine great revenue was half a million dollars in the first quarter of fiscal year 2025, compared to $1.1 million in the first quarter of fiscal year 'twenty 'twenty four due.
Mark Palamountain: Due to the timing of harvest no wine grape revenue was recorded for the first quarter of fiscal year 2025, compared to $600000 in the first quarter of fiscal year 'twenty 'twenty four.
Mark Palamountain: Farm management revenues were $1.2 million in the first quarter of fiscal year 2025, compared to $2 million in the same period of fiscal year 'twenty 'twenty four and similar acreage the decrease in farm management revenues in the first quarter of fiscal year 2025 was primarily due to fire management decisions.
Mark Palamountain: Based on weather and crop conditions.
Harold Edwards: As Harold mentioned, we are evolving our farm management services division to position ourselves as a value add partner rather than a competitor in the agricultural ecosystem.
Harold Edwards: By positioning ourselves as an essential technology and expertise resource, we're able to deploy our agricultural technology and century of expertise across a much broader customer base, while creating mutually beneficial relationships with farm management service providers.
Harold Edwards: This collaborative approach significantly expands our market reach while allowing us to leverage the same advanced farming capabilities, we've refined across our own operations.
Harold Edwards: Total costs and expenses for the first quarter of fiscal year, 2025 decreased by 16% to $39 $7 million compared to $47.5 million in the first quarter of last year.
Harold Edwards: Operating loss for the first quarter of fiscal year, 2025 improved by $2 $4 million to a loss of $5 $3 million compared to an operating loss of $7 $7 million in the first quarter of the previous fiscal year.
Harold Edwards: Net loss applicable to common stock after preferred dividends for the first quarter of fiscal year, 2025, with $3 $2 million compared to a net loss applicable to common stock of $3 $7 million in the first quarter of fiscal year 2024.
Harold Edwards: Net loss per diluted share for the first quarter of fiscal year 2025 was 18 cents compared to a net loss per diluted share of 21 cents for the same period of fiscal year 2024.
Harold Edwards: Adjusted net loss for diluted EPS for the first quarter of fiscal year, 2025 was $2 $5 million compared to adjusted net loss for diluted EPS of $3 $2 million in the same period of fiscal year 'twenty 'twenty four.
Harold Edwards: Adjusted net loss per diluted share for the first quarter of fiscal year 2025 was 14th.
Harold Edwards: Compared to adjusted net loss per diluted share of <unk> 18 cents for the first quarter of fiscal year 2024.
Harold Edwards: A reconciliation of net loss attributable to Luminaire company to adjusted net loss for diluted EPS is provided at the end of our earnings release.
Harold Edwards: Adjusted EBITDA for the first quarter of fiscal year, 2025 improved to a loss of $2 $3 million compared to a loss of $4 $8 million in the same period of fiscal year 2024.
Harold Edwards: A reconciliation of net loss attributable to Luminaire company to adjusted EBITDA has also provided at the end of our earnings release.
In the first quarter of fiscal year 2025, we sold water pumping rights in the Santa Paula basin for $30000 per acre foot in three separate transactions.
Harold Edwards: The total selling price was $1 $7 million and we recorded a gain on sales of water rights of $1.5 million.
Turning now to our balance sheet and liquidity.
Harold Edwards: Long term debt as of January 31, 2025 was $57 $9 million compared to $40 million at the end of fiscal year 2024 debt levels as of January 31, 2025 minus $1.1 million of cash on hand resulted in a net debt position of $56 eight.
Harold Edwards: $8 million at quarter end.
Harold Edwards: Additionally, our 50 50 joint venture with the Lewis group held $62 $4 million of cash and cash equivalents as of January 31, 2025 of which 50% is approximately $31.2 million. This additional liquidity source for my joint venture partnership provides further.
Harold Edwards: Financial flexibility beyond the quarter end net debt figures now I'd like to turn the call back to Harold to discuss our fiscal year 2025 outlook and longer term growth pipeline.
Thanks, Mark we.
