Limoneira Company Stock

Thank you. Good afternoon, everyone, and thank you for joining us for Limoneira's Third Quarter Fiscal Year 2026 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer, and Greg Hamm, Chief Financial Officer. By now, everyone should have access to the third quarter fiscal year 2026 earnings release, which went out today at approximately 4 p.m. Eastern time. If you've 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'd 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 results, performance, or achievements expressed or implied by such forward-looking statements.

Important factors that could cause or contribute to such differences include risk detailed in the company's Form 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 a result of new information, future events, or otherwise. Please note that during today's call, we'll 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, in 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 is my pleasure to turn the call over to the company's president and CEO, Mr. Harold Edwards.

Thanks, John, and good afternoon, everyone. During the third quarter, we continued to make progress on our value creation strategy of growing long-term agricultural income, which includes streamlining operations, expanding avocado production, optimizing lemon packing with recently announced Sunkist partnership, and expanding our organic recycling facility. In addition, we have identified real estate development and non-strategic land assets and water rights of over $200 million. The third quarter results came in below our expectations due to lighter than anticipated lemon sales volume. However, adjusted EBITDA exceeded prior year third quarter results. The quarter benefited from higher total agribusiness operating income driven by stronger than expected avocado volume and progress toward our targeted $10 million in annual selling, general and administrative expense savings. We now expect to achieve the lower end of our lemon volume guidance as a result of higher lemon imports hitting the U.S. market.

However, we are again raising our avocado volume guidance for fiscal year 2026. Looking ahead, we expect to produce more than 10 million pounds of avocados in fiscal year 2027, an increase of approximately 30 percent over fiscal year 2026. This growth is driven by the 400 acres of avocados we planted in 2023 and 2024, which are expected to set a crop this year and contribute to volume in fiscal year 2027. We also have an additional 400 non-bearing acres that are expected to begin bearing in the next two to four years. As a reminder, California avocados command premium pricing due to the superior quality, and our strategic location provides logistical advantages to the highest per capita consumption markets in the U.S. Turning to the monetization of non-strategic assets, we expect the sale of Windfall Farms for $15 million to close on September 14, 2026, which is the most recent step in our ongoing strategy to monetize non-strategic assets, strengthen our balance sheet, reduce debt, and redeploy capital into higher return opportunities across our core agribusiness and real estate platforms. As we enter the fiscal fourth quarter, we expect another quarter of positive adjusted EBITDA and additional asset monetization events.

Regarding our water rights monetization, we've taken decisive steps in Arizona, ceasing citrus farming operations on 600 acres of lemons to focus on water monetization by farming low-water use crops, which we anticipate will make this asset significantly more profitable. We expect a monetization event from our Class III Colorado River water rights in 2026. Additionally, our Santa Paula Basin conserved pumping rights represent high-value, non-operational resources that we can convert to cash while maintaining our agricultural operations. Looking into fiscal year 2027, we are well positioned to achieve meaningfully stronger EBITDA. This includes the benefit from our recently signed 50-50 organic recycling joint venture with Agromin to create a potential high return facility with the capacity to process up to 290,000 tons of organic waste annually. This is expected to generate significant shared earnings when the facility becomes operational in the second half of fiscal year 2027. With a dramatic increase in our avocado volume from the additional acreage that was planted in 2023 and 2024, realizing the full benefit from our current cost savings initiatives, optimizing lemon packing with our transition to Sunkist, and an additional $4 million in anticipated operating improvement due to Windfall Farms management, improved lemon storage margins, and improved lemon logistics. Turning to our real estate development project, Harvest at Limoneira, we continue to expect future proceeds from Harvest, Limoneira Lewis Community Builders II and East Area II to total $155 million over the next five fiscal years.

Home sales for phase two continued to be robust with two to seven homes per week being sold. Phase three of the project consists of approximately 500 home lots, and we believe we will go to market with this phase in fiscal year 2027. In addition, we have 300 apartments approved and expect to break ground on this portion of the project in the second half of fiscal year 2027. Part of our real estate development is a 25-acre East Area II medical pavilion project that we believe could begin to be monetized in fiscal year 2026. Additionally, we have Leoncito Del Mar, our 221-acre agricultural infill property, which represents a strategic asset with potential for residential development and significant long-term value creation. In summary, as we enter the fourth quarter of fiscal year 2026, we believe we are very well positioned to achieve positive adjusted EBITDA and monetize one of our water assets in the quarter and continue building the foundation for sustained profitability. We've transformed our cost structure, focused our revenue streams, optimized our asset base, and positioned ourselves for sustainable EBITDA growth.

I believe the items just discussed have us very well positioned to unlock the tremendous asset value at Limoneira. Now let me turn the call over to Greg for the financial details, and then we'll take your questions. Thank you.

Thank you, Harold, and good afternoon, everyone. I'm pleased to be speaking with you today to discuss our third quarter fiscal year 2026 financial results. As we discussed last quarter, the third and fourth quarters were expected to be our seasonally stronger periods under the Sunkist Agreement, and our third quarter results are tracking in line with that expectation. Total net revenue for the third quarter of fiscal year 2026 were $43.8 million compared to $47.8 million in the third quarter of fiscal year 2025. Agribusiness revenues totaled $42.2 million compared to $45.9 million in the prior year third quarter. Other operations revenue was $1.6 million compared to $1.5 million in the prior year third quarter. The year-over-year decrease was primarily due to the transition of our citrus brokerage operations to Sunkist, which eliminated orange and specialty citrus revenues and decreased brokered lemon and other lemon sales, partially offset by increased fresh lemon and carton sales driven by higher pricing.

Additionally, avocado revenues decreased due to lower prices, partially offset by higher volume of avocados sold compared to the prior year third quarter. Fresh lemon carton sales were $27.3 million in the third quarter of fiscal year 2026, compared to $23.8 million in the same period last year. We sold approximately 1,373,000 cartons of fresh lemons at an average price of $19.88 per carton during the third quarter of fiscal year 2026, compared to 1,397,000 cartons at $17.02 per carton in the prior year third quarter. Fresh lemon carton sales and per carton prices for the third quarter of fiscal year 2026 are net of the Sunkist marketing fee. Brokered lemons and other lemon sales were immaterial in the third quarter of fiscal year 2026, compared to $3.8 million in the third quarter of fiscal year 2025. Turning to avocados, through the first nine months of fiscal year 2026, we sold approximately 7.3 million pounds of avocados, exceeding the high end of our previous full-year guidance range of 5.5 million to 6.5 million pounds. In the third quarter of fiscal year 2026, we sold approximately 7 million pounds at an average price of $1.15 per pound compared to 5.7 million pounds at $1.50 per pound in the prior year period.

The increase in volume includes some of the harvest we intentionally delayed from the second quarter to maximize pricing and reflects the alternating high and low production years that are typical of the California avocado crop, partially offset by lower average pricing this quarter compared to the prior year. There was no orange revenue in the third quarter of fiscal year 2026 compared to $1.7 million in the same period last year, and no specialty citrus and wine grape revenue compared to $600,000 in the third quarter of fiscal year 2025, both due to the transition of our citrus brokerage operations to Sunkist. Total costs and expenses in the third quarter of fiscal year 2026 were $46.8 million compared to $48.1 million in the third quarter of last fiscal year, primarily driven by a decrease in agribusiness costs and lower selling, general and administrative expenses partially offset by impairment of assets related to Windfall Farms. Selling, general and administrative expenses were $4 million compared to $5 million in the third quarter of fiscal year 2025, primarily reflecting lower salaries, benefits, and other selling expenses related to the Sunkist transition. Operating loss for the third quarter of fiscal year 2026 was $3 million, compared to an operating loss of $600,000 in the prior year period. This reflects the revenue and cost factors just described. Net loss applicable to common stock after preferred dividends was $3 million, or 17 cents per diluted share, in the third quarter of fiscal year 2026, compared to a net loss applicable to common stock of $1 million, or 6 cents per diluted share, in the third quarter of fiscal year 2025.

