LMNR earnings name for the interval ending June 30, 2024.
Picture supply: The Motley Idiot.
Limoneira (LMNR 0.28%)
Q3 2024 Earnings Name
Sep 09, 2024, 4:30 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Contributors
Ready Remarks:
Operator
Greetings, and welcome to Limoneira’s third quarter 2024 monetary outcomes convention name. Right now, all contributors are in a listen-only mode. A short question-and-answer session will observe the formal presentation. It’s now my pleasure to introduce your host, John Mills with ICR.
Thanks, sir. It’s possible you’ll start.
John Mills — Head of Investor Relations
Nice. Thanks. Good afternoon, everybody, and thanks for becoming a member of us for Limoneira’s third quarter fiscal yr 2024 convention name. On the decision in the present day are Harold Edwards, president and chief government officer; and Mark Palamountain, government vp and chief monetary officer.
By now, everybody ought to have entry to the third quarter fiscal yr 2024 earnings launch, which went out in the present day at roughly 4 p.m. Jap Time. If you happen to’ve not had an opportunity to evaluate the discharge, it is obtainable on the Investor Relations portion of the corporate’s web site at limoneira.com. This name is being webcast, and a replay will likely be obtainable on Limoneira’s web site as effectively.
Earlier than we start, we would wish to remind everybody that ready remarks include forward-looking statements, and administration could make extra forward-looking statements in response to your questions. Such statements contain a variety of recognized and unknown dangers and uncertainties, a lot of that are outdoors the corporate’s management and will trigger its future outcomes, efficiency, or achievements to vary considerably from outcomes, efficiency, or achievements expressed or implied by such forward-looking statements. Necessary elements that might trigger or contribute to such variations embody danger particulars within the firm’s Type 10-Qs and 10-Ks filed with the SEC and people talked about within the earnings launch. Besides as required by regulation, we undertake no obligation to replace any forward-looking or different statements herein, whether or not because of new data, future occasions, or in any other case.
Please notice that in in the present day’s name, we will likely be discussing non-GAAP monetary measures, together with outcomes on an adjusted foundation. We consider these adjusted monetary measures can facilitate a extra full evaluation and larger understanding of Limoneira’s ongoing outcomes of operations, significantly when evaluating underlying outcomes from interval to interval. We’ve offered as a lot element as doable on any gadgets which might be mentioned on an adjusted foundation. Additionally, inside the firm’s earnings launch and in in the present day’s ready remarks, we embody adjusted EBITDA and adjusted diluted EPS, that are non-GAAP monetary measures.
A reconciliation of adjusted EBITDA and adjusted diluted EPS to essentially the most instantly comparable GAAP monetary measures are included within the firm’s press launch, which has been posted to our web site. And with that, it’s my pleasure to show the decision over to the corporate’s president and CEO, Mr. Harold Edwards.
Harold S. Edwards — President, Chief Govt Officer, and Director
Thanks, John, and good afternoon, everybody. We’re extraordinarily happy with the general efficiency of our enterprise this quarter, highlighted by 21% web income progress and producing $13.8 million in adjusted EBITDA for the quarter. As well as, we generated $25.5 million of adjusted EBITDA for the primary 9 months of this yr in comparison with $1.1 million for a similar interval final yr. This progress was pushed by pricing enchancment in contemporary lemons in addition to avocados experiencing strong demand with larger quantity and favorable pricing dynamics, positioning us to realize file avocado income this fiscal yr and elevating our avocado quantity steerage by over 50%.
At the side of this elevated avocado steerage, we anticipate our avocado phase will contribute roughly 4 million to five million kilos in our seasonally softer fourth quarter for the primary time in our firm’s historical past. These outcomes validate our strategic resolution to considerably develop our avocado manufacturing by 1,000 acres over the subsequent three years. Along with our agricultural success, our actual property improvement three way partnership harvest at Limoneira has seen elevated momentum within the present decrease rate of interest setting with regular dwelling gross sales. The expanded avocado manufacturing and total stable diversified agricultural enhancements, coupled with the continued anticipated earnings from harvest, reinforces our confidence in attaining sturdy EBITDA progress.
