Q2 2025 Limoneira Co Earnings Call
Greetings and welcome to the limit here in the second quarter 2025 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.
Speaker Change: It is now my pleasure to introduce your host John Mills ICR. Thank you Sir you may begin.
Speaker Change: Good afternoon, everyone and thank you for joining us for <unk> second quarter fiscal year 2025 conference call on the call today are Harold Edwards, President and Chief Executive Officer, and Mark Palo Mountain Executive Vice President and Chief Financial Officer by now everyone should have access to the second quarter of fiscal year 2025 earnings release.
Speaker Change: Which went out today at approximately four P. M. Eastern time, if you've not had a chance to review the release, it's available on the Investor Relations portion of the company's website at <unk> Dot com.
Speaker Change: This call is being webcast and a replay will be available on luminaries website before.
Speaker Change: Before we begin we'd like remind everyone that 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.
Speaker Change: Or achievements expressed or implied by such forward looking statements.
Speaker Change: Factors that could cause or contribute to such differences include risk details in the company's form 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.
Speaker Change: Please note that during today's call we will be discussing.
Speaker Change: 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.
Speaker Change: The company's earnings release and in today's prepared remarks, we include adjusted EBITDA and adjusted diluted EPS, which are non-GAAP financial measures a reconciliation of adjusted EBITDA and adjusted diluted EPS to the most directly comparable GAAP financial measures are included in the company's press release, which has been posted to its website.
Speaker Change: And with that it's my pleasure to turn the call over the company's President and CEO, Mr. Harold Edwards.
Harold Edwards: Thanks, John and good afternoon, everyone.
Speaker Change: As we've discussed on previous calls we've been executing a road map to create stockholder value through multiple strategic avenues.
Speaker Change: We conducted a lengthy process to explore strategic alternatives, which concluded in March and provided valuable insights leading to today's citrus sales and marketing announcements.
Speaker Change: I am pleased to announce that beginning in the first quarter of fiscal year 2026, we're merging our citrus sales and marketing operations with Sunkist growers as one of their largest lemon growers and as a sunkist private licensed Packer.
Speaker Change: We expect this to quickly improve the efficiency of our supply chain significantly reduce cost and provide access to many of the best foodservice and retail customers in the country.
Speaker Change: Our sales and marketing personnel will transfer to sunkist with a significant cost savings to our bottom line to.
Speaker Change: The move will also allow us to cooperatively partner with others Sunkist Packers to utilize excess wash and storage capacity within the Sun care system.
Speaker Change: These moves will save us approximately $5 million a year in selling and marketing expenses and improve our EBITDA by approximately $5 million a year.
Speaker Change: This transition directly advances several key objectives enhances our citrus services business sharpens, our focus on sustainable value drivers and expands our access to foodservice and regional and national quick serve restaurants.
Speaker Change: This citrus sales and marketing announcements reunites organization is built on a shared foundation with a legacy of collaboration shared values and deep Trust. Both companies were founded and $18 93 with common founders and worked together for over a century developing a profound understanding of the land or.
Speaker Change: Growers in the market, along with long standing relationships with customers and partners.
Speaker Change: Over the years each entity has evolved in a specialized in distinct ways strengthening our capabilities insights and regional expertise with learnings that now complement one another perfectly.
Speaker Change: This intentional reunion allows us to blend our individual strengths for greater impact, creating a unified system with align teams and shared strategic direction that honors what worked in the in our past while building new pathways forward together.
Speaker Change: Together, we can deliver a leading platform serving foodservice and quick serve restaurants across multiple segments. This combined sales and marketing effort is uniquely positioned to drive continued growth in the fast growing <unk> sector as well as a strong retail growth opportunity. We are now part of an operate at.
Speaker Change: <unk> that includes a full category of citrus, providing us access to the very best retail customers in the country, who require one go to market partner to provide all their citrus needs.