Now, let me turn to adjusted results. Adjusted net income for diluted EPS in the third quarter of fiscal year 2026 was $400,000, or two cents per diluted share, compared to an adjusted net loss of $400,000, or two cents per diluted share in the prior year period. A full reconciliation is provided in our earnings release. Non-GAAP adjusted EBITDA was $3.9 million in the third quarter of fiscal year 2026, compared to $3 million in the same period last year. Reconciliation to net loss attributable to Limoneira Company is provided in our earnings release. Turning to our balance sheet, long-term debt less current portion as of July 31st, 2026 was $100.7 million compared to $72.5 million at the end of fiscal year 2025. Cash and cash equivalents were $2.2 million as of July 31st, 2026 compared to $1.5 million at the end of fiscal year 2025.

During the first nine months of fiscal year 2026, we received aggregate insurance proceeds of $5.4 million related to combined business interruption and casualty loss claims arising from incidents at our packinghouses. On September 2, 2026, we received confirmation from our insurance company then an additional $2 million of insurance proceeds is to be paid for these claims. We anticipate receiving these additional insurance proceeds in the fourth quarter of fiscal year 2026, at which time income will be recognized for the amounts received. I also want to update you on the Windfall Farms transaction. Subsequent to quarter end on August 17, we announced that we entered into a new agreement to sell Windfall Farms for $15 million all cash following a competitive public auction process. We expect this transaction to close on September 14, 2026, subject to customary closing conditions, and we intend to use the proceeds to reduce debt and fund continued avocado acreage expansion, consistent with our capital allocation priorities. There are two additional pieces of the transaction worth highlighting.

First, the buyer has executed a farming agreement under which we will continue to farm the vineyard property and will be paid $200,000 per year in addition to full reimbursement of all expenses on the property. Second, the buyer elected to exclude the 2026 crop from the sale so we will be able to collect the economic benefit of this year's vineyard crop, which we expect to be substantially complete by October 31st. Now I'd like to turn the call back to Harold to discuss our remaining fiscal year 2026 outlook and longer-term growth objectives.

pipeline. Thank you, Greg. We expect to achieve the lower end of our fresh lemon volumes due to higher import volume and now believe we will sell 4.0 million to 4.25 million cartons for fiscal year 2026. We have increased our expected avocado volumes to now be in the range of 7 million to 7.25 million pounds compared to the previous range of 5.5 million to 6.5 million pounds for fiscal year 2026. We expect at least 30% increase in volume in fiscal year 2027 compared to fiscal year 2026. We have identified over $200 million in real estate development and non-strategic land assets and water rights that we expect to monetize beginning in the fourth quarter of this year and over the next few years. In addition, we expect to receive total proceeds of approximately $180 million from Harvest, Limoneira Lewis Community Builders II, and East Area II spread out over seven fiscal years, of which $10 million was received in fiscal year 2025 and $15 million was received in fiscal year 2024. We're excited about our overall business for fiscal year 2027 and the tremendous opportunity we have to enhance shareholder value through improved agricultural results and monetization events. Operator, we'll now open the call to questions.

Thank you. We'll now be conducting a question and answer session.

[Operator Instructions]

Thank you. Our first question is from Puran Sharma with Stephens.

Good afternoon and thanks for the question here. Just wanted to understand the lemon volumes and imports you called out. I believe you mentioned higher imports as the reason you're going to the lower end of the guide here. Could you maybe give us a sense as to where you're seeing these imports coming from? Is this mainly a timing issue? Or is it just more industry supply than you're anticipating here in the back half? Yes.

Hi, Puran. Thanks for the question. Yes, so as usual, there's a series of connected dots items that happened that caused the challenges in our sales volume in the third quarter. So the first thing that happened was Western Europe got oversupplied with lemons from South Africa. And Western Europe is typically the outlet for Argentina fruit. And so as the price went down in Western Europe, the Argentina fruit diverted to the U.S. and, in essence, oversupplied the market. And so that's really what happened is Sunkist's sales plan fell short because there were just too many lemons in the market at this time. And it hurt us on volume and it actually hurt us on price as well.

And it was just an unexpected oversupply from Argentina. And Argentina was the sole culprit of the oversupply in the lemons. And while that's beginning to be better and relieve itself as that fruit is diminishing in the market, we have intentionally held back on sort of pushing that additional supply forward in the fourth quarter out of an abundance of caution. We are seeing price beginning to firm and strengthen a bit, but there's still challenges with the aftermath of the oversupply caused by the imports of fruit from Argentina.

Okay. Appreciate the color there. Maybe just on water monetization, I think you mentioned you have over $200 million of real estate, strategic land and certain water rights for potential monetization. I believe the Colorado River water monetization event, you're expecting it to occur here in fiscal 2026, which leaves kind of a narrow window. I just wanted to get your thoughts on what needs to happen here to complete a transaction. And has your confidence around the timing and the value of that monetization changed at all since the last quarter?

No, it's kind of right on track with the last quarter. So, a series of things needed to happen. The first is we needed to remove our lemons from our 1300 acres that we have of farmland in Yuma, Arizona. We've done that. The next thing is we needed to identify lower water-using crops that could be substituted for the lemons. And so we're close to some exciting announcements of what those crops will be. But by doing that, that then frees up a certain amount of water that won't be required for our agricultural operations, that we can contribute to following programs, long-term following programs that will allow water users, principally from municipalities, specifically probably the Central Arizona Project, so all of the housing Phoenix that goes all the way down to Tucson and throughout Arizona to take advantage of those water rights from the Colorado River. And so we're very confident that we're very close to entering into a long-term agreement to take advantage of these following programs, will provide significant benefit for us and our shareholders as we monetize those water rights in the fourth quarter of this fiscal year.

Great. Thank you very much. Thanks, Puran.

Thank you. Our next question is from Mark Smith with Lake Street Capital Markets.

Hey guys, good afternoon. This is Alex Ewig on for Mark Smith. I just want to start. You guys raised avocado volume guidance again and are expecting over 10 million pounds in fiscal year 2027, which is about 30% increase year over year. Could you maybe walk us through the cadence of your 400 acres planted in 2023 and 2024 coming online and how much of that fiscal year 2024 is going to be? number is already locked in versus weather or yield dependent.

I would say that seven million, six to seven million is a lock-in because that's on acreage that is already producing and contributed to this year's volume. And then the rest of the increase would be on the expanded acreage from the 2022, 2023, 2024 planning.

I would just add to that that I think it's dangerous to use the word locked in because there's a lot of events that need to happen. Specifically, the fruit needs to grow. It needs to remain on the tree. It needs to survive wind events and weather-related events to get itself a runway between us and actual harvest and sales for 2027. But what we do know is we have a very large crop that's set for next year. We see the fruit on the tree right now. So we're off to a great start.

And so we're confident that we should see the trees that were planted in 2023 and 2024 begin to contribute to the overall production in 2027.

Great, thank you. And what weather impact do you guys expect if the El Nino weather pattern is continuing?

Yes. So, they're predicting quite a bit of rain in this part of California, and just so long as it doesn't all come at once that creates flooding, then rain is actually a good thing for us. It fills up our aquifers and really helps with the physiology of our trees. The danger is, again, if it all comes all at once or too much at once, which causes flooding, which is always a challenge for us and potentially a risk for us. So we're ready. We've got our teams ready. We've got our culverts and our barrancas cleaned out, and we're ready for the rain. We're ready to face it. And I think the El Nino is predicted to have less rainfall in Mexico, which in theory would reduce the size of their crop and provide more opportunity for the California avocados.

Great. Thank you. I'll turn it over. Thank you. [Operator Instructions]

Thank you. At this time, there are no further questions. I'd like to hand the floor back over to Harold Edwards for any closing remarks.

So thank you all for your questions and your interest in Limoneira. Feel free to call Greg or I with additional questions, but we'd like to wish you a great day. Thank you. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

This live transcript is auto-generated without human intervention or review.