The success throughout a number of segments of our enterprise underscores our dedication to sustainable progress and worth creation for our stockholders. Turning to our actual property, we achieved two vital milestones in the course of the first 9 months of this yr. First, in April of 2024, our three way partnership with the Lewis Group closed on lot gross sales representing 554 residential models, thus finishing the sell-out of Section 2 of the event. A complete of 1,261 residential models have closed from the venture’s inception.
Second, in Might of 2024, the Santa Paula Metropolis Council accepted the three way partnership’s proposal to extend the whole variety of residential models for the venture from 1,500 to 2,050 models. The 550-unit improve will present 250 extra single-family for-sale dwelling websites inside Section 3 of harvest. A separate three way partnership with the Lewis Group plans to assemble 300 multifamily rental houses on a mixed-use portion of the venture. This can be a 37% improve within the dwelling models, unlocking additional value-creation alternatives.
Based mostly on these occasions and continued improve within the land worth related to this venture, we elevated our money movement projections by 46% in June and anticipate to obtain $180 million in whole future proceeds unfold out over the subsequent seven fiscal years. Mark will present extra colour on our dramatically improved steadiness sheet, however I wished to focus on that our long-term debt from the second quarter to our third quarter was diminished by 33%, because of our enchancment in adjusted EBITDA and actual property transactions. Our web debt as of July thirty first, 2024, was $39.6 million at quarter-end. Nevertheless, by closing a further 554 dwelling websites on our 50-50 actual property improvement three way partnership, we had $69.9 million of unaudited money and money equivalents readily available as of July thirty first, 2024, of which 50% or roughly $35 million is our share.
Now, to supply a fast replace on our resolution to judge strategic options for the general enterprise. In October of 2022, we developed a strategic highway map supposed to boost near-and long-term shareholder worth. In the present day, we think about ourselves to be in a stronger monetary place, having not too long ago diminished our web debt place and rightsized the steadiness sheet by way of our ongoing strategic shift towards an asset-lighter enterprise mannequin and stronger money movement projections from harvest at Limoneira. Since asserting our exploration of strategic options in December of 2023, we have obtained vital curiosity and are diligently working with our advisors at Stephens Inc.
to interact with these different events to judge potential alternatives. We stay dedicated to completely exploring all choices to maximise stockholder worth and can present updates if the board of administrators discover that additional disclosure is important or advisable. Even after the latest nonstrategic asset gross sales over the previous yr and a half, we proceed to handle roughly 10,500 acres of land with roughly 21,000 acre-feet of owned water utilization and pumping rights, representing great long-term worth progress alternatives in our property. You’ll be able to see by our enchancment in our working earnings in the course of the third quarter, our transition to an asset-lighter enterprise mannequin and concentrate on one of the best use of our property to boost shareholder worth is having a optimistic impact.
We’ve dramatically decreased curiosity expense, eliminated our pension obligation, are monetizing water by way of a fallowing program with the Yuma Mesa Irrigation and Drainage District, and we’re considerably elevating our avocado quantity steerage for fiscal yr 2024. And with that, I will now flip the decision over to Mark.
Mark Palamountain — Chief Monetary Officer, Company Secretary, and Treasurer
Thanks, Harold, and good afternoon, everybody. Earlier than I start, I’d remind you it’s best to view our enterprise on an annual, not quarterly, foundation because of the seasonal nature of our enterprise. Traditionally, our first and fourth quarters are the seasonally softer quarters, whereas our second and third quarters are stronger. For the third quarter of fiscal yr 2024, whole web income elevated 21% to $63.3 million in comparison with whole web income of $52.5 million within the third quarter of the earlier fiscal yr.
Agribusiness income was $61.8 million in comparison with $51.1 million within the third quarter final yr. Different operations income was $1.5 million within the third quarter of fiscal yr 2024 in comparison with $1.4 million within the third quarter final yr. Agribusiness income for the third quarter of fiscal yr 2024 consists of $25.8 million in contemporary packed lemon gross sales in comparison with $24.2 million throughout the identical interval of fiscal yr 2023. Roughly 1,400,000 cartons of U.S.
packed contemporary lemons had been bought in the course of the third quarter of fiscal yr 2024 at an $18.43 common worth per carton in comparison with 1,352,000 cartons bought at a $17.92 common worth per carton in the course of the third quarter of fiscal yr 2023. Brokered lemons and different lemons gross sales had been $9.8 million and $8 million within the third quarter of fiscal years 2024 and 2023, respectively, representing 23% progress yr over yr. The corporate acknowledged $13.9 million of avocado income within the third quarter of fiscal yr 2024 in comparison with $3.5 million throughout the identical interval of fiscal yr 2023. Roughly 8.9 million kilos of avocados had been bought in mixture in the course of the third quarter of fiscal yr 2024 at a $1.57 common worth per pound in comparison with roughly 2.8 million kilos bought at a $0.99 common worth per pound in the course of the third quarter of fiscal yr 2023.