Harold Edwards: We continue to expect fresh lemon volumes to be in the range of 5 million to $5 5 million cartons for fiscal year, 2025, and expect avocado volumes to be in the range of 7 million to 8 million pounds for fiscal year 2025. In addition, we expect to receive $165 million.
Harold Edwards: From harvest Lehman <unk> Lewis community builders to an east area two over the next six fiscal years.
Harold Edwards: Looking ahead, we continue to see a strong EBITDA outlook underpinned by plans to expand avocado production by 1000 acres through fiscal year 2027 to capitalize on robust consumer demand trends. During this transition the company expects fiscal year 2025.
Harold Edwards: Volume to be lower compared to fiscal year 2024, due to the alternate bearing nature of avocado trees. These.
Harold Edwards: These operational results do not take into account anticipated additional gains from asset monetization.
Overall, we're very pleased with our start to fiscal year 2025, and look forward to updating you on our progress during our second quarter earnings call.
Harold Edwards: Operator, well now open the call to questions.
Great. Thank you at this time, we will be conducting a question and answer session.
Harold Edwards: That's a question. Please press star one on your telephone keypad.
Harold Edwards: A confirmation tone will indicate your line is in the question.
Speaker Change: Let me first start to remove yourself from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the psyche.
Speaker Change: One moment, please pool for questions.
Speaker Change: First question here.
Speaker Change: From Lake Street Capital. Please go ahead.
Speaker Change: Alright, Thanks for taking my questions and apologies in advance of the background noise I'm on the road Tibet.
Speaker Change: Couple of questions for you guys first of all on this water right transaction.
It was very encouraging to see the per acre foot number I'm curious about the total volume.
Speaker Change: While total level of acre feet and this agreement.
Speaker Change: Back from like 55 acre feet, something like that barely a rounding error relative to your total asset base. So I'm wondering why was that 55, the right number where are you guys holding back on.
Speaker Change: On the sale.
Speaker Change: You know wanted to retain these assets for a longer time, where those customers are not in need of more.
Speaker Change: In this transaction can you just kind of give us some context for it.
Speaker Change: Yes.
Speaker Change: That dynamic.
Dan: Hi, Dan, Yes, happy too so really it's more of a function of.
Opportunistic demand that presented itself.
Dan: The opportunity to.
Dan: Five buyers at these at these values.
Dan: Come up periodically.
Dan: The the benchmark value levels, we used and how we arrived at the 30000 per acre foot is that's the fee in Lou that developers are paying two adjacent cities.
Dan: Where our assets are located and where the water comes from so we benchmark to those rates as as a way to come up with the $30000 an acre foot.
Dan: They were three separate transactions, but to two different buyers different type of buyers.
Dan: One was one was for a development development buyer and in a city and the other was for foreign agricultural buyer.
Dan: The opportunities to to monetize come around periodically, but this was one of the first opportunities for us to.
Dan: Two to actually execute we thought it was a great opportunity for us to to.
Dan: To be able to point to the.
Dan: The values.
On these 58 acre feet that we monetize against the approximately 9500 acre feet that we actually own in the basin.
Dan: And you'll see more of this kind of activity coming in 2025, we have additional opportunistically driven demand.
Dan: For additional pumping rights that you'll you'll see in two forms one in additional actual pumping rights sales, but also in long term water leases.
Dan: At Munis municipal rates, which are if you net present value back. These long term lease opportunities youll find that it creates extraordinary value, but over a long period of time of sustainable cash flows.
Dan: Got it.
Dan: Very helpful and then I guess, one follow up to this.
Dan: You seem pretty optimistic that there will be additional transactions.
Dan: You know it.
This asset base here within this fiscal year is this confidence are derived from those existing partners that you had with this with this transaction are these new parties that you are bringing in.
I'm, just trying to get a sense of kind of how far down. The road you are in this process.
Dan: Yeah, so both actually.
A little bit more to some prior buyers but to other.
Dan: Opportunities to monetize water, which will be announced shortly in 2025. The other the other opportunity that we're exploring right now is actually the development or a creation of a water utility where we're we're actually aggregating our water asset resources.