Thank you. 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. It is now my pleasure to introduce you to our host, John Mills with ICR. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us for Lehman Air's second quarter fiscal year 2026 conference call. On the call today are Harold Edwards, President and Chief Executive Officer, and Greg Hamm, Chief Financial Officer. By now, everyone should have access to the second quarter fiscal year 2026 earnings release, which went out today at approximately 4.05 p.m. Eastern Time. If you've not had a chance to view the release, it's available on the investor relations portion website at limanera.com. This call is being webcast, and a replay will be available on Limanera's website as well. Before we begin, we'd 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 may not be available to you. statements involve a number of known and unknown risk 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 include risk detail in the company's Form 10Qs and 10Ks 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 a result of new information, future events, or otherwise. Please note that during today's call, we'll 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 Lehman Air's ongoing results of operations, particularly when comparing underlying results from period to period. We've provided as much detail as possible on the information. any items that are discussed on an adjusted basis. Also, within the company's earnings release, and in today's prepared remarks, we included adjusted EBITDA and adjusted diluted earnings per share, 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 its website. that, it's my pleasure to turn the call over to the company's president and CEO, Mr.

Harold Edwards.

Thanks, John, and good afternoon, everyone. Our second quarter results demonstrate continued execution of our strategic transformation to position Limonera for long-term value creation. Our second quarter includes $23.8 million of non-cash charges comprised of $9.3 million of impairment on the Windfall Farms property, $7.8 million loss on asset disposals primarily related to our Yuma, Arizona lemon orchards, $5.1 million net accumulated foreign exchange losses and $1.6 million in allowance on foreign receivables. We We exceeded expectations for revenue and adjusted EBITDA in the second quarter, reinforcing our confidence in the strategic decisions we are implementing. The fundamentals of our business are strengthening as we track towards our targeted $10 million in annual selling, general, and administrative savings, excluding the second quarter on foreign receivables and benefiting from improved operational efficiency through our Sunkist partnership. Our avocado production capacity continues to expand, and we increased our full-year avocado volume guidance, reflecting the strength of our growing operations. These enhancements lead us to a high level of confidence in achieving positive adjusted EBITDA in the third and fourth quarters of this year.

It's important to remember that Sunkist provides enhanced customer access to premium food service accounts and major U.S. retailers through a full category citrus offering. This positions us to deliver comprehensive solutions for both food service and retail buyers while removing pricing pressure from the marketplace and strengthening the both our packing margins and grower-partner relationships. Considering we are now seeing lemon pricing above $20 per carton and continued high levels of fresh utilization, we are very confident in improved performance this year as a lemon grower. Another key initiative involved expanding our avocado production. Today we have 1,700 acres planted with only 800 acres currently bearing fruit. An additional 800 acres will begin bearing fruit over the next two to four years, representing a near 100% increase in our avocado production capacity. Included are 400 acres of avocados we planted in 2023 and 2024 that are expected to set a crop this year and be additive to volume in fiscal year 2027.

California avocados command premium pricing due to superior quality, and our strategic location provides logistical advantages to the highest per capita consumption markets in the western United States. Beyond our core agricultural business, we continue to unlock value from our diversified asset base. During the second quarter, we completed two strategic initiatives, our 50-50 organic recycling joint venture with AgriMint to create a potential high return platform with the ability to process up to 50% of our total revenue. to 295,000 tons of organic waste annually and expected to generate substantial shared earnings when the facility becomes operational in fiscal year 2027. In addition, we executed an agreement for the partial sale of our Paso Robles, California vineyard for $16 million, which Greg will provide more details on in a moment. We've also taken decisive steps in Arizona, ceasing citrus farming operations on 600 acres of lemons to focus on water modernization by farming low water use crops, which we anticipate will make this asset significantly more profitable. Our water monetization strategy is advancing on track and we expect a monetization event from our Class III Colorado River water rights in fiscal year 2026. Additionally, our Santa Paula Basin conserved pumping rights represent high-value non-operational resources that we can convert to cash while maintaining our agricultural operations.

We also have our real estate development project, Harvest at Limonera. We continue to expect future proceeds from Harvest, Lima Nera Lewis Community Builders II, and East Area II to total $155 million over the next five fiscal years. Home sales for phase two continue to be robust with two to seven homes per week being sold. Phase three of the project consists of approximately 500 home lots. And we believe we will go to market with this phase in fiscal year 2027. In We have 300 apartments approved and expect to break ground on this portion of the project in the second half of 2027. Part of our real estate development is a 25-acre East Area 2 medical pavilion project that we believe could begin to be monetized in fiscal year 2026.

Additionally, we have LIMCO Del Mar, our 221 acre agricultural infill property, which represents a strategic asset with potential for residential development and significant long-term value creation. In summary, as we enter the second half of fiscal year 2026, we believe we are very well positioned to achieve positive adjusted EBITDA and continue building the foundation for sustained profitability. Looking at the remainder of this year and into 2027, we expect to benefit from the Agramin joint venture that we've been working on. expect will contribute to earnings in 2027, further expansion of avocado acres to be planted in 2027, $10 million in savings from our SG&A improvements in 2026, increased cash flow from harvest at Lima Nera. continued improvement in our sun-kissed relationship, and expected monetization of water rights. We've transformed our cost structure, focused our revenue streams, optimized our asset base, and positioned ourselves for sustainable EBITDA growth, and the items I just discussed have us very well positioned to unlock the tremendous asset value at Lima Nera. Now let me turn it over to Greg for the financial details, and then we'll take your questions.

Thank you, Harold, and good afternoon, everyone. I'm pleased to be speaking with you today to discuss our second quarter fiscal year 2026 financial results. Our second quarter performance demonstrates meaningful progress in our strategic transformation. While we are navigating a transitional period under our Sunkist partnership, I'm encouraged to report that we exceeded expectations for revenue and adjusted EBITDA this quarter. This validates the operational improvements we've been and gives us confidence as we move into the seasonally stronger second half of our current fiscal year. Let me start by addressing the quarterly rhythm that's now fundamental to understanding our business. Under the Sunkist partnership, the seasonality of our lemon revenue has shifted.

The first and second quarters represent our seasonally softer periods, while the third and fourth quarters will be stronger. Total net revenues for the second quarter of fiscal year 2026 were $23.9 million, compared to $35.1 million in the second quarter of fiscal year 2025. Agribusiness revenues totaled $22.5 million compared to $33.6 million in the prior year second quarter. Other operations revenue was $1.4 million compared to to $1.5 million in the prior year second quarter. The year-over-year decrease in total net revenues reflects three key strategic changes. First, the Sunkist transition and its shift in the quarterly sales cadence. Second, our exit from the brokerage business and Chilean farming operations in the first quarter of this year.

And third, the termination of our farm management operations last fiscal year. Fresh lemon carton sales were $17.1 million in the second quarter of fiscal year 2026, compared to $19.7 million in the same period last year. We sold approximately 1,028,000 cartons of fresh lemons at an average price of $16.63 per carton during the second quarter of fiscal year 2026, compared to 1,357,000 cartons at $14.52 per carton in the prior year second quarter. The decrease in volume was related to the change in cadence under the Sunkist Agreement. It's important to note that per carton prices for fiscal year 2026 are net of the Sunkist marketing fee. Brokered lemons and other lemon sales were immaterial in the second quarter of fiscal year 2026 compared to $2.3 million in the second quarter of fiscal year 2025, the decrease primarily due to the sale of our Chilean farms in the first quarter of fiscal year 2026. According to Avocados, we delayed the harvest of a portion of our avocados and recognized nominal avocado revenue in the second quarter of fiscal year 2026, compared to $2.8 million in the prior year period.

This was a deliberate decision on our part to delay the harvest to capture better expected pricing in the third quarter of this fiscal year. Orange revenue was nominal in the second quarter of fiscal year 2026 compared to $1.6 million in the same period last year, primarily related to the transition of Citrus Brokerage Operations to Sunkist. Specialty citrus and wine grapes were also nominal in the second quarter of fiscal year 2026, compared to $700,000 in the second quarter of fiscal year 2025, due to the transition of our citrus brokerage operations to scientists. There was no farm management revenue in the second quarter of fiscal year 2026 compared to $300,000 in the prior year period due to the termination of our farm management agreement effective March 31, 2025. Total costs and expenses in the second quarter of fiscal year 2026 were over $45.6 million compared to $38.5 million in the second quarter of last fiscal year, driving this increase were two significant non-cash charges. We recorded a $9.3 million impairment related to the strategic sale of an 80% interest in our Windfall Farms Vineyard property in Paso Robles and a $7.8 million loss on asset disposals primarily related to the disposal of lemon orchards in Yuma, Arizona. Combined, these non-cash charges totaled $17.1 million and were disciplined capital allocation decisions.