The corporate strategically postponed a good portion of its avocado harvest from the second quarter into the third quarter of fiscal yr 2024 so as to seize extra favorable anticipated pricing. We additionally anticipate to have roughly 4 million to five million kilos of avocados remaining to reap in our seasonally comfortable fourth quarter. The corporate acknowledged $1.2 million of orange income within the third quarter of fiscal yr 2024 in comparison with $1.3 million within the third quarter of fiscal yr 2023. Roughly 43,000 cartons of oranges had been bought in the course of the third quarter of fiscal yr 2024 at a $26.98 common worth per carton in comparison with roughly 71,000 cartons bought at an $18.17 common worth per carton in the course of the third quarter of fiscal yr 2023.
As a reminder, the corporate opportunistically has buy-sell preparations for orange orders with our retail and meals service clients to enrich our lemons gross sales. Specialty citrus and different crop income was $600,000 within the third quarter of fiscal yr 2024 in comparison with $1.9 million within the third quarter of fiscal yr 2023. Through the third quarter of fiscal years 2024 and 2023, roughly 25,000 and 70,040 pound carton equivalents had been bought at a mean worth per carton of $22 and $25.88, respectively. Farm administration revenues had been $3.2 million within the third quarter of fiscal yr 2024 in comparison with $5.4 million in the identical interval of fiscal yr 2023 on related acreage.
The lower in farm administration revenues within the third quarter of fiscal yr 2024 was primarily attributable to farm administration choices based mostly on climate and crop circumstances. Our profitability is predicated on whole acres managed, which stays unchanged. Complete prices and bills for the third quarter of fiscal yr 2024 had been $54.3 million in comparison with $54 million within the third quarter of final yr. This yr’s third quarter whole prices and bills included a $643,000 noncash impairment of an intangible asset.
Excluding the noncash impairment, whole prices and bills decreased yr over yr. Working earnings for the third quarter of fiscal yr 2024 was $9 million in comparison with an working lack of $1.5 million within the third quarter of the earlier fiscal yr. Internet earnings relevant to widespread inventory after most well-liked dividends for the third quarter of fiscal yr 2024 was $6.5 million in comparison with a web loss relevant to widespread inventory of $1.3 million within the third quarter of fiscal yr 2023. Internet earnings per diluted share for the third quarter of fiscal yr 2024 was $0.35 in comparison with a web loss per diluted share of $0.07 for a similar interval of fiscal yr 2023.
Adjusted web earnings for diluted EPs for the third quarter of fiscal yr 2024 was $7.8 million in comparison with $400,000 in the identical interval of fiscal yr 2023. Adjusted web earnings per diluted share for the third quarter of fiscal yr 2024 was $0.42 in comparison with adjusted web earnings per diluted share of $0.02 for the third quarter of fiscal yr 2023. A reconciliation of web earnings or loss attributable to Limoneira Firm to adjusted web earnings or loss for diluted EPs is offered on the finish of our earnings launch. Adjusted EBITDA for the third quarter of fiscal yr 2024 was $13.8 million in comparison with $2.8 million in the identical interval for fiscal yr 2023.
The $11 million enchancment highlights elevated pricing and quantity of contemporary lemons and robust avocado efficiency. A reconciliation of web earnings or loss attributable to the Limoneira Firm to adjusted EBITDA can also be offered on the finish of our earnings launch. Turning now to our steadiness sheet and liquidity. Within the first quarter of final yr, we bought our northern properties, which resulted in whole web proceeds of $98.4 million.
