Limoneira Company Q2 FY2026 earnings call

- Strategic Transformation Progress * Management reports continued execution of its strategic transformation focused on long-term value creation, with Q2 revenue and adjusted EBITDA exceeding analyst expectations. * The company is on track to hit its targeted $10 million in annual selling, general, and administrative cost savings, with SG&A reductions already reflected in the current quarter results.

- Core Agribusiness Updates * The Sunkist partnership provides expanded access to premium food service and major U.S. retail accounts via full-category citrus offerings, reducing pricing pressure, improving packing margins, and strengthening grower relationships. Fresh utilization of lemons is now above 80%, the highest level in years, and current lemon pricing exceeds $20 per carton. * Avocado production capacity is expanding: 1,700 total acres planted, with 800 acres currently bearing fruit. An additional 800 acres will come online over the next 2–4 years, representing a nearly 100% capacity increase. 400 acres planted in 2023–2024 are expected to begin producing this year, adding volume in FY2027. California avocados command premium pricing, and the company’s strategic location offers logistical advantages to high-consumption Western U.S. markets. * The company ceased lemon farming on 600 acres in Yuma, Arizona, as part of its water monetization strategy, shifting to low-water-use crops to improve profitability of the asset. A Colorado River water rights monetization event is expected in FY2026.

- Diversified Asset and Real Estate Value Creation * A 50-50 organic recycling joint venture with Ackerman was completed, with a processing capacity of 295,000 tons of organic waste annually; the facility is expected to generate shared earnings when it becomes operational in FY2027. * An agreement for the partial sale of the Paso Robles, California vineyard was signed: the 80% interest sale for $16 million is expected to close in Q4 FY2026, with the company retaining a 20% upside stake. * The Harvest at Lima Nera real estate development project has strong phase 2 home sales (2–7 homes sold per week). Phase 3 (500 home lots) is expected to launch in FY2027, with apartment construction groundbreaking scheduled for H2 2027. Total expected proceeds from all real estate tranches are $155 million over the next five fiscal years, with the 25-acre medical pavilion project expected to begin monetization in FY2026.

Total net revenue for Q2 FY2026 was $23.9 million, down from $35.1 million in Q2 FY2025. The Agribusiness segment generated $22.5 million in revenue (94.1% of total revenue), down from $33.6 million in the prior year quarter. Fresh lemon sales, the largest Agribusiness sub-segment, were $17.1 million (71.5% of total revenue): 1,028,000 cartons sold at an average price of $16.63 per carton, compared to 1,357,000 cartons at $14.52 per carton in Q2 FY2025. Avocado revenue was nominal in Q2 FY2026, down from $2.8 million in the prior year quarter, due to a deliberate harvest delay. All other Agribusiness sub-segments (oranges, specialty citrus, wine grapes, farm management) generated nominal revenue in Q2 FY2026, down from $2.6 million combined in the prior year quarter, due to strategic business exits and the Sunkist transition. The Other operations segment generated $1.4 million in revenue (5.9% of total revenue), down slightly from $1.5 million in Q2 FY2025. Total costs and expenses were $45.6 million in Q2 FY2026, up from $38.5 million in Q2 FY2025, driven by $17.1 million in non-cash charges. GAAP operating loss was $21.7 million, compared to a $3.3 million operating loss in Q2 FY2025. Non-GAAP adjusted EBITDA loss was $1.7 million, compared to a $0.2 million adjusted EBITDA loss in the prior year quarter. Adjusted diluted net loss per share was 29 cents, compared to 17 cents in Q2 FY2025.

- Full-year 2026 fresh lemon volume guidance is maintained at 4 to 4.5 million cartons. - Full-year 2026 avocado volume guidance is raised from prior levels to 5.5 to 6.5 million pounds. - Management confirms confidence in achieving positive adjusted EBITDA in both the third and fourth quarters of FY2026, driven by higher seasonal volumes, delayed avocado harvests capturing stronger pricing, improved lemon prices, and realized cost savings. - The organic recycling joint venture and phase 3 of the Harvest at Lima Nera real estate development are expected to contribute to operations in FY2027, with earnings contributions from the joint venture beginning that year.

- The partial sale of the 80% interest in Windfall Farms has closing risk: if the buyer cannot fund the purchase by the end of Q4 FY2026, the transaction may fall out of escrow. - Forward-looking statements are subject to known and unknown risks and uncertainties, many outside of the company’s control, that could cause actual future results to differ materially from current expectations; key risks are outlined in the company’s SEC filings (10-Q and 10-K). - Water rights monetization in Colorado River is dependent on regulatory progress from the Bureau of Land Management Reclamation, tied to expiring reservoir contracts at the end of 2026, creating timing uncertainty for the monetization event.

Q: How much avocado volume was shifted from Q2 to Q3, what is current market pricing for avocados, and what is the current price of lemons? What are the closing conditions for the Windfall Farms partial sale? / A: Approximately 500,000 pounds of avocado volume was delayed from Q2 to Q3 to capture better pricing. Current market pricing for the most common avocado size is $1.30 to $1.40 per pound, with an expected blended average price around $1.30 for the shifted volume. Lemon pricing is currently averaging above $20 per carton across all sizes and grades, and forecasts project further monthly increases through October 2026. For the Windfall sale, the buyer has until the end of Q4 FY2026 to complete due diligence and fund the $10 million cash portion of the purchase; if the buyer cannot close by that date, the transaction is expected to fall through. The sale is structured as $10 million cash at closing plus a $6 million seller-financed note paid over three years.

Q: Why has lemon pricing improved year-over-year even after accounting for the Sunkist marketing fee? What is the driver of this improvement? / A: The pricing improvement comes from a mix of a stronger overall lemon market, expanded Sunkist customer access to large retail and food service contracts, and higher fresh utilization rates. Management attributes the majority of the pricing gain to Sunkist's strong market presence and established buyer relationships. Fresh utilization since the Sunkist partnership has risen above 80%, the highest level the company has seen in several years.

Q: What milestones should investors watch for the FY2026 Colorado River water monetization, and what is the most likely transaction structure? / A: The key milestone to watch is the expiration of existing reservoir contracts on December 31, 2026, which is driving regulatory progress from the Bureau of Land Management Reclamation. An outright sale of the water rights is considered the least likely outcome; the most probable structure is a crop substitution that frees up water rights, which will then be leased long-term or have access rights sold directly to third parties. At a minimum, an extension of current temporary water leasing agreements is expected, but management anticipates a long-term monetization program will be put in place this year.