Limoneira Company (NASDAQ:LMNR) Q4 2023 Earnings Call Transcript
Limoneira Company (NASDAQ:LMNR) Q4 2023 Earnings Call Transcript December 21, 2023
Limoneira Company reports earnings inline with expectations. Reported EPS is $-0.15 EPS, expectations were $-0.15. LMNR isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to Limoneira's Fourth Quarter Fiscal Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Mills with ICR. Thank you. You may begin.
John Mills: Thank you, Doug. Good afternoon, everyone, and thank you for joining us for Limoneira's fourth quarter fiscal year 2023 conference call. On the call today are Harold Edwards, President and Chief Executive Officer; and Mark Palamountain, Chief Financial Officer. By now, everyone should have access to the fourth quarter of fiscal year 2023 earnings release, which went out today at approximately 4.00 PM today Eastern Time. If you have not had a chance to view the release, it's available on the Investor Relations portion of the Company's website at limoneira.com. This call is being webcast and a replay will be available on Limoneira's website as well. Before we begin, we would like to 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, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risk details in the Company's 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 as a result of new information, future events or otherwise. Please note that during call today, we will 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 Limoneira's 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 within 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 our website. And with that, it's my pleasure to turn the call to the Company's President and CEO, Mr. Harold Edwards.
Harold Edwards: Thanks, John, and good afternoon, everyone. I am pleased with our performance in fiscal year 2023, as we achieved our full year avocado and revised lemon volume guidance despite harsh weather conditions and softer lemon pricing throughout most of the year. Additionally, our company's strategic shift towards an asset lighter business model progressed this year and is reflected in our latest results with brokered lemons and other lemon sales growing year-over-year for the second quarter in a row, in the fourth quarter, and our farm management revenue reaching close to $10 million this fiscal year, compared to no revenue last year. We made progress monetizing or eliminating certain non-strategic assets with the sale of our Northern properties for $98 million in net cash proceeds, entering a water following program in Yuma, Arizona for expected annual proceeds of $1.3 million and exiting our unprofitable farming operations in Cadiz.
All these actions have positioned our company to be in a stronger financial position with our balance sheet right sized and our net debt position at the lowest level since becoming a publicly traded company. Heading into fiscal year 2024, we are committed to advancing our strategic shift and believe the actions taken this past year have set us up to improve margins in fiscal year 2024. We also anticipate selling the remaining two identified non strategic assets this next fiscal year for an expected $50 million in proceeds. While rising interest rates this past year caused a temporary slowdown in our harvest at Limoneira project, we are encouraged to have seen sales pick back up the end of the year, with the remaining 121 residential units in Phase 1 of the project, selling out at a 40% premium to lot sales at the inception of the project.
We have adjusted our cash flow projections to account for increased sales prices and now expect a 14% increase in total proceeds to $131 million spread out over nine fiscal years with approximately $8 million received in fiscal year 2022 and $3 million expected in fiscal year 2024. Also in fiscal fourth quarter, the overall lemon market has shown improvement with prices being higher for all grades and sizes. This is caused by the supply and demand curve being out of balance. On the supply side, the availability of fruit has been reduced. Californian and South American supply on the trees in combination with remaining volume in storage is much lower than at the same time last year. Weather events like flooding in Chile are having an impact on the quantity and quality of the lemon crop.
Closer to the USA, in Mexico, excessive heat in July impacted the grade and size of the fruit. Add good demand to this situation and prices should go up. We believe all these factors position us very well for expected higher lemon pricing in fiscal year 2024. The overall improvements we are making to our business are well aligned with our strategic asset lighter transition plan that we expect to be completed in this next fiscal year. We are working to pivot our business towards a model that will streamline our operations, sell nonstrategic assets, improve the consistency of our earnings, increase EBITDA and dividends per share, reduced debt, right sized the balance sheet, and improved the return on invested capital. Debt less cash on hand as of October 31, 2023 was $37.4 million compared to $105 million at the end of fiscal year 2022.
The benefits of all these improvements will begin to be fully realized in fiscal year 2024. Even after the recent non strategic asset sales, we continue to manage approximately 11,100 acres of land with approximately 21,000 acre feet of owned water usage and pumping rights. This year we announced that we entered into a second following program with Yuma Mesa Irrigation and Drainage District and the United States Bureau of Reclamation that supersedes the initial program and will commit to follow owned land through at least calendar year 2025. We expect to receive approximately $1.3 million annually paid in quarterly installments for following approximately 600 acres out of our 1300 acres of farmland in Yuma, Arizona. Yuma Mesa Irrigation and Drainage District will refrain from diverting Colorado River water that otherwise would have been used to irrigate followed lands, so that the same water may be retained in Lake Mead as Colorado River system conservation water.