Speaker Change: Combining with Sunquest, we immediately have access to the largest retail grocers throughout the country, because we can assure reliable supply while operating at the lowest cost with a full citrus offering.
Speaker Change: Through our broader footprint and deeper combined expertise will have enhanced scale and capabilities to serve customers more effectively across the entire citrus market.
Speaker Change: The combined go to market approach will generate meaningful operational efficiencies.
Speaker Change: <unk> will consolidate all sales and marketing functions for both companies citrus production enhancing our customer relationships, while reducing overhead we will optimize our supply chain through shared storage washing and packing capabilities and deliver enhanced value added services for customers.
Speaker Change: Once the transaction is effective our citrus brokerage business will transition to sunkist, which will reduce our top line revenue, but more importantly, this process will enhance our operational capabilities and cost structure, improving our foundation for sustainable EBITDA growth and margin expansion in our citrus operations.
Speaker Change: This represents the natural evolution of strategies, we've been discussing we're not changing direction, we're accelerating execution on our stated priorities of growing our citrus business through multiple channels and growing our long term citrus returns.
Speaker Change: Combined scale and capabilities position us to serve our grower partners more effectively expand our packing services, both our own production and grow our partner production and capture growth opportunities across multiple customer segments, including the high growth <unk> market, where consumer demand continues to drive category.
Speaker Change: Lori expansion.
Speaker Change: We remain committed to our multifaceted approach to shareholder value creation.
Speaker Change: This joining of forces strengthens our core operating business, while we continue executing across our other strategic initiatives. Our avocado business remains unchanged. We continue our planting regime as one of the largest growers in the United States, while working with several different handlers a structure that serves us well.
Speaker Change: Our real estate development project harvest at Lehman era is seeing strong velocity in home sales with robust activity that could accelerate the timing of phase III.
Speaker Change: We continue to advance our water monetization efforts with two transactions expected to close this year. While also remaining focused on the divestiture of our farming assets in Chile, and our windfall farms vineyard in Paso Robles.
Speaker Change: In summary, we're making meaningful progress across our business, while positioning ourselves for stronger performance ahead, our citrus operational enhancements expanding avocado production real estate development progress and water monetization initiatives all contributed to building sustainable long term shareholder value.
Speaker Change: Through our unique asset base and market position.
Speaker Change: We look forward to updating you on our continued progress across all of these initiatives as we move through the year.
Speaker Change: And with that I'll now turn the call over to Mark to discuss our second quarter results.
Speaker Change: You Harold and good afternoon, everyone.
Speaker Change: 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 seasonally softer quarters, while our second and third quarters are stronger.
Speaker Change: For the second quarter of fiscal year 2025, total net revenue was $35 1 million compared to total net revenue of $44 $6 million in the second quarter of the previous fiscal year.
Speaker Change: Agribusiness revenue was $33 $6 million compared to $43 $3 million in the second quarter of last year.
Speaker Change: Other operations revenue was $1 $5 million in the second quarter of fiscal year 2025, compared to $1 $3 million in the second quarter last year.
Speaker Change: The decline in agribusiness revenue year over year stems, primarily from a temporarily oversupplied lemon market. This oversupply has created significant pricing pressure as competitors are selling below cost to retain customers, forcing overall market prices down.
Speaker Change: We expect relief from these challenging market conditions 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.
Speaker Change: Looking beyond this year, the citrus sales and marketing plan, we announced with Sunquest will enhance our resilience to market volatility by creating a more efficient cost structure that enables us to maintain profitability during periods of pricing pressure.
Speaker Change: Agribusiness revenue for the second quarter of fiscal year, 2025 includes $19 $7 million and fresh pack lemon sales compared to $25 $8 million during the same period of fiscal year 2024.
Speaker Change: Approximately $1 4 million cartons of U S pack fresh lemons were sold during the second quarter of fiscal year, 2025, and $14 52, <unk> average price per carton compared to $1 4 million cartons sold at a $17 85 average price per carton during the second quarter of <unk>.
