Alico, Inc. (NASDAQ:ALCO) Q1 2024 Earnings Call Transcript
Alico, Inc. (NASDAQ:ALCO) Q1 2024 Earnings Call Transcript February 8, 2024
Alico, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to Alico's First Quarter 2024 Earnings Conference Call. [Operator Instructions] And as a reminder, today's conference is being recorded. Last night, the company issued a press release announcing its results for the first quarter ended December 31, 2023. If you have not had the chance to view the release, it is available on the Investor Relations portion of the company's website at alicoinc.com. This call is being webcast, and a replay will be available on Alico's website as well. Before we begin, we would like to remind everyone that the prepared remarks today contain forward-looking statements. Such statements are subject to risks, uncertainties and other factors may cause actual results to differ materially from those expressed or implied in these statements.
Important factors that could cause or contribute to such differences include risk details in the company's quarterly reports on Form 10-Q and annual reports on Form 10-K, current reports Form 8-K and any thereto filed with the SEC and those mentioned in the earnings release. The company undertakes no obligation to subsequently update or revise the forward-looking statements made on today's call except as required by the law. During this call, the company will also discuss non-GAAP financial measures including EBITDA, adjusted EBITDA and net debt. For more details on these measures, please refer to the company's press release issued earlier today. With that, I would like to turn the conference call over to the company's President and CEO, Mr. John Kiernan.
Please go ahead.
John Kiernan : Thank you, Kelsey, and thank you, everyone, for joining us for Alico's First Quarter 2024 Earnings Call this morning. As previously announced, on September 18, 2023, Alico signed a contract with the State of Florida to sell the remaining 17,229 acres of the Alico Ranch and on December 21, 2023, we closed on the sale for $77.6 million in gross proceeds. A portion of the proceeds from this sale were used to repay the outstanding balance on our working capital line of credit and $19.1 million of Metlife variable rate term loans plus accrued interest. The remainder, we retained in cash. Results from our early and mid-season harvest this season were disappointing resulting in an inventory write-down of approximately $10.8 million in the first quarter of fiscal year 2024.
We believe that the early and mid-season box production was affected by the continued impact of Hurricane Ian. We are cautiously optimistic that our Valencia crop, which we'll begin harvesting soon will show a stronger rate of recovery. That harvest is expected to begin in another week or so. In January 2024, the company received funding from the Citrus Research and Field Trial Foundation to support our use of oxytetracycline to combat the effect of greening in the citrus trees. Last year, beginning in January 2023, over 35% of our producing trees were treated with an OTC trunk injection with the expectation that would improve fruit quality and decrease the rate of fruit drop. We expect that the full extent of the benefits of these prior year OTC treatments will not be measurable until the full 2023-'24 harvest is completed.
Also last month, we published our 2023 Annual Sustainability Report highlighting our approach to sustainability and progress with our environmental, social and government -- governance priorities. We believe that our balance sheet remains one of our greatest strengths as we continue to operate in a challenging citrus industry. Because of the sale of the remaining acreage of Alico Ranch, we have been able to reduce our total debt by $44 million and our net debt by almost $62 million, representing a decrease of 34% in our total debt and a decrease of 48% in our net debt in each case from September 30, 2023 to December 31, 2023. Even more importantly, we have the full $95 million available of undrawn credit, which is comprised of approximately $70 million on our working capital line, which matures in November 2025 as well as $25 million of undrawn credit on the revolving line of credit, which matures in November of 2029.
We believe that these credit facilities provide Alico with ample liquidity, while the company continues to recover from the impact of recent weather events. With that, I will turn the call over to Brad to discuss our more detailed financial results.
Brad Heine: Thank you, John. Good morning, everyone. I'd like to remind everyone that our business is seasonal, and the majority of our citrus crop is harvested in the second and third quarters of the fiscal year, with the majority of our profit and cash flow is also recognized in the second and third quarters. Quarterly results for the first quarter are not indicative of our full year results. The $3.3 million increase in revenue for the 3 months ended December 31, 2023, as compared to the 3 months ended December 31, 2022, was primarily due to a 24.9% increase in pound solids, driven by a 30.1% increase in process box production, as we began to recover from the effects of Hurricane Ian. Our food production for the 3 months ended December 31, 2022, was adversely impacted by the fruit drop caused as a result of the impact of Hurricane Ian in September '22.
And although hurricane initially impacted the fiscal year 2023 harvest, we expected to take another season or more for the growth to recover the pre hurricane production levels. In addition, there was an increase in the price per pound sold of 3.4% for the 3 months ended December 31, 2023, compared to the same period in the prior year as a result of more favorable pricing in one of our contracts with Tropicana. Total operating expenses were $28.2 million and $14.4 million for the fiscal first quarters ended December 31, 2023, and 2022, respectively. The increase in operating expenses primarily relates to the $10.8 million adjustment to reduce our inventory to its net realizable value as a result of significantly lower-than-anticipated box production from our early and mid-season crop due to the ongoing effects of Hurricane Ian as well as an increase in harvest and all costs driven by our increased box production and approximately $1.3 billion we received in the quarter ended December 31, 2022, which was the last installment of the Florida citrus block grant program for the 2017 storm, Hurricane Irma.
General and administrative expenses for the 3 months ended December 31, 2023, and 2022 were $3.3 million and $2.5 million, respectively. The increase was primarily due to an increase in salary and wages of $0.6 million and consulting fees principally related to real estate entitlement activities of $0.3 million. Other income expense, net, for the 3 months ended December 31, 2023, and 2022, was $75.5 million and $2 million, respectively. The increase is primarily due to the sale of 17,229 acres of the Alico Ranch to the State of Florida. For the first fiscal quarter ended December 31, 2023, the company reported net income attributable to common -- attributable to Alico common stockholders of $42.9 million, compared to a net loss of $3.2 million for the first fiscal quarter ended December 31, 2022, driven by the aforementioned sale of the Alico Ranch.
I'll now pass the call back to John.
John Kiernan: Thanks, Brad. Although the first part of our harvest season was off to a slow start, which we believe was because of Hurricane Ian, we remain cautiously optimistic that our upcoming Valencia harvest will show stronger improvement from the effects of Hurricane Ian. Alico has over 125 years of experience as a leader in Florida agriculture and land management. Since 2017, we planted over 2.2 million new trees, and we remain committed to the Florida citrus industry for the long term. We plan to apply the OTC therapy to substantially all of our producing trees in fiscal year 2024 and believe that this treatment, combined with the recent tree plantings that are maturing in consistent caretaking practices, should support a significant increase in fruit harvest in next season.
In addition, Alico is continuing to evaluate all of our properties to determine the highest and best use to create long-term value for our shareholders. We strive to provide our investors with the benefits and stability of conventional agricultural investment with the enhanced optionality that comes through active land management. And with that, we'll now open the line up to questions from industry analysts. Kelsey?
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