This will result in increasing the supply and elevation of Lake Mead and helping to avoid water shortages in Arizona and the lower basin. In fiscal year 2024 on the operational side of our business, you will continue to see our transition to an asset lighter business model and focus on the best use of our assets to enhance shareholder value. We have dramatically decreased interest expense, removed our pension obligation, we'll be receiving quarterly payments from Yuma Mesa Irrigation and Drainage District for our following program, and we believe lemon pricing will be better this year compared to fiscal year 2023, positioning us well for strong improvements in fiscal year 2024. In addition to our operational improvements, our board and management team will continue to evaluate how to best leverage our expertise in farm management, packing, marketing and distributing citrus combined with our valuable portfolio of agricultural lands, real estate properties, and water rights in order to enhance long-term shareholder value.
This has led our board towards an additional process to explore potential strategic alternatives aimed at maximizing value for stockholders, including but not limited to a sale of all or parts of the Company, merger and other potential strategic transactions. And with that, I'll now turn the call over to Mark.
Mark Palamountain: Thank you, Harold, and good afternoon, everyone. As a reminder, due to the seasonal nature of our business, it is best to view our business on an annual not quarterly basis. Historically our first and fourth quarters are the seasonally softer quarters while our second and third quarters are stronger. For the fourth quarter of fiscal year 2023, total net revenue increased 4% to $41.4 million compared to total net revenue of $39.7 million in the fourth quarter of the previous fiscal year. Agribusiness revenue was $40.1 million compared to $38.2 million in the fourth quarter last year. Other operations revenue was $1.3 million, compared to $1.4 million in the fourth quarter last year. Agribusiness revenue for the fourth quarter of fiscal year 2023 includes $11.3 million in fresh lemon sales, compared to $13.1 million during the same period of fiscal year 2022.
Approximately 550,000 cartons of fresh lemons were sold during the fourth quarter of fiscal year 2023 at a $20.39 average price per carton, compared to 680,000 cartons sold at a $19.33 average price per carton during the fourth quarter of fiscal year 2022. The industry experienced softer pricing for lemons throughout most of the year, because of the heavy rains in California throughout December until May, which delayed a portion of our lemon harvest and an industry-wide pest issue that lowered the grade on certain fruit. Beginning in August, we began to see a steady recovery in price for all grades and sizes that continued throughout the fourth quarter, leading us to record the highest fourth quarter lemon pricing since 2019. Brokered lemons and other lemon sales were $14.4 million and $12.7 million in the fourth quarter of fiscal years 2023 and 2022 respectively, representing 13% growth year-over-year.
The Company recognized no avocado revenue in the fourth quarter of fiscal year 2023, compared to nominal avocado revenue in the fourth quarter of the previous fiscal year, due to the seasonal nature of this fruit. The Company recognized $1.9 million of orange revenue in the fourth quarter of fiscal year 2023, compared to $2.7 million in the fourth quarter of fiscal year 2022. Approximately 69,000 cartons of oranges were sold during the fourth quarter of fiscal year 2023 at a $28.32 average price per carton, compared to approximately 86,000 cartons sold at a $31.22 average price per carton during the fourth quarter of fiscal year 2022. Specialty citrus and other revenue was $5.4 million in the fourth quarter of fiscal year 2023, compared to $5.5 million in the fourth quarter fiscal year 2022.
As a reminder, we sold the majority of our orange and specialty citrus acreage in the Northern Properties transaction during the first quarter of fiscal year 2023. Farm management revenues were $3.1 million in the fourth quarter of fiscal year 2023 and there were no farm management revenues in the fourth quarter of fiscal year 2022. Total costs and expenses for the fourth quarter of fiscal year 2023 were $51.1 million, compared to $41.5 million in the fourth quarter of last year. The increase of $9.6 million was primarily due to farm management costs expensed in fiscal year 2023, but capitalized as cultural cost in fiscal year 2022, and decreased gain on asset disposals. Operating loss for the fourth quarter of fiscal year 2023 was $9.7 million compared to operating loss of $1.9 million in the fourth quarter of the previous fiscal year, primarily due to increased costs and expenses as described above.