Speaker Change: Fiscal year 2024.
Speaker Change: Brokered lemons and other lemon sales were $2 $4 million and $3 $8 million in the second quarter of fiscal years, 2025, and 2024, respectively.
Speaker Change: The company recognized $2 $8 million of avocado revenue in the second quarter of fiscal year 2025, compared to $2 $3 million of avocado revenue in the same period of fiscal year 2024.
Speaker Change: Approximately $1 2 million pounds of avocados were sold in aggregate during the second quarter of fiscal year 2025 at an impressive $2 26 average price per pound compared to approximately $1 6 million pounds is that a $1 47 average price per pound during the second quarter of fiscal year <unk>.
Speaker Change: 24.
Speaker Change: Similar to prior year. The company has postponed a significant portion of its avocado harvest from the second quarter into the third quarter in order to capture more favorable pricing.
Speaker Change: The company recognized $1 $6 million of Orange revenue in the second quarter of fiscal year 2025, compared to $1 $2 million in the second quarter of fiscal year 2024.
Speaker Change: Approximately 92000 cartons of oranges were sold during the second quarter of fiscal year 2025 at a $17 seven average price per carton compared to approximately 66000 cartons sold at a $17 58 average price per carton during the second quarter of fiscal year 2024.
Speaker Change: Specialty citrus and wine grape revenue was $671000 in the second quarter of fiscal year 2025, compared to $839000 in the second quarter of fiscal year 2024.
Speaker Change: Farm management revenues were 339000 in the second quarter of fiscal year, 'twenty five compared to two $2 million in the same period of fiscal year 2020 for the decrease in farm management revenues in the second quarter of fiscal year 2025 was primarily due to the previously announced termination of our farm manner.
Speaker Change: Isn't agreement effective March 31 2025.
Speaker Change: Total costs and expenses for the second quarter of fiscal year 2025 decreased by 22% to $38 5 million compared to $49 $3 million in the second quarter of last year.
Speaker Change: Operating loss for the second quarter of fiscal year, 2025 improved by $1 $3 million to a loss of $3 3 million compared to an operating loss of $4 $7 million in the second quarter of the previous fiscal year.
Speaker Change: Total other income was $281000 in the second quarter of fiscal year 2025, compared to $16 $5 million in the same period of fiscal year 2024, primarily due to the equity and earnings of investments recognized on the sale of 554 residential homesites at harvest at Lehman era.
Speaker Change: In April 2024.
Speaker Change: Net loss applicable to common stock after preferred dividends for the second quarter of fiscal year 2025, with $3 5 million compared to net income applicable to common stock of $6 $4 million in the second quarter of fiscal year 2024.
Speaker Change: Net loss per diluted share for the second quarter of fiscal year 2025 was 20.
Speaker Change: Compared to a net income per diluted share of 35 for the same period of fiscal year 2024.
Speaker Change: Adjusted net loss per diluted EPS for the second quarter of fiscal year, 2025 was $3 $1 million compared to adjusted net income for diluted EPS of $8 1 million in the same period of fiscal year 2024.
Speaker Change: Adjusted net loss per diluted share for the second quarter of fiscal year 2025 was <unk> 17 compared to adjusted net income per diluted share a 44.
Speaker Change: For the second quarter of fiscal year 2024.
Speaker Change: A reconciliation of net income or loss attributable to luminaire company to adjusted net income or loss for diluted EPS is provided at the end of our earnings release.
Speaker Change: Adjusted EBITDA for the second quarter of fiscal year, 2025 was a loss of $167000 compared to a gain of $16 $6 million in the same period of fiscal year 2020 for.
Speaker Change: A reconciliation of net income or loss attributable to luminary company to adjusted EBITDA has also provided at the end of our earnings release.
