Limoneira Company Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Agriculture and Partnerships: Navigated challenging lemon market conditions, with strategic partnership with Sunkist for $5 million annual cost savings and EBITDA enhancements starting fiscal 2026; expanded avocado production with 700 acres of nonbearing avocados maturing in next 2-4 years; advanced water monetization with sale of water pumping rights generating $1.7 million proceeds.
• Real Estate: Real Estate Development exceeding expectations, with Harvest at Limoneira selling homes ahead of schedule; exploration of Limco Del Mar property for residential development to address Ventura County's housing shortage, involving comprehensive community-based planning process.
• Water Monetization: Sold water pumping rights in Santa Paula Basin in January 2025 for $30,000 per acre foot across three transactions, generating $1.7 million in proceeds and $1.5 million in gains.

Segment Performance

• Agribusiness:
  • Third quarter 2025 total revenue: $45.9 million, compared to $61.8 million in third quarter of previous fiscal year.
  • Lemon sales: Fresh packed lemons: $23.8 million in 2025 vs $25.8 million in 2024; brokered lemons: $3.8 million in 2025 vs $9.8 million in 2024.
  • Avocado sales: $8.5 million in 2025 vs $13.9 million in 2024; volume: 5.7 million lbs in 2025 vs 8.9 million lbs in 2024.
  • Orange sales: $1.7 million in 2025 vs $1.2 million in 2024.
  • Specialty citrus and wine grape: $600,000 in both 2025 and 2024.
  • Farm management: $100,000 in 2025 vs $3.2 million in 2024 (due to terminated farm management agreement).
• Other Operations: $1.5 million in both third quarter of 2025 and 2024.

Guidance

• Fiscal year 2025: Fresh lemon volume expected 4.5-5 million cartons; avocado volume ~7 million lbs.
• Fiscal year 2026: Anticipates improved lemon pricing due to international shortages; avocado production to increase as nonbearing avocados mature; $5 million annual cost savings from Sunkist partnership starting 2026; expects $155 million in real estate distributions over next 5 fiscal years; lemon volume estimated 4-4.5 million cartons in 2026.

Risks

• Lemon market pricing pressures; avocado crop alternating years of high and low production.
• Regulatory and development costs associated with Limco Del Mar property development, estimated $3-5 million over 3-5 years.
• Uncertainties in weather affecting citrus crops (e.g., Turkey freeze, Spain weather issues) impacting supply and pricing.

Question and Answer

Q: First, a couple of questions on the Limco Del Mar opportunity here. Any expectations of costs flowing through the income statement on this, say, through '26, maybe associated with regulatory costs or consulting costs? And second, what's your vision for how this will get developed over the long term in terms of what Limoneira's role will be?

A: Great question, Ben. So as to costs, it will be similar to how we developed Harvest and the entitlement period. We're trying to be conservative, thinking 3 years on a minimum, 5 years out and $3 million to $5 million depending on that time frame. But the majority of those costs will be capitalized and will not run through the income statement and then as we develop the project. Now Limoneira being the community player behind all this, and Lewis has been a great partner and we'd love to have them involved at that point. Right now, it's just Limoneira running with the ball, and we've put together a great team of legal experts and development experts and county experts to really figure out what the community benefit is going to be and how we make this a benefit for everybody so we can move it across the line.

Q: On a higher level, what's your vision for how this will get developed over the long term in terms of what Limoneira's role will be? I mean, are you going to be looking for kind of a Lewis Group type 50-50 partner? Do you want to maybe offload more of the kind of developmental burden on a partner?

A: (Continued from above) ... Right now, it's just Limoneira running with the ball, and we've put together a great team of legal experts and development experts and county experts to really figure out what the community benefit is going to be and how we make this a benefit for everybody so we can move it across the line.

Q: First, a couple of questions on the lemon market. Given the reset that lemons -- the lemon market has had over the past few years, how do you kind of think about what normalized pricing is in this business today? And then kind of what are the different kind of sources of supply constraints that you see out there that are going to be helpful as you look into next year?

A: Yes. So Ben, we were pleasantly surprised into August into the lemon pricing. So as we mentioned, it lasted a little longer. Our average price in the quarter was -- in Q3 was just over $17. August, we saw prices in the low 20s, so almost a $4 to $5 jump. There was a bit of a shortage around on the East Coast. A lot of the imports that usually came to the U.S. went to Europe. And you mentioned some of those issues. And Turkey had a really challenging freeze, which it's always hard to get the best assessment, but could have gone all the way down to damaging trees, which would be 2 years of crop. And so -- and then also Spain had their own set of weather issues. So next year, we see Spain and Turkey being short, call it, 20% to 30%, which then, again, will allow some of our Southern Hemisphere friends to move fruit there. And all of our market is about balance, right? And so when us -- Limoneira coming back into the Sunkist, there's a lot more contracted business. And we've got those new customers in the quick-serve restaurant business, along with our existing customer base, we see a lot more potential for stability. And I think you'll see a price with a two in front of it. Right now, as I said, August was in the low 20s, call it, $23. And if you keep a higher price, and this has been historical since as long as I've been here, coming into the fall, you always have a dip into that winter. But if you have a higher entry point, obviously, you're going to have a lower low theoretically. And so that's sort of what is setting up. And we're at year 7 going into year 8 of a really challenging lemon environment. And usually, those cycles last that long. Will we have a mother nature event? We're not sure about that. But for the most part, that's what gives us confidence is the balance around the world, the lemons we've seen come out, including our own at a higher starting point going into next year.

Q: One more for me, and I'll get back in queue. And it might be a little premature on the '26 outlook for avocados. But given the kind of biannual nature of the crop and the California harvest complete at this point, do you have any kind of rough ideas of what your expectations are for avocado volumes here looking into '26?

A: So it's a little premature, but we're looking up into the trees right now. You're seeing a set. I would say that as this -- as we're counting pieces and assuming we hold on to the fruit, I would expect it to not be greater than this year. It looks like it's going to be similar to this year to less, but it's too early to really know that. So I wouldn't count on a big rebound in production. It's why we made our forward-looking comments that we believe our first big breakout year with volume improvement will be 2027. But more to come. Let's see what we come up with. And when we talk in the next call, we'll have a much better idea of what we're looking at for 2026 with avocados.