The Windfall Farms transaction, which we announced in April, involves selling an 80% interest in approximately 724 acres in for an aggregate purchase price of $16 million, $10 million in cash at closing, and a $6 million seller finance note secured by a deed of trust. We're retaining 20% interest in the property. This transaction allows us to monetize a non-strategic asset, redeploy capital into higher return opportunities, and maintain upside participation in the vineyards through our retained interest. We expect this transaction to close in the fourth quarter of fiscal year 2020. The Yuma Lemon Orchard Disposal Decision is equally strategic. We made the decision to cease farming operations on the 600 acres of lemons that are associated to Citrus Packers property in Yuma, Arizona. This decision aligns with our water monetization strategy.

Instead of farming marginally profitable lemon acres, we're focusing on water monetization by conserving water by a crop substitution to low-water-use crops. We believe this makes the Arizona asset significantly more profitable on a go-forward basis. These impairment and disposal-related charges were partially offset by a decrease in agribusiness costs and expenses, a $1.1 million increase in other operating income from insurance proceeds, and a decrease in selling general and administration expenses. The SG&A reduction reflects our target We targeted $10 million in annual savings from our Sunkist partnership net of a second quarter allowance on foreign receivables. We are seeing these planned cost improvements flowing through our P&L. operating loss for the second quarter of fiscal year 2026 was $21.7 million, compared to an operating loss of $3.3 million in the prior year period. The increase in operating loss was primarily due to the decreased agribusiness revenues and net increased costs and expenses, which included the $17.1 million in non-cash charges I described earlier. Additionally, total other expense for the second quarter of fiscal year 2026 includes $5.1 million in accumulated foreign exchange losses recognized on the Chilean farming entities.

This foreign currency loss accumulated from the time we purchased the Chilean farms approximately eight years ago until we received proceeds from the sale of these entities. A positive note, we received $2.3 million in aggregate insurance proceeds in March 2026 related to an incident at our packinghouse, partially related to repair costs we incurred in the first quarter of fiscal year 2026. Of the total insurance proceeds received, $1.2 million was recognized as a reduction of agribusiness costs, and $1.1 million was recognized in other operating income during the second quarter of fiscal year 2026. Next slide. loss applicable to common stock after preferred dividends was $21.4 million or $1.20 per diluted share in the second quarter of fiscal year 2026 compared to a net loss applicable to common stock of $3.5 million or $0.20 per diluted share in the the second quarter of fiscal year 2025. The increase in net loss reflects the same factors impacting total cost of expenses and operating loss described earlier. Now let me turn to our adjusted results. Adjusted net loss for diluted EPS in the second quarter of fiscal year 2026 was $5.2 million, or 29 cents per diluted share, compared to an adjusted net loss of $3.1 million, or 17 cents per diluted share in the prior year period. of full reconciliation is provided in our earnings release.

Non-GAAP adjusted EBITDA was a loss of $1.7 million in the second quarter of fiscal year 2026, compared to a loss of $200,000 in the same period last year. We exceeded expectations on adjusted EBITDA in the second quarter of fiscal year 2026, and a reconciliation to net loss attributable to Lehman Air Company is provided in our earnings release. I want to emphasize what these second quarter results represent. They reflect the new seasonal cadence under our Sunkist partnership. The specific non-cash charges I described and the strategic investments we're making to position the company for improved performance throughout the remainder of fiscal year 2026. The underlying operational trends are positive and we have clear visibility into accelerating performance in the second half of this fiscal year. Turning to our balance sheet, we remain in a solid position to execute on our strategic initiatives, and I expect our liquidity position to improve as we move into the seasonally stronger second half of the fiscal year.

Long-term debt as of April 30th of 2026 was $93.7 million compared to $72.5 million at the end of fiscal year 2025. The increase in debt reflects the seasonal nature of our business and timing of cash flows, which we expect to improve in the third and fourth quarters as our higher volume period generates stronger cash flow. As we enter the second half of fiscal year 2026, now our seasonally stronger period, we have visibility into expected improvements in financial results. Our The third and fourth quarters should benefit from higher lemon volumes under the Sunkist agreement, increased avocado volumes as we strategically delayed harvest to capture better expected pricing, and continued operational efficiency. Now I'd like to turn the call back to Harold to discuss our fiscal year 2026 outlook and longer-term growth pipeline. Thank you, Greg. Looking at the remainder of fiscal year 2026, we expect to achieve positive adjusted EBITDA in the third and fourth quarters due to a large increase in avocado volumes, better lemon volume and pricing, and realization of cost savings. For full year fiscal 2026, we are reiterating our fresh lemon volumes of 4 to 4.5 million cartons and are raising our avocado volumes to 5.5 to 6.5 million pounds.

Beyond our core operations, we have several additional value creation opportunities progressing. Our real estate pipeline remains strong with $155 million in expected total proceeds over the next five fiscal years. The LIMCO Del Mar entitlement process represents another significant real estate development opportunity, and our organization is committed to ensuring that the LIMCO Del Mar entitlement process is a success. Organic recycling joint venture is expected to contribute meaningful earnings when the facility becomes operational in fiscal year 2027. We've built a more resilient business model that's less dependent on commodity lemon pricing while creating multiple engines for profitable growth. We believe we are very well positioned to begin unlocking the tremendous value in all of our assets over the next few years and look forward to updating you on our progress.

Operator, we'll now open the call to questions. Thank you, thank you. With that, we will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. your tone will indicate that your line is in the question queue. You may press star 2 to remove yourself from the queue. participants using speaker equipment and may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. All right, and our first question comes from the line of El Nabor with Lake Street Capital Markets.

with your question. Hey, guys. Thanks for taking my question. So, notice with harvest timing you delayed the avocado harvest to capture better pricing with only 285,000 pounds sold in Q2 at 96 cents a pound. So how much volume has been pushed into Q3 and what pricing are you currently seeing in the market?.

That's a great question. So we pushed about 500,000 pounds from Q2 into Q3. And right now we're seeing pricing anywhere. So remember, pricing is a function of how many sizes and the price per size. But the peak size right now is about a 48. And we're seeing about $1.40 for 48. today. So anywhere from $1.30 to $1.40. So I would expect our blended average price to be somewhere on the order of magnitude of $1.30 maybe.

Yes.

Got you. Okay, thank you. And then can you also give us an update on current lemon pricing per carton?.

Yes, lemons are also another encouraging story right now. We're seeing average pricing across all grades and sizes above $20. And Greg and I just saw a forecast for the remainder of the fiscal year that has the average pricing across all sizes and grades, the average going up about $1. carton each month between now and October. So theoretically, $21 in July, $22 in August, and so on and so forth. So we haven't seen that much strength in lemon pricing since 2018.

Oh, awesome. Well, good to hear. One more for me. So with Windfall Farms, kind of a little bit of a closing risk potentially. So the Paso Robles sale is structured with $10 million cash and $6 million permissionary note. So what are the conditions to closing in Q4? And then what happens to the transaction if the buyer can't close on schedule?.

Yes, so if the buyer can't close on schedule, the deal probably falls out of escrow. But we receive our first hard money on July 1st, so just in a matter of weeks here. And then the deal can close at any time after July 1st. We gave the buyer a substantial amount of money. amount of time for him to complete his due diligence, which is he can extend it all the way to the end of October, at which point he'll have to fund $10 million to have a execute the transaction, and then we'll owe us $2 million annually for the next three years to complete the $16 million purchase for 80% of the farm.

Thank you. Thank you. And our next question comes from the line of Puran Sharma with Stevens Inc. Please proceed with your question.

Hi, this is Jack Harden for Paran Sharma. Just to follow up on the lemon pricing and Sunkist, pricing was up year-over-year despite being net of the Sunkist marketing fee. How much of that improved? Improvement is mix or market slash Sunkist, customer access or fresh utilization.