Speaker Change: You will notice a decrease in the year to date estimated income tax rate recorded in the first six months of fiscal year 2025, compared to the first quarter, we expect our tax rate to normalize by the end of fiscal year 2025 as discrete transactions are completed.
Speaker Change: Turning now to our balance sheet and liquidity long term debt as of April 32025, with $54 $9 million compared to $40 million at the end of fiscal year 2024.
Speaker Change: Debt levels as of April 32025, minus $2 $1 million of cash on hand resulted in a net debt position of $52 9 million at quarter end.
Speaker Change: In April 2025, we received $10 million of our share of a $20 million cash distribution from our 50 50 real estate and development joint venture with the Lewis group of companies.
Harold Edwards: The distribution came from the joint venture's available available unaudited cash and cash equivalents, which as of April 32025 totaled $37 3 million now I'd like to turn the call back over to Harold to discuss our fiscal year 2025 outlook and longer term growth pipeline.
Speaker Change: Thanks, Mark we now expect fresh lemon volumes to be in the range of $4 5 million to 5 million cartons for fiscal year 2025 down from our prior expectation of five to $5 5 million cartons and expect avocado volumes to continue to be in the range of 7 million to 8 million pounds for fiscal <unk>.
Speaker Change: Year 2025.
Speaker Change: The reduced lemon volume is due to lower fresh utilization in the second quarter, but we believe our third quarter will be stronger than our second quarter fiscal year 2025, avocado volume is expected to be lower compared to fiscal year 2024, due to the alternate bearing nature of avocado trees. These operational results do not take into.
Speaker Change: Account anticipated additional gains from asset monetization.
Speaker Change: Looking beyond fiscal year 2025, we have strong visibility on multiple value drivers and our strong EBITDA outlook, we expect to receive an additional $155 million from harvest.
Speaker Change: And east area two over the next six fiscal years, we are expanding avocado production by 2000 acres by the end of fiscal year 2027 to capitalize on robust consumer demand, which will significantly enhance our EBITDA outlook as these trees mature and reach full production.
Speaker Change: Our partnership with Sunkist fundamentally strengthens our citrus business model with $5 million in annual cost savings beginning next year. While this partnership will reduce revenue by transitioning our brokerage business to sunkist it creates a stronger operational foundation.
Speaker Change: For fiscal year 2026, we're estimating four to $4 5 million cartons.
Speaker Change: It's early for formal guidance. This represents our current best assessment given the structural changes what makes this partnership particularly exciting is the long term growth potential it creates overtime, we could see the cartons processed through our packinghouse increase significantly as this partnership enhances our ability to recruit.
Speaker Change: Growers and together, we expect to access more foodservice and retail customers importantly, we expect our packing margin per carton will increase which is very favorable for us given the fluctuations in lemon pricing we've experienced over the past few years. This stable pricing can pay compared combined with our enhanced.
Speaker Change: The ability to fill our packinghouse capacity and the operational efficiencies, we are gaining support sustainable EBITDA growth and create a strong foundation for long term value creation.
Speaker Change: In summary, we're executing a comprehensive strategy that positions us for both near term resilience and long term growth today's citrus sales and marketing announcements combined with our other growth initiatives demonstrates our commitment to creating sustainable shareholder value through multiple avenues, we have the asset base the strategic partnership.
Speaker Change: And the operational improvements in place to deliver on these projections, while maintaining the flexibility to capitalize on additional opportunities as they arise.
Speaker Change: Operator, we will now open the call to questions.
Speaker Change: Thank you.
Speaker Change: We will now be conducting a question and answer session.
Speaker Change: 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 to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.
Speaker Change: One moment please.
Speaker Change: Four questions.
Speaker Change: And our first question.
Speaker Change: It comes from the line of.
Speaker Change: <unk> <unk> with Lake Street Capital markets. Please proceed with your question.
Speaker Change: Alright, Thanks for taking my questions congratulations on the deal.