And in an organized regulate regulated way, providing water service to our workforce houses, but also to our agricultural operations as a way to manage over the long term the ability to provide wet water too.
Dan: Gee delivery areas that we have the capability of delivering too, but also to our existing farming assets and workforce housing assets.
Speaker Change: Got it got it interesting well look forward to hearing more about that later this year and then one other one for me on the avocado front I mean with with each passing quarter. It seems that this initiative that you've had in place just gets more and more.
Dan: Attractive so so.
Dan: Congratulations on really making a pretty sensible move here.
Speaker Change: Kadow space My question is around.
Speaker Change: The the kind of opportunity beyond what you already have have announced.
Speaker Change: The.
How much of your acreage that you have and you know lemons. Another other crops would it be agronomics like feasible for you to make additional plantings in the avocado space.
Speaker Change: And then.
Speaker Change: In the context of a market that's pretty challenge with a lot of permanent crops in.
Speaker Change: Other citrus or stone fruits or nuts.
Speaker Change: Do you see other growers in California doing this as well.
Speaker Change: No. It was it wasn't my two questions and then I've got a friend.
Speaker Change: Great. Thanks, Dan so.
Speaker Change: Couple of answers to those questions so as far as expanding our production, we probably could expand maybe 250 to 500 additional acres outside of the 2000 that we've already have designated the only issues come there is some some areas you get into some colder areas that make it less feasible and you'd want to have an opportune.
Speaker Change: Not to have to have wind machines, and all that so I would say 2000 2500 acres will be somewhere within that range.
Speaker Change: If you think about how avocados grow so San Diego County used to be a big avocado grower. They have been and are running out of water down there. That's that's affordable at least and so really Ventura County, and parts of Santa Barbara County are really the only place from a temperature perspective, and avocado likes a warm day in a cool night, but not too.
Speaker Change: Many extremes and so where we are in Ventura County, specifically, you've seen a lot of lemons come out and you'll continue to see lemons come out and replanted into avocados, just because it's a reliable source of water. We've got really long term reliable water in our basins and our and the temperature zones are a perfect and so between here.
Speaker Change: And again, Santa Barbara Youll see growth, but again I don't think we will probably get right now, California produces anywhere from 300 to 400 million pounds, and if that goes to five or $600 million at most that's still only 10% to 15% of the U S consumption. So a lot of tailwind there so Ben I might pile on just to throw a little more color on there.
Speaker Change: So.
Speaker Change: So you can't as Mark pointed out you can't grow avocados everywhere and so in our sort of location in Ventura County, there are areas that are colder in areas that are warmer the additional expansion, where we're we're expanding our in warmer areas, where we have a better chance of surviving.
Speaker Change: Future freezes and freezes are a reality that we all kind of live around avocados don't like cold temperature, it's kind of like why are we like living around avocado trees, but so that's one factor, but so I guess the answer is is that as you see lemons coming under pressure and more and more lemon growers getting out of <unk>.
Speaker Change: <unk> production, just because of the challenging economics of lemons not all of them will go into a into avocados, because they won't be able to to grow them just due to the the temperature realities of some of some of their properties. The other interesting limiting factor to growth of avocados right. Now is nursery stock there's not there's not a lot of new.
Speaker Change: History stock out there for growers that are interested in converting to access new trees, there's probably backed up pipeline demand of four to five years of avocado trees right now for nurseries and so even if it even if they were growers that were pushing lemons out and wanting to plant new laminates, it's very difficult.
Speaker Change: To get the nursery stocks.
Speaker Change: And I guess, Fortunately or unfortunately, where we're probably a contributing factor to that just because of the sheer volume of expansion that we've been managing.
Speaker Change: Got it very interesting stuff.
Speaker Change: Appreciate you guys, taking my questions look forward to more updates here later this year I'll get back in queue.
Speaker Change: Thanks, Ben Thanks, Dan.
Speaker Change: This concludes the question.
Harold Edwards: A question and answer session I'd like to turn the floor back to Harold Edwards.
Harold Edwards: Great I want to thank you all for your questions and your interest in Lee Minera have a great day.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time, thank you again.
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