The proceeds had been used to pay down all of our home debt besides the AgWest Farm Credit score $40 million non-revolving line of credit score which has a set rate of interest of three.57% till July 1, 2025. Lengthy-term debt as of July 31, 2024, was $40 million in comparison with $40.6 million on the finish of fiscal yr 2023. Debt ranges as of July 31, 2024, minus $1.1 million of money readily available resulted in a web debt place of $39.6 million on the quarter-end. As Harold talked about, you will need to notice that our 50-50 three way partnership with Lewis Group held $69.9 million of money and equivalents as of July 31, 2024, of which our share is 50% or roughly $35 million.
Moreover, with the closure of the extra 554 residential dwelling websites in April, the three way partnership distributed $30 million on June fifth, 2024, and Limoneira obtained $15 million in money proceeds. This extra liquidity supply from our three way partnership partnerships supplies additional monetary flexibility past the quarter-end web debt determine. Now, I might like to show the decision again over to Harold to debate our fiscal yr 2024 outlook and longer-term progress pipeline.
Harold S. Edwards — President, Chief Govt Officer, and Director
Thanks, Mark. We’re elevating our avocado steerage for the second time this yr. We now anticipate avocado volumes to be within the vary of 14.5 million to fifteen.5 million kilos for fiscal yr 2024 in comparison with earlier steerage of 9 million to 10 million kilos, a greater than 50% improve in comparison with prior steerage. We anticipate to finish the avocado harvest within the fourth quarter with roughly 4 million to five million kilos remaining.
Bear in mind, we anticipate our fourth quarter to symbolize a file in avocado quantity attributable to our timing and skill to carry the fruit to match the next pricing setting. We now anticipate contemporary lemon volumes to be within the vary of 4.5 million to five million cartons for fiscal yr 2024 in comparison with earlier steerage of 5 million to five.5 million cartons attributable to decrease contemporary utilization from late season rains. The lemon harvest for fiscal yr 2024 is roughly 85% full. We proceed to anticipate to obtain whole future proceeds of $180 million from harvest at Limoneira Lewis Group Builders 2 and Limoneira Lewis Group Builders East Space 2 unfold out over the subsequent seven fiscal years.
Wanting forward, we proceed to see a powerful EBITDA outlook underpinned by plans to develop avocado manufacturing by 1,000 acres over the subsequent three years to capitalize on strong client demand tendencies. Throughout this transition, the corporate expects fiscal yr 2025 avocado quantity to be decrease in comparison with fiscal yr 2024 because of the alternate bearing nature of avocado timber, and the corporate believes avocado pricing could also be barely decrease in comparison with the current-year pricing setting attributable to worldwide circumstances. These operational outcomes don’t have in mind anticipated extra earnings from Harvest at Limoneira. Operator, we’ll now open the decision to questions.
Questions & Solutions:
Operator
Thanks. We’ll now be conducting a question-and-answer session. [Operator instructions] One second, please, whereas we ballot for questions. And our first query comes from the road of Ben Klieve with Lake Avenue Capital Markets.
Please proceed together with your query.
Ben Klieve — Analyst
All proper. Thanks for taking my questions. Congratulations on a pleasant quarter right here. I might like to begin with a pair associated to the present avocado expectations.
So, first query right here is, you realize, with only a staggering improve within the anticipated quantity this yr, are you able to discuss type of what developed over the past three months that led to such a significant improve? That quantity was simply shocking to me. So, I might respect any ideas you have got there.
Harold S. Edwards — President, Chief Govt Officer, and Director
So, two elements are driving this, Ben, the primary one being a a lot bigger crop yr over yr, which is at all times useful, but additionally the crew’s resolution to delay harvest from the second quarter into the third quarter. And two issues occurred when that call was made. The primary was that by delaying the harvest, that provides the crop measurement the flexibility to proceed to develop and to get greater. And as that occurs, that really can improve the whole quantity harvested considerably as a result of as a producer, we receives a commission by the pound.
And so, our kilos had been materially impacted for the optimistic due to the delay. After which the opposite issue that drove it was attributable to a state of affairs the place, for 10 days in the course of the season, the U.S. border was closed to Mexican fruit in the course of the Mexican peak, Mexican season. It occurred proper at the start of when the California harvest started, and that put great tailwinds behind the pricing setting that we skilled into our harvests.