That's a great question because it's a little bit of all of the above. I would say the market is strengthening, but I would attribute the majority of the increase to the very, very strong market presence that Sunkist provides with with contract relationships with retail buyers and very strong contracts with food service buyers. and the last thing just to mention is that our fresh utilization since returning to Sunkist is the highest we've seen in years. above 80% so far. So I know we still have half the year to go, but we're off to a great start in our relationship with Sunkist.

Awesome, thank you. And then for the Colorado River timing for the water rights in FY26, what milestones should investors watch between now and year end, and what is most likely the structure? Is it like following agreement, outright sale, or something else?.

I'll take that one. Outright sale is probably less likely than some sort of crop substitution that frees up water that's allocated to our land and make it available to lease long term or sell the access to the rights directly. I think as far as what needs to happen to get that done, we're keeping an eye closely on some contracts along the Colorado River with the reservoirs that are set to expire December 31 of 2026. So the pressure's on BLM, or Bureau of Land Management reclamation to get things moving in the right direction. At the very least, there would be an extension of the current following agreements, but we think there's more opportunity that we get a long-term program in place and we can monetize ourselves. Awesome. Thanks so much. Thank you.

And once again, ladies and gentlemen, if you'd like to pass the keypad, that is star 1. All right. It looks like there are no more questions at this time. I'd love to turn the floor back over to Harold Edwards for closing comments.

We'd like to thank you for your questions and your interest in Lima Nera and wish you all a very great day. Thank you.

Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time, and have a wonderful rest of your day.

[Call has ended.]

Hi, I'm Harold Edwards. I'm the President and CEO of the Limoneira Company. We're proudly celebrating our 133rd year of operation at Limoneira this year. The company is going through a significant amount of change. The company has made it its business to evolve with a rapidly changing world. As the world grappled with the global pandemic, Limoneira struggled with the lemon business. We realized we needed to change to address the realities that faced us with the oversupply of lemons in the world.

We'd also experienced significant amounts of inflation across all parts of our business. The toll it took on the financial performance of the company was significant. In 2023, the Board of Directors and Limoneira Company came together and we created a road map. We identified nonstrategic and non-core assets that we would divest and monetize to help us strengthen our balance sheet to be able to achieve financial success, not only for today, but also for the sustainable future.

All retailers throughout the United States and throughout the world wanted a one-stop shop in their purchase of the entire citrus category. We realized that going back into the Sunkist network was the right move for us. It opened the door to new retail customers as well as providing us access to the best and largest customers in the food service industry. We could not be more proud to be back within the Sunkist growing cooperative.

When I think about Limoneira coming back into Sunkist, the first thought that crosses your mind is the emotional one. It's one of the founders coming back in that was with us in 1893 when we started this thing. But then as you think more practically from an operation standpoint, whether it's the Limoneira customers, the Sunkist customers, whether it's the way that the growers' fruit can be sold to a broader base in both cases, as we consider the external part and how much value that's created, and then think about the sales teams coming back together, the operations guys learning from each other, I don't think we've even scratched the surface yet. I don't think there's a person I found yet, whether it's in the broader industry or inside this building, that doesn't think this is a wonderful thing for both organizations.

As we have transitioned back into the Sunkist marketing agreement, we have been able to refocus our energy on the foundation and core aspects of our business, consistency of high-quality lemons while achieving greater utilization at a lower cost. This renewed focus is enabling us to drive operational efficiencies throughout the supply chain, maximizing returns and strengthening our packing margins. Being part of the Sunkist system has significantly reduced price pressures. We are extremely optimistic about the value that will be unlocked as we continue to capitalize on our shared passion for excellence.

We think about the mutual benefit of Limoneira coming back into the Sunkist system. I think it's simple. It's more important today than ever that you have collaboration and consolidation. I think we have the opportunity to be a better supplier to our customers, a better custodian to our growers, and support a more efficient supply chain. We're thrilled, and all of our growers are for Limoneira to be back in the Sunkist family.

Technology is very important to us here at Limoneira.

A piece of technology that we're using is drones. With the imaging drone, we can see real-time data of tree health, stress, and acreage status. The spray drones allow us to act on that data. That accuracy and that precision you don't have with regular conventional methods. We reduce fuel. We reduce water consumption and chemical products. We can do more acreage than the heavy equipment in less time. So we reduce labor costs too. We reduce the operational risk by taking out the people from the field. Technology made us more agile. Now we're acquiring data and using that data to be a step ahead of the problems and that's really important when you're farming.

We want to be as perfect as we can. Autonomy is one of those pillars that is going to help us get there.

One of the things that autonomy brings is reduced costs for the precious skilled labor that we have trouble finding these days. But there are a lot of other benefits, fuel reduction, more efficient equipment use, worker health and safety benefits. You're not on dangerous equipment operating in trees and obstacles. You can operate entire fleets of vehicles from the comfort of your pickup truck or other safe environments. We continue to push the envelope to really help growers be a lot more efficient, save money, be safer, and get the job done better and more efficiently so that we can have a healthy and prosperous future.

Having a visual of your farm, especially when you're farming at a large scale is key because you don't have the capacity to look at every tree. Technologies like SeeTree has helped us a lot in the past few years to really know the state of our plantations. We know that the apple industry is very advanced in trellis farming and robotic harvest. So we thought why don't we do lemons on trellises. We decided to do an experimental block of about 2 acres. We've had great results. The normal density of an acre is about 120 trees. Over here we have 850-some trees per acre. We've put a lot of effort into learning how to do trellises. Is probably going to be the future of how we plant.

Another area of excitement for the company is the expansion of our organic recycling business in partnership with Agromin.

Agromin is the largest organics recycler in the state of California. We recycle about 1.2 million tons a year of organic waste for over 200 cities and counties in California. We have the most experience on how to manage organics and transform them into compost, renewable energy, organic fertilizers, and feed. And we are about to embark on a very large project with Limoneira, which would expand that facility to 70 acres, which would make it the only commercial compost center in Ventura County.

We were successful in obtaining a conditional use permit to process 290,000 tons of organic waste annually. This is significant because it's been mandated that up to 75% of all the green waste that goes to landfills needs to be diverted to reduce the amount of methane that's produced. We take the green waste and we bring it into our facility to process that into a highly valuable agronomic mulch. The operation itself is under construction today and should be fully operational by 2027.

We also applied for a grant through California to help us build this $35 million project and we were awarded $10 million from the state of California.

Agromin is building more compost centers throughout the state to help meet that state's mandate of 100 facilities. So it's about $2.4 billion of new infrastructure that has to be built. So we're excited to be part of that expansion and Limoneira is excited to be partnered with us to scale our model up across the whole state of California.

We're very excited to be one of the main players in production of avocados in the United States. We presently have about 1,600 acres of avocados. Our goal is to have 2,000 acres in the next year. We are already seeing great results in our new plantations. One of the most exciting things about the avocado production and the years to come is a total change in terms of productivity on a per-acre base. The average in California is about 6,000 pounds to the acre. What we can expect with the new densities, the new setup of our plantations, the way that we can assist this plantations. That's how we're going to get to 15,000 pounds on a per-acre base and that's what we can expect.

I been working with the Limoneira Company on the harvest project since the inception back in the planning days of 2004, has been very good for both the city and Limoneira. Phase 1 is completely sold out, 707 units. Phase 2 has been sold to Lennar Home Building. They have 554 homes to be built. Phase 1 of the 38-acre sports park is complete. Phase 2, which includes some additional sports fields and some recreational areas, is planned on being completed by spring of 2027. The Santa Paula Street Bridge is under construction and should be completed by April of 2027.

We're very pleased with the results from the harvest community. We've had a strong response from the public and we're hearing that they like the houses, but even more they like the community and the lifestyle that we're delivering. We're also getting very good feedback from the city of Santa Paula. They like that we're bringing in new residents who support their shopping, that we're bringing in trails, parks, and a bridge to be built. Overall, the response has been great.

The city of Ventura and Ventura County has a severe housing shortage that's leading to housing affordability problems throughout the county. The Limco Del Mar property is a large infill development site surrounded by existing neighborhoods that offers the potential to add a large number of single-family homes to the city of Ventura. We've worked with the Limoneira Company on a number of master planning projects over the last 20 years.

