Limoneira CO Q3 FY2026 earnings call

• Agribusiness Growth & Strategy: Management is executing a value creation strategy focused on growing long-term agricultural income. Avocado production is expanding significantly, with over 10 million pounds expected in FY2027 (a ~30% increase over FY2026), driven by 400 acres planted in 2023/2024 now coming into bearing.
• Lemon Operations Transition: The company has optimized lemon packing through a partnership with Sunkist. This transition eliminated brokered orange/specialty citrus revenues but improved fresh lemon carton margins. Lemon volumes are expected to be at the lower end of guidance due to higher US market imports.
• Asset Monetization: Identified over $200 million in non-strategic real estate, land assets, and water rights. Windfall Farms ($15 million sale) is closing soon. Water monetization efforts in Arizona involve ceasing citrus farming on 600 acres to focus on low-water crops, freeing up Class III Colorado River water rights for municipal transfer.
• Real Estate Development: The 'Harvest at Limonera' project continues robust home sales (2-7 per week in Phase 2). Phase 3 (500 lots) targets FY2027 launch. A 25-acre medical pavilion may monetize in FY2026, and 300 apartments will break ground in H2 FY2027.
• Cost & Efficiency: Achieving targeted $10 million annual SG&A savings. Operating costs decreased year-over-year, though an operating loss of $3 million was recorded due to asset impairments related to Windfall Farms.

Total net revenue for Q3 FY2026 was $43.8 million, a decrease from $47.5 million in Q3 FY2025. Agribusiness revenues totaled $42.2 million (down from $45.9 million), driven by lower lemon sales volume and avocado price declines, partially offset by higher avocado volume and improved lemon pricing. Other operations revenue was $1.6 million (up from $1.5 million). The transition of citrus brokerage to Sunkist eliminated orange and specialty citrus revenues. Adjusted EBITDA increased to $3.9 million from $3.0 million in the prior year period.

• FY2026 Lemon Volume: Revised downward to the lower end of previous estimates; expecting 4.0 to 4.25 million cartons due to higher import volumes from Argentina affecting US supply.
• FY2026 Avocado Volume: Raised again; now expecting 7.0 to 7.25 million pounds (previously 5.5-6.5 million).
• FY2027 Avocado Volume: Expects >10 million pounds, representing a ~30% increase over FY2026.
• Monetization Proceeds: Expects total proceeds of ~$180 million from real estate projects (Harvest, Lewis Community Builders II, East Area II) spread over seven fiscal years.
• EBITDA Outlook: Expects positive adjusted EBITDA in Q4 FY2026 and meaningfully stronger EBITDA in FY2027 driven by avocado volume growth, cost savings, and operational improvements.

• Import Competition & Pricing Volatility: Higher lemon imports from South America (diverted from Europe) have oversupplied the US market, pressuring volumes and prices.
• Weather Dependency: Agricultural yields, particularly for avocados, remain dependent on weather conditions. While rain is generally beneficial for aquifers, excessive rainfall causing flooding poses a risk to harvestability.
• Operational Execution Risks: The success of the 2027 avocado volume targets depends on the new acreage surviving wind events and successfully reaching harvestable maturity.
• Regulatory/Market Timing for Water Rights: Monetizing water rights requires complex regulatory approvals and long-term agreements with municipal entities, carrying execution risk within the narrow fiscal window.

Q: Analyst asked about the sources of higher lemon imports impacting the revised volume guidance and whether this is a timing or structural supply issue. / A: CEO explained that Western Europe’s oversupply from South African lemons caused Argentine fruit to divert to the US, oversupplying the market. Management intentionally held back pushing additional supply into Q4 out of caution, noting prices are beginning to firm despite the aftermath of these imports.

Q: Analyst inquired about the timeline and confidence regarding the monetization of Class III Colorado River water rights in FY2026. / A: CEO confirmed the project is on track. The company removed lemon farming from 1,300 acres in Yuma, AZ, and identified low-water crop substitutes. This frees up water rights for transfer to municipalities like those served by the Central Arizona Project. Confidence remains high for entering a long-term agreement and monetizing these assets in Q4.

Q: Analyst requested details on the cadence of the 400 new avocado acres coming online and how much of the FY2027 10M+ pound target is secured versus weather-dependent. / A: CFO noted that ~7M pounds are effectively locked in from existing producing acreage. The remaining increase comes from 2023/2024 plantings. CEO added that while a large crop is set, terms like 'locked in' are risky due to weather/wind hazards, but early signs show strong fruit development on trees.

Q: Analyst asked about the potential impact of the El Niño weather pattern on operations and regional competition. / A: CEO stated that moderate rain is beneficial for aquifers and tree physiology, though flooding is a risk they are mitigating via drainage preparation. CFO added that El Niño predicts less rain in Mexico, which could reduce their crop size, thereby creating more market opportunity for California avocados.