That was form of why we made the forward-looking feedback for subsequent yr is we do not anticipate the market to be, from a pricing perspective, as sturdy because it was this yr as a result of this yr, we handled a considerably underserved marketplace for a time period, which actually drove the costs larger. I do not know that we are able to anticipate that subsequent yr, however we do anticipate sturdy client demand and robust demand for avocados. So, we consider that the pricing setting will likely be good, perhaps simply not so good as this yr.
Ben Klieve — Analyst
OK, yeah. Loud and clear on pricing. And I assume my follow-up query then is — I respect the last word bearing nature of the crop, however I assume I am curious, you realize, what, if any classes, you take from this yr to your outlook for subsequent yr. I imply, does this sort of vital quantity improve type of change how you consider managing this crop even within the, you realize, biannual down yr? Or do you suppose subsequent yr will likely be similar to final yr from a quantity perspective?
Harold S. Edwards — President, Chief Govt Officer, and Director
No, Ben, I do not suppose we’ll see any vital downward stress. I believe typical, you realize, up yr, down yr is anyplace from 30% to 50% completely different in crops. I’ll let you know, a part of the extra weight or poundage that we have obtained this yr is a few work that is been finished over the past two years by the crew. We have actually began focusing extra on avocados as our corporations carry out higher traditionally in good avocado years.
So, we had a renewed focus. We began this group internally known as the Avocado Congress, which is each constituent that’s concerned from farming to advertising and marketing to gross sales and myself. And so, we met weekly. And within the prior three years, we had been aggressive in pruning.
We have actually modified our fertilization packages. And, you realize, we’re anticipating anyplace from 15,000 to twenty,000 kilos an acre this yr on a superb yr on an current tree crop and timber which have been planted traditionally for some time. And so, as you see going ahead, which provides us our confidence within the EBITDA progress, we’ll have fully new timber, some completely different rootstocks, new tree spacing, which will likely be extra dense. And we see alternative to have actually strong poundage per acre going ahead after we get completed with this plantings within the subsequent three years.
Ben Klieve — Analyst
Obtained it. Excellent. Properly, inform the Avocado Congress to maintain up the nice work over there. Another for you, Mark.
Across the debt, I am curious the way you’re eager about the fastened debt place that you’ve in the present day within the face of declining rates of interest and, you realize, a extremely wholesome type of working money movement plus Harvest at Limoneira money movement outlook right here. Are you contemplating varied debt devices to let you have extra extra money readily available, or do you anticipate to only eradicate that debt place right here over the course of the subsequent, like, 10 or 11 months, at any time when that facility is due?
Mark Palamountain — Chief Monetary Officer, Company Secretary, and Treasurer
So, it is really bodily due on July 1st of ’26. It goes variable for one yr. So, as we all know that we expect rates of interest are going to begin coming down, we’ll most likely have some flexibility there. Take into account that we’ve $35 million of money and equivalents on the Lewis steadiness sheet, and the explanation why we solely distributed 30 million or 15 million for us is as a result of as soon as we do a distribution, we’ve to take away the road of credit score.
As these credit score traces loosen up, I can see going ahead the potential for extracting extra out of that chance. So, we’ll simply should see. I’ll say that we are going to have a decrease web debt place subsequent yr than this yr, and we’ll simply have to determine the place charges are. However proper now, we’re very happy with the power of our steadiness sheet and looking out ahead.
Ben Klieve — Analyst
Excellent. Thanks for taking my questions, guys. Once more, congratulations on a pleasant quarter right here. And I will get again in line.
Harold S. Edwards — President, Chief Govt Officer, and Director
Thanks, Ben.
Mark Palamountain — Chief Monetary Officer, Company Secretary, and Treasurer
Thanks, Ben.
Operator
Thanks. Our subsequent query comes from the road of Raj Sharma with B. Riley. Please proceed together with your query.
Howdy, Raj?
Raj Sharma — B. Riley Monetary — Analyst
Thanks. I am sorry. Are you able to hear me? Thanks for taking my questions. A very good quarter, congratulations.
I might wish to — if you happen to may speak a little bit bit about — you realize, I do know you possibly can’t speak a lot concerning the strategic evaluate, however simply attempting to grasp how that is going to pan out. , how does your efforts on One World of Citrus and the farm administration proceed ahead? How does the Harvest JV, you realize, transfer ahead with any potential doable end result with the corporate? Is that — you realize, is all the pieces on the desk by way of in components or, you realize, the entire? If you happen to may discuss that in some colour please, that’d be nice.