We're very pleased to join them in engaging the city and community of Ventura in imagining some of the possibilities for the Limco Del Mar properties. This process overall will take several years. If approved, the proposal would be put on the ballot for a vote. Any increase in the amount of housing will provide an opportunity to expand the city's housing supply with new single-family neighborhoods over the next decade or more.

The number one demographic leaving the county are young people ages 19 to 45. And what that means is that we're losing our workforce. We're losing kids in our schools. The number one reason people are leaving is the cost of housing to build housing and the scale we need. It takes developers who really and truly drive community buy-in and we've seen that with Limoneira. When you look at the Limco site in East Ventura, I have all the confidence that Limoneira will again drive a process that is collaborative, that engages the community, and at the end of the day really delivers the housing this community so desperately needs.

The reality of water is that without it, we wouldn't be able to produce the agricultural products that we produce throughout California and Arizona. The sustainability of that resource is critical for our ongoing operations. However, we do have an opportunity to monetize conserved water. The Limoneira company is pleased to own Class 3 Colorado River water rights in Yuma, Arizona.

As a result, the company's in perfect position to take advantage of very valuable fallowing programs. We will actually get paid to not use the water. We also have water rights and ownership in the adjudicated Santa Paula Basin. We've successfully monetized a small portion of the conserved water rights, but we'll continue to focus on finding opportunities to monetize the conserved water that we've been able to generate in the Santa Paula Basin.

Approximately 20 years ago, we started a plan to update our water system that for 100 years has been operating on a gravity basis. The idea was to upgrade our system to a pressurized system that would benefit all farmers and irrigators in the valley.

A pressurized pipeline for irrigation is going to be a game changer to us. Water is a key element for agricultural production. The reason why this is so important is because we're going to be able now to deliver the exact amount of water that our crops need. We will be able to control cost.

We anticipate the growers will be able to cut their overall water use by 30%.

This year further strengthened our foundation as an avocado and lemon producer and as a lemon packer. With disciplined financial decisions and a clear long-term strategy, we are building a more focused and efficient company for the future.

At the center of everything we do are our people, our team. It's their commitment, their experience, their integrity. That's what turns our everyday strategy into results.

We have to be very competitive in the products that we put out in the market. We are committed to be that company that is very effective, that is very diligent, that will continue to be and positioned in the market today.

This is an exciting time for Limoneira. The pivot that the company has made with its new strategic direction, with its return to Sunkist, the expansion of its organic recycling business and its expansion of avocados has put the company into a trajectory of growth that we're excited to experience while we continue to realize the benefits of our Harvest at Limoneira residential master plan community development project, our efforts to entitle the Limco Del Mar property, and finally the opportunistic modernization of our conserved water rights.

In combination, the value that will be created from each of these activities will be significant, and I couldn't be more proud of the Limoneira team. We're excited to see the beginnings of these results appear in 2026 and beyond.

Greetings, and welcome to Limoneira's First Quarter 2026 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, John Mills with ICR.

Great. Thank you. Good afternoon, everyone, and thank you for joining us for Limoneira's First Quarter Fiscal Year 2026 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer; and Greg Hamm, Chief Financial Officer. By now, everyone should have access to the first quarter fiscal year 2026 earnings release, which went out today after the market close.

If you've 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'd 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 risks detailed in the company's Form 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 a result of new information, future events or otherwise. Please note that during today's call, we'll 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 earnings per share to the most directly comparable GAAP financial measures are included in the company's press release, which has been posted to its website. And with that, it is my pleasure to turn the call over to the company's President and CEO, Mr. Harold Edwards.

Thanks, John, and good afternoon, everyone. Our first quarter results reflect the strategic transformation we've been executing to position Limoneira for sustainable long-term value creation. While the cadence of lemon sales will shift during our return to Sunkist and due to our return to Sunkist, with the first and second quarters expected to have lower sales and the third and fourth quarters higher, we're pleased that fresh utilization improved in the first quarter.

Even though we incurred some specific costs, which we believe are nonrecurring during this transition quarter, the strategic foundation we've built is now delivering measurable results, and we remain firmly on track to achieve our fiscal 2026 objectives, including our annual volume guidance for lemons and avocados. I would like to add a little more color on the specific costs reflected in our first quarter results.

We experienced $2.5 million in specific expenses, which consisted of $1 million in packinghouse repairs that we recovered from insurance proceeds in the second quarter, $0.5 million in costs related to the closing of our Chilean farming operations and $1 million in foreign exchange fluctuation on the receivables from the sale of the Chilean farming assets.

Adjusted net loss was a $0.48 loss per diluted share and includes approximately $0.06 per share of loss related to the packinghouse repairs and closing the Chilean farming operations. Additionally, we are expecting another $1.4 million of insurance proceeds in the second quarter. Looking beyond these items, our underlying business performance demonstrates the strength of our strategic repositioning. Our Sunkist partnership is functioning as planned.

Our avocado operations continue to expand, and our asset monetization initiatives are progressing on schedule. The strategic initiatives we began implementing were driven by a clear assessment of market realities. We took decisive action to reduce our exposure to volatile lemon pricing while building sustainable competitive advantages. In the fourth quarter of fiscal year 2025, we accelerated this work by reducing future costs to position us for stronger fiscal year 2026 results.

In fiscal year 2026, we expect the enhancements we are making to our cost structure will generate $10 million in selling, general and administrative savings compared to the fiscal year 2025. Importantly, Sunkist provides enhanced customer access to premium accounts and major U.S. retailers through a full category citrus offering.

This positions us to deliver comprehensive solutions for retail buyers while removing pricing pressure from the marketplace and strengthening both our packing margins and grower partner relationships. Another key initiative involved expanding our avocado production. Today, we have 1,600 acres planted with only 800 acres currently bearing fruit. The additional 800 acres will begin bearing fruit over the next 2 to 4 years, representing a near 100% increase in our avocado production capacity.

California avocados command premium pricing due to superior quality and our strategic location provides logistical advantages to the highest per capita consumption markets in the Western United States. Our strategic initiatives extend well beyond agriculture. We have our planned 50-50 organic recycling joint venture with Agromin that we expect to process 300,000 tons of organic waste annually and contribute to EBITDA when the facility becomes operational in fiscal year 2027.

We also have our real estate development project, Harvest at Limoneira. We continue to expect future proceeds from Harvest, Limoneira Lewis Community Builders, II and East Area 2 to total $155 million over the next 5 fiscal years. Phase 3 of the project consists of approximately 550 home lots and 300 apartments, plus we have 35 acres of East Area 2 medical pavilion development that we believe could begin to be monetized in fiscal year 2026.

Additionally, we have Limco Del Mar, our 221-acre agricultural infill property in the city of Ventura, California, which represents a strategic asset with potential for residential development and significant long-term value creation. We are also unlocking value by divesting nonstrategic assets and monetizing our water rights to fuel this transformation and strengthen our balance sheet.

We are now advancing the monetization of our Windfall Farms vineyard in Paso Robles and our Argentina agricultural assets with Windfall Farms completion targeted by the end of fiscal year 2026. Our water monetization strategy is also progressing well. Following last year's $1.7 million realization from Santa Paula Basin water rights sales, we are actively working to realize meaningful value from our Class 3 Colorado River water rights and Santa Paula Basin conserved pumping rights.

These water assets represent high-value nonoperational resources that we can convert to cash while maintaining our agricultural operations. The proof points are clear. Our cost structure has dramatically improved. Our customer access enhanced, our product mix is optimized, and our asset base is being monetized. These are strategic initiatives that we believe will drive financial results throughout fiscal year 2026.

In summary, our first quarter fiscal year 2026 results reflect the company in transition, absorbing specific costs while building the foundation for sustained profitability. The strategic initiatives we've implemented are now delivering tangible financial benefits. We anticipate you will see these improvements on a sequential basis this year as we expect our second quarter to show improvement compared to the first quarter and our third and fourth quarters being the strongest period of the year.