Net loss applicable to common stock after preferred dividends for the fourth quarter of fiscal year 2023 was $3.6 million compared to net loss applicable to common stock of $2.8 million in the fourth quarter of fiscal year 2022. Net loss per diluted share for the fourth quarter of fiscal year 2023 was $0.20 compared to net loss per diluted share of $0.16 for the same period of fiscal year 2022. Adjusted net loss for diluted EPS for the fourth quarter of fiscal year 2023 was $2.6 million compared to $5.7 million in the same period of fiscal year 2022. Adjusted net loss per diluted share for the fourth quarter of fiscal year 2023 was $0.15 compared to an adjusted net loss per diluted share of $0.32 for the fourth quarter of fiscal year 2022. A reconciliation of net loss attributable to Limoneira Company to adjusted net loss for the diluted EPS is provided at the end of our earnings release.
Adjusted EBITDA was a loss of $1.3 million in the fourth quarter of fiscal year 2023 compared to a loss of $3.8 million in the same period of fiscal year 2022. A reconciliation of net loss attributable to Limoneira Company to adjusted EBITDA is also provided at the end of our earnings release. For the fiscal year ended October 31, 2023, revenue was $179.9 million, compared to $184.6 million in the same period last year. Operating income for fiscal year 2023 was $10.8 million compared to operating income of $2.2 million in the same period last year. Net income applicable to common stock after preferred dividends was $8.9 million for fiscal year 2023 compared to a net loss applicable to common stock after preferred dividends of $737,000 for fiscal year 2022.
Net income per diluted share for fiscal year 2023 was $0.50 compared to net loss per diluted share of $0.04 in fiscal year 2022. For fiscal year 2023, adjusted net loss for diluted EPS was $7.6 million, compared to an adjusted net loss for diluted EPS of $1.3 million for fiscal year 2022. Adjusted net loss per diluted share was $0.43, compared to adjusted net loss per diluted share of $0.08 for fiscal year 2022 based on approximately $17.6 million and $17.5 million weighted average diluted common shares outstanding for fiscal years 2023 and 2022, respectively. We recorded for fiscal year 2023 and income tax provision of $4.2 million on pre-tax income of $13.4 million. The tax provision recorded for fiscal year 2023 differs from the U.S. Federal statutory tax rate of 21%, due primarily to foreign jurisdictions which are taxed at different rates, state taxes, tax impact of stock-based compensation, non-deductible tax items and valuation allowances on certain deferred tax assets of foreign subsidiaries.
The effective tax rate for fiscal year 2023 and 2022 was 31.8% and 234.8%, respectively. For fiscal year 2023, adjusted EBITDA was a loss of $224,000 compared to income of $11.9 million for fiscal year 2022. Turning now to our balance sheet and liquidity. At the beginning of the year, we sold our Northern properties which resulted in a total net proceeds of $98.4 million. The proceeds were used to pay down all of our domestic debt except the AgWest Farm Credit $40 million non-revolving line of credit which has a fixed interest rate of 3.57% until July 1, 2025. Long-term debt as of October 31, 2023 was $40.6 million compared to $104.1 million at the end of fiscal year 2022. Debt levels as of October 31, 2023 minus $3.6 million of cash on hand resulted in a net debt position of $37.4 million at the end of fiscal year 2023.
As a reminder, we have $50 million of remaining non-strategic assets for monetization over the next fiscal year and their sales combining with approved EBITDA may provide an opportunity to further reduce our net debt position by this time next year. Now, I'd like to turn the call back to Harold to discuss our fiscal year 2024 outlook and longer term growth pipeline.
Harold Edwards: Thanks Mark. For fiscal year 2024, we expect fresh lemon volumes to be in the range of 5 million to 5.5 million cartons and avocado volumes to be in the range of 7 million to 8 million pound for fiscal year 2024. We have 700 acres of nonbearing lemons and avocados estimated to become full bearing over the next four to five years, which we expect will enable strong organic growth in the coming years. Additionally, we plan to expand our plantings of avocados over the next three years and also expect to have a steady increase in third-party grower fruit. Turning to our real estate projects, harvest at Limoneira, Limoneira Lewis Community Builders II and East Area II, we have increased our expected total proceeds by 14% to $131 million over nine fiscal years.
The increase is primarily due to increased lot pricing based on our 121 lot sales in October of 2023. Lastly, as a reminder based on our asset lighter model transition, we anticipated an additional $50 million of asset sales during the next fiscal year. And with that, I'd like to turn it over to the operator.
Operator: [Operator Instructions] Our first question comes from the line of Ben Bienvenu with Stephens. Please proceed with your question.
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