Harold S. Edwards — President, Chief Govt Officer, and Director
Certain, Raj. So, you realize, we have been coached to not communicate extensively about it, however we’ll attempt to add some colour simply to type of form of let you know from our perspective the way it’s taking part in out and the way we’re taking a look at it. So, I believe the truthful assertion is the board of administrators is evaluating all alternatives and never taking something off the desk from a price perspective. And so, there’s the consideration of the continued enterprise in its entirety.
There’s the consideration of, for lack of a greater technique to clarify it, an working firm and a property firm, so OpCo, PropCo with multiple proprietor. There’s strategic curiosity throughout citrus. There’s strategic curiosity throughout avocados. There’s strategic curiosity from homebuilders and land builders.
And there is additionally strategic curiosity from a water perspective. So, I believe we have been very happy with the quantity of curiosity that we have obtained, however it’s nonetheless early within the course of to essentially perceive the path that the strategic options will take. I will let you know that Mark and I are having loads of enjoyable attempting all of it on and eager about all of it. And I do know the board is being very diligent as they’re contemplating all the pieces that is being launched to them.
However I believe we have got one other time period, at the very least one other quarter, of exploration and deliberation. And as we mentioned in our ready remarks, when and if the board is able to present extra colour or commentary, we look ahead to doing that.
Raj Sharma — B. Riley Monetary — Analyst
So, I form of wished to get a way of the timeline. Would that be 1 / 4 out or two quarters out do you suppose it will get form of wrapped up?
Harold S. Edwards — President, Chief Govt Officer, and Director
It is too early to say there, too. , we would adore it to occur in a short time and to be finished. However the board is deliberately being extraordinarily deliberate and considerate about it. We’re experiencing wonderful service and assist from our banking advisors and our authorized advisors.
So, to set a timeframe on it, I am hesitant to try this as a result of I do not need to, you realize, miss no matter I say. However I might say it’s wanting favorable that it’s going to occur within the comparatively close to time period.
Raj Sharma — B. Riley Monetary — Analyst
Obtained it. Thanks for that. After which simply form of a follow-on query on the farm administration revenues and profitability. I do know you simply made a remark that it was decrease than final yr.
Are you able to speak concerning the causes for the decline and what to type of anticipate by way of the subsequent few quarters on farm administration and the way the profitability works on the acreage, not on the revenues?
Harold S. Edwards — President, Chief Govt Officer, and Director
You wager. So, this season or this previous quarter, choices had been made that there was decrease inputs like for pest pressures, pesticides, and many others., and pruning than in prior durations. And so, as you talked about, we’re — our profitability is predicated on a per-acre charge, so it is mainly a cost-plus state of affairs. So, we make about $288 per acre, after which there’s some add-ons for various equipment and stuff.
So, if you happen to get to these 3,000 acres, that is the place we get to about $1 million that we have talked about up to now of working revenue. So, actually, to consider the profitability of that enterprise going ahead, we’re nonetheless persevering with to search for new shoppers. There’s a lot of flux going round within the citrus business normally proper now, and so we’ll look to develop that in fiscal yr ’25.
Raj Sharma — B. Riley Monetary — Analyst
Nice. Thanks. I will take my questions offline. Thanks for answering my questions.
Harold S. Edwards — President, Chief Govt Officer, and Director
Thanks, Raj.
Operator
Thanks. [Operator instructions] There are not any additional questions right now. I want to flip the ground again to CEO Harold Edwards for closing remarks.
Harold S. Edwards — President, Chief Govt Officer, and Director
Thanks very a lot, all people, for all of your questions and your curiosity in Limoneira. Have a terrific day.
Operator
[Operator signoff]
Length: 0 minutes
Name contributors:
John Mills — Head of Investor Relations
Harold S. Edwards — President, Chief Govt Officer, and Director
Mark Palamountain — Chief Monetary Officer, Company Secretary, and Treasurer
Harold Edwards — President, Chief Govt Officer, and Director
Ben Klieve — Analyst
Raj Sharma — B. Riley Monetary — Analyst