We've transformed our cost structure, focused our revenue streams, optimized our asset base and positioned ourselves for sustainable EBITDA growth. The Limoneira today is a fundamentally stronger company, more focused and better positioned for long-term value creation. We look forward to demonstrating continued progress throughout fiscal year 2026. Now I'd like to officially introduce Greg Hamm as our new Chief Financial Officer. I've had the privilege to work with Greg for over 22 years at Limoneira since he was hired in 2004.

He previously served as our Vice President and Corporate Controller since 2008. Greg succeeds Mark Palamountain, who served as our Chief Financial Officer since 2018 and was instrumental in our strategic transformation. As part of our commitment to succession planning, we identified Greg as a candidate for Chief Financial Officer, and we have worked closely with him over the years to prepare him for this role. Now let me turn it over to Greg for the financial details, and then we'll take your questions.

Thank you, Harold, and good afternoon, everyone. I'm pleased to be speaking with you today as Limoneira's Chief Financial Officer. While I've had the privilege of working alongside this talented team for a number of years, this marks my first earnings call in this role, and I'm pleased to share our financial results with you. As Harold mentioned, we're executing a significant transformation that we believe positions Limoneira for sustainable long-term value creation.

Let me walk you through the financial details of our first quarter performance and explain how our strategic initiatives are ready to deliver measurable results. Before diving into specifics, I want to remind everyone that our business is best viewed on an annual basis due to its seasonal nature. With our transition to Sunkist, our quarterly rhythm has fundamentally shifted.

Under our partnership with Sunkist, the first and second quarters are now our seasonally softer periods, while the third and fourth quarters will be stronger. As we move through fiscal year 2026, you'll see this new cadence taking shape. Let me walk you through our revenue performance for the first quarter. Total net revenues were $18.2 million compared to $34.3 million in the first quarter of fiscal year 2025.

Agribusiness revenues totaled $16.8 million compared to $32.9 million in the prior year first quarter. The year-over-year decrease in total net revenue reflects the strategic transition to Sunkist for lemon sales and marketing and the resulting shift in quarterly sales cadence as well as exiting our brokerage business in the first quarter of fiscal year 2026 and farm management business during fiscal year 2025, which further contributed to the year-over-year revenue decrease.

Other operations' revenue was $1.4 million and essentially flat compared to the prior year quarter. Fresh packed lemon sales were $11.9 million compared to $21.2 million in the same period last year. We sold approximately 681,000 cartons of U.S. packed fresh lemons at an average price of $17.41 per carton compared to 1,147,000 cartons at $18.44 per carton in the prior year first quarter.

The decrease in volume was entirely related to the change in cadence under the Sunkist agreement. It's important to note that per carton prices for fiscal 2026 are now net of the Sunkist marketing fee. Brokered lemons and other lemon sales were $1 million compared to $2.2 million in the first quarter of fiscal year 2025, reflecting the transition of brokerage operations to Sunkist. There was no avocado revenue in the first quarter of fiscal year 2026 compared to $162,000 in the prior year period due to harvest timing.

Orange revenue was $10,000 compared to $1.6 million in the same period last year, reflecting the sale of our Chilean agricultural properties and the transition of brokerage operations to Sunkist. Specialty citrus, wine grapes and other revenues were $700,000 in the first quarter of fiscal year 2026 compared to $500,000 in the first quarter of fiscal year 2025.

There was no farm management revenue in the first quarter of 2026 compared to $1.2 million in the prior year period due to the termination of our farm management agreement effective March 31, 2025. Total costs and expenses in the first quarter were $28.8 million, down 27% from $39.7 million in the first quarter of fiscal year 2025.

The decrease was primarily driven by reduced agribusiness volumes and the elimination of citrus sales and marketing costs following the transition to Sunkist, which resulted in lower agribusiness costs and a meaningful decrease in selling, general and administrative expenses. Operating loss for the first quarter of fiscal year 2026 was $10.6 million compared to an operating loss of $5.3 million in the prior year period.

The increase in operating loss was primarily due to decreased agribusiness revenues as well as $1 million in packinghouse repairs, $500,000 of costs related to closing the Chilean farming operations and $1.5 million of gain on sales of water rights in fiscal year 2025. Additionally, total other expenses for fiscal year 2026 includes $1 million in foreign exchange fluctuations on the receivables from the sale of our Chilean farming assets.

Excluding these items, our underlying operational performance reflects the cost improvements we've been implementing. Net loss applicable to common stock after preferred dividends was $9.6 million or $0.53 per diluted share for the first quarter of fiscal year 2026 compared to a net loss of $3.2 million or $0.18 per diluted share in the first quarter of fiscal year 2025.

On an adjusted basis, adjusted net loss for diluted EPS in the first quarter of fiscal year 2026 was $8.5 million or $0.48 per diluted share compared to an adjusted net loss of $2.5 million or $0.14 per diluted share in the prior year period. A full reconciliation is provided in our earnings release. Non-GAAP adjusted EBITDA was a loss of $7.7 million in the first quarter of fiscal year 2026 compared to a loss of $2.3 million in the same period last year.

A reconciliation of net loss attributable to Limoneira Company to adjusted EBITDA is also provided in our earnings release. Again, I want to emphasize that these first quarter results reflect the new seasonal cadence under our Sunkist partnership, the specific expenses mentioned and the strategic investments we're making to position the company for improved performance throughout the remainder of fiscal year 2026.

Turning to our balance sheet. We remain in a solid position to execute on our strategic initiatives. Long-term debt as of January 31, 2026, was $89.9 million compared to $72.5 million at the end of fiscal year 2025. Our net debt position was $88.6 million at quarter end after accounting for $1.3 million of cash on hand. Let me provide more detail on the financial impact of our strategic initiatives, particularly our Sunkist partnership.

We expect to realize approximately $10 million in total annual selling, general and administrative savings for fiscal year 2026. These are real tangible cost reductions that will flow through our P&L this fiscal year and position us for improved profitability as our revenue cadence normalizes in the second half of the year. In summary, while our first quarter results reflect the new seasonal cadence and specific expenses, the underlying operational improvements are substantial.

The 27% reduction in costs year-over-year demonstrates our disciplined execution. We have clear visibility into $10 million of selling, general and administrative savings benefiting fiscal year 2026 through the Sunkist partnership, which fundamentally improves our cost structure. Now I would like to turn the call back to Harold to discuss our fiscal year 2026 outlook and longer-term growth pipeline.

Thank you, Greg. Looking at the remainder of fiscal year 2026, we expect this period to be when our strategic transformation begins delivering measurable financial results. We anticipate you will see these improvements on a sequential basis this year as we expect our second quarter to show improvement compared to the first quarter and our third and fourth quarters being the strongest periods of the year.

We ended this year with approximately $10 million in cost-saving initiatives based primarily on the benefits of our Sunkist partnership, which will be visible in our fiscal year 2026 results through improved cost structure and enhanced customer relationships. Our avocado expansion continues on schedule with significant production increases expected in fiscal year 2027 as our nonbearing acreage matures.

For full year fiscal 2026, we are reiterating the following guidance: fresh lemon volumes of 4 million to 4.5 million cartons and avocado volumes of 5 million to 6 million pounds. Beyond our core operations, we have several additional value creation opportunities progressing. Our real estate pipeline remains strong with $155 million in expected total proceeds over the next 5 fiscal years.

The Limco Del Mar entitlement process represents another significant real estate development opportunity, and our planned organic recycling joint venture is expected to contribute meaningful EBITDA when the facility becomes operational in fiscal year 2027. We've built a more resilient business model that's less dependent on commodity lemon pricing while creating multiple engines for profitable growth. Operator, we'll now open the call to questions.

[Operator Instructions] Our first question comes from Pooran Sharma with Stephens.

This is Adam Shepherd on for Pooran. On the $10 million in expected SG&A savings this year, I think you mentioned $10 million was to be realized this year. And I was going to ask about how much would be visible in the first half versus the back half? And if that ramp kind of implies there might be a higher than $10 million run rate exiting the year? And then if there are any offsets to keep in mind as the Sunkist transition like fully ramps, that would be great.

No, those are great questions, Adam. Thank you. I think that you'll see -- we had some lingering or dragging costs from fiscal year 2025 that entered into the first quarter of 2026. So while we were pleased with our cost reduction, we think our run rate was slightly behind in Q1 versus what you'll see in Q2, Q3, Q4. The actual reduction isn't going to be linear. So you'll see it move around.