Speaker Change: First of all I my phone cut out for a minute or two here. So I'm quite certain I'm going to ask you. Some stuff has already been addressed in my apology.
Speaker Change: I apologize if im making you guys repeat yourselves.
Speaker Change: A couple of questions on the frontier deal first of all just kind of some basic.
Speaker Change: Basic information you said that that the brokered fruit business is going to be going away. So I want to make sure I understand this right. So the revenue base attributable to brokered fruit, which was about 2700 $28 million last couple of years that will be going away, but third party cartons are going to continue to run through your facility and be reflected on the on the top line is that correct.
Speaker Change: Okay.
Speaker Change: That's all correct and you got it.
Speaker Change: Okay, perfect and then.
Speaker Change: Hi.
Speaker Change: Can you can you elaborate a bit on the on how we should think about kind of the box economics on this front.
Speaker Change: Day. One is this is this a kind of more.
Speaker Change: More of a fixed cost model between between the two years there are variable.
Speaker Change: Element to it.
Speaker Change: Depending on on.
Speaker Change: Market conditions or anything else you know, how how exactly the structure.
Speaker Change: Yes, so there's three pieces to it. The first piece is you went right right to it. So if you looked at our supply chain and the various packing assets that we used to to wash to store and then to pack fresh lemons youll recall that we actually when we made an acquisition.
Speaker Change: Of Oxnard Lemon.
Speaker Change: Years ago. We then we're very fortunate to be able to divest those assets, but once we divested them, we put ourselves into a required sale leaseback situation, where we needed to lease back the wash and storage capability of our of our Oxnard facilities.
Speaker Change: And so that's proven to be very expensive not only because of the logistics of having fruit here in Santa Paula but also in Oxnard.
Speaker Change: But also just with the pure lease payment.
Speaker Change: So by being by rejoining Sunkist were now able to take advantage of it.
Speaker Change: Additional capacities that exist in other sunkist supply chain, specifically in the wash and storage size.
Speaker Change: They're they're assets that have extra capacity, which gives us the opportunity to use those that use that capability.
Speaker Change: On assets that are closer to us but also.
Speaker Change: On an as needed basis with no lease requirements. So that's the first piece of the benefit from it the.
Speaker Change: The second benefit from it is the entire sales and marketing staff that was part of Lehman ore transitions now over to Sunkist and becomes part of the sunkist team. So all of that cost moves out of lean minera and over to Sunkist and sunkist offers their marketing and sales services.
Speaker Change: Is at a fixed fee.
Speaker Change: Which is considerably less than the cost per carton that we were paying to provide sales and marketing service.
Speaker Change: The aspect that was allowing us to continue to invest into this business was growth.
Speaker Change: As you you've watched because of the competitive environment the challenging space out there. The the volume growth had been compromised and certainly the pricing growth had been challenged as well so by moving into a fixed cost environment for the sales and marketing side, that's going to be a benefit not to mention the fact that <unk>.
Speaker Change: Sunkist has the full category of citrus offerings. So when we go to a customer we're now able to offer orange is an and common times, an easy PL, citrus and limes and along with our lemons, whereas before we were pretty much of a one trick lemon pony. They made it challenging for us to service, our retail customers who really.
Speaker Change: Like to have the full category of citrus offered.
Speaker Change: And then the final piece to it is all the administration behind the effort too.
Speaker Change: To take care of the accounting and everything behind the sales and marketing effort is all all of those are services that are provided in that fixed fee to sunquest. So no longer will we have.
Speaker Change: That to bear as far as the margin aspect to your question.
Speaker Change: Our packing margins for our own fruit and for our grow our partner fruit remain virtually unchanged, but actually will be strengthened because of the more streamlined infrastructure behind our our packing services and the elimination of the Oxnard lease so the combination of all of those.
Speaker Change: Aspects are what give us the confidence in our being able to increase our EBITDA by $5 million year over year from this year to next year and then ongoing in future years.
Speaker Change: Perfect. That's very helpful and apologize again, if you went over any of that for a second time.
Speaker Change: One other question on Sunkist, and then I'll move over to the operational questions.
Speaker Change: Around our balance sheet is there any I didn't hear any balance sheet impact one way or another here.
Speaker Change: When the transaction is completed does that is that correct.
Speaker Change: Yes, so really the main effect will be for us as they are in credit. So that will then I'll go over to the <unk> system. So really we're just going to have an inventory and a sales position.
Speaker Change: And so that will be really helpful from a cost perspective and logistics on our side and then like we said, we just have that fixed charge per carton of our own grown cartons.
Mark: Okay, all right very good thanks Mark.
Speaker Change: Turning to kind of the current state of affairs in the avocado side.
Speaker Change: Given that you are.
Speaker Change: Delaying the harvest.
Speaker Change: Great intention here.
Speaker Change: It seems to me that youre pretty comfortable with.
Speaker Change: With fruit size and quality at this point.
Speaker Change: But just going into harvest wondering if theres anything you wanted to call out.
Speaker Change: Regarding either of those.
Speaker Change: So mother nature has been good to us this year. The weather has been cooperative we haven't had a lot of heat we've had.
Speaker Change: Warm days cool nights.
Speaker Change: We've had pretty good rainfall less than average rainfall, but but spread out.
Speaker Change: And in a nice way that gives us comfort that we're going to continue to see the fruit size.
Speaker Change: And then as you know from from prior years the longer you can hold the avocados on the tree the better chance, we can get a bigger size than the bigger size typically create better pricing, but also more weight and we get paid on the weight. So the strategy of holding fruit into the into the later months, we believe because of.
Speaker Change: Mother, Nature's cooperation that it's going to give us a good opportunity for some bigger size more volume and.
Speaker Change: We still are confident that the market will remain in a in a really strong position.
Speaker Change: Okay perfect. Thank you and then one more for me on Avocados and I'll pass it on is the.
Speaker Change: The.
Speaker Change: Biennial nature of the harvest is something you guys have talked about quite a bit.
Speaker Change: I appreciate you're flagging it again, though here for comparing this year's harvest to last year, but I'm wondering.
Speaker Change: As you walk from say fiscal.
Speaker Change: Fiscal 'twenty four to fiscal 'twenty six do you think that any of the plantings that you've made.
Speaker Change: Over the past few years are going to be bearing yet by 26, such that you would expect kind of an increase in yield between 24 and 26 or is that maturity is still.
Speaker Change: Kind of a fiscal 'twenty seven and beyond type of event.
Speaker Change: Yes, no. That's a great question. So we are actually very pleased with the progress of our early plantings. They come out of a nursery with about two years on them and so our earliest plantings now have about three years on them and we just did a harvest on a strip block there and got over 10000 pounds, an acre for a three year old tree. So.
Speaker Change: We're trying to get to an average of 17. So we think those are about a year to year and a half ahead of what we expected. So that's why we have the confidence of getting those 2000 acres and to 50 million of EBITDA by 2030.
Speaker Change: Great.
Speaker Change: Very good.
Speaker Change: Alright, well. Thank you for taking my question Congratulations again on getting the deal across the finish line I'll get back in queue.
Speaker Change: Thanks Pat.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: And as a reminder, if anyone has a question you May press star one on your telephone keypad to join the queue.
Speaker Change: Okay.
Speaker Change: And it looks like we have reached the end of the question and answer session I would like to turn the floor back over to CEO Harold Edwards for closing remarks.
Speaker Change: Great I'd like to thank you all for your questions and your interest in Lehman era, and I Hope you all have a great day. Thank you.
Speaker Change: This concludes today's conference you may disconnect your lines at this time.
Speaker Change: Thank you and have a great day.
Speaker Change: Okay.
Speaker Change: Yeah.