And we've also tried to be conservative in our estimates. I think at the end of the year, though, you'll see a total reduction of $10 million from the SG&A overhead line item. As it relates to whether you'll see sort of a faster or higher ramp and rate at the end of the fiscal year, I wouldn't expect it. I think you'll get to the end of the year and then see much more of a fixed overhead as we enter 2027.

Yes, I agree. It's not tied to volume. It's more of a steady savings throughout the year.

Okay. Great. And then switching over to avocados for my follow-up. Are you able to just give us an update on weather conditions, how the trees are looking? Just color around that would be great, too.

Sure. It's been pretty much an idyllic winter in California. It really never got cold, which is fantastic. And the East winds, which can oftentimes be a real problem for holding fruit on the trees have been moderate. The young trees look fantastic. We're actually entering a week here. It's March 12 today of potentially record heat levels, which won't harm the trees. It will actually accelerate fruit growth, but also the bloom and the flower on the trees for next year's crop setting.

We've had really good rain conditions this year. A normal year of rain in this part of the world is about 17 inches a year. To date, we've received almost 25 inches in nice, steady, warm rains. And that's allowed us to realize good fruit growth. So there's good, big fruit hanging on the trees for this year. And it looks like the flowering and the blooming set for next year with the avocados looks as good as it can right now. So we feel like it's been almost idyllic weather conditions to set us up for a strong 2027 with avocados.

Our next question comes from Mark Smith with Lake Street Capital.

Similar to the last question, I just wanted to ask kind of around -- pricing around lemons, weather impact, anything that you're seeing there?

Yes, I'll start with avocados, Mark. Thanks for the question. So Mexico has an extraordinarily large crop this year. And through the last 3 months of weekly shipments, we've seen some of the highest weekly shipments coming into the United States from Mexico. Conventional wisdom was always that the U.S. consumed about 60 million pounds a week. The last week saw 75 million pounds of fruit from Mexico come into the U.S. The good news is that fruit is all being consumed.

But the issue is that with that much fruit coming in, it's putting downward pricing pressure on avocados right now. 48s are going for -- size 48s are going for about $1 a pound right now and 60s are going for about $1.05 to $1.10. So ironically, the smaller sizing fruit is more valuable right now. As you see and we begin to see Mexico's crop tapering off, I would expect pricing to buoy a little bit here in California, maybe $1.10 to $1.20.

But right now, you're seeing pricing sort of on the low end because of how much fruit is in the marketplace. Again, it's great news that the fruit is being consumed. You're seeing per capita consumption growing when you see pricing this low as it works its way through the supply chain and consumers are able to access fruit more readily and less expensively.

So that should set us up for a pretty strong environment in 2027. As it relates to lemons, we started out Q1 with pricing that was similar to 2025 in Q1. And then the market became supplied and full, and we've seen sort of lower pricing for pricing in lemons. Greg, do you want to maybe comment on lemon pricing?

Yes. We ended up at $17.42 for this quarter versus $18.44, and that Sunkist charge is $0.60 a carton. So you take that into account. And then coming into February, it softened up to around $16, which isn't as low as it was last year, but I predict that this is probably the trough for pricing, and that will start picking back up again as we head into -- head towards May.

And Mark, the other comment I'd just make on that pricing is that sort of a lemon isn't a lemon, isn't a lemon because buried into that average pricing is a product mix sort of factor is how much of your valuable fancy fruit, how much of your middle range choice fruit and how much of your standards actually got sold fresh.

And so the comment that we made earlier about a much higher percentage of fresh utilization in the first quarter meant that a lot of the standards, which before last year went to juice, that actually made it to the fresh market. So the total impact it drags your average price down, but your units are much higher.

And throughout the course of the full season, that should sort of work itself out in a very positive way for us, if that makes sense. So while it seems like it's very, very low pricing, on half the fruit, we sold a significant amount of more volume fresh in the first quarter than we saw last year, and that bodes very, very well for the rest of the year for us.

Perfect. And last question for me was just as we look at certain markets in the West with drought conditions, low snowpack, does this create opportunities for monetization of some of these water assets? And any update you can give us on kind of how that process is going would be great.

Yes. Thanks, Mark. That's a great question. I'm glad we get to talk about it just a little bit. So the 2 most opportunistic situations we have with our water assets are related to our conserved water in the Santa Paula Water Basin and not much to report there other than that there remains demand for that water.

As you probably remember, we sold water last year at $30,000 an acre foot and sort of did that as a placeholder to show sort of the potential value that could be created as more and more of that water that's conserved is made available into the marketplace in Santa Paula. The real opportunity right now, and I'm sure this is what most people are focused on, we certainly are, is what's going on, on the Colorado River.

For background, as you may recall, we have Class 3 Colorado River water rights. There are 7 states now that are negotiating into who gets what in terms of a new water accord that's put on the Colorado River. The Department of Interior and the Bureau of Reclamation have mandated that 1/3 of the consumptive use of the Colorado River be cut and so now each of the 7 states who derive benefit off the river today are negotiating on to who gets what and what kind of cuts need to be made.

The reality is that the actual agreements for future water use have not been reached. There continues to be quite a bit of turmoil between the states, and there's been sort of an inability, at least to this point, to come up with an agreement for each of the 7 states that is satisfactory.

With that being said, though, the amount of cuts that need to come off the river put Limoneira's water rights in -- off the Colorado River into a position of being very, very valuable. How they monetize at this point is still a little bit unclear, although we do believe that there will be long-term following programs that will be positioned for our advantage.

And we do expect to announce programs in the near term that we'll be able to take advantage of that will bring value and allow that water from the Colorado River to be monetized in the near term. So nothing specific to report at this time. However, I would say that I would hope that by the next time we talk in the -- at the conclusion of the second quarter, we'll have specifics in which we can address and speak to about the monetization of our Colorado River water rights.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Harold Edwards for closing comments.

Great. Thank you very much for all of your questions and your interest in Limoneira. Have a great day.

Thank you.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to Limoneira's Fourth Quarter Fiscal Year 2025 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, John Mills with ICR. Thank you, and you may begin.

Good afternoon, everyone. Thank you for joining us for this Fourth Fiscal Year 2025 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer; and Mark Palamountain, Executive Vice President and Chief Financial Officer. By now, everyone should have access to the fourth quarter fiscal year 2025 earnings release, which went out today at approximately 4:05 p.m. Eastern time. If you've 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'd 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 Form 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 today's call, 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 or operations, particularly when comparing underlying results from period to period.

We've 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 earnings per share, which are non-GAAP financial measures. A reconciliation of adjusted EBITDA and adjusted diluted earnings per share to the most directly comparable GAAP financial measures are included in the company's press release, which has been posted to its website.

And with that, it is my pleasure to turn the call over to the company's President and CEO, Mr. Harold Edwards.

Thanks, John, and good afternoon, everyone. Today, I want to update you on the substantial progress we've made in transforming Limoneira's business model. Over the past 2 years, we've systematically addressed the fundamental oversupply in the global lemon market by repositioning our company around multiple profit centers and dramatically improving our cost structure. The strategic initiatives we began implementing in fiscal year 2023 were driven by a clear assessment of market realities. We took decisive action to reduce our exposure to volatile lemon pricing while building sustainable competitive advantages.

In the fourth quarter of fiscal year 2025, we accelerated this work by reducing future costs to position us for stronger fiscal year 2026 results. Our return to Sunkist exemplifies this strategy in action. In fiscal year 2026, we expect to generate $10 million in cost savings compared to fiscal year 2025.

Importantly, Sunkist provides enhanced customer access to premium accounts and major U.S. retailers through a full category citrus offering. This positions us to deliver comprehensive solutions for retail buyers while removing pricing pressure from the marketplace and strengthening both our packing margins and grower partner relationships. Another key initiative involved expanding our avocado offering. Today, we have 1,500 acres planted with only 800 acres currently bearing fruit. The additional 700 acres will begin bearing fruit over the next 3 to 4 years, representing a near 100% increase in our avocado production capacity. California avocados command premium pricing due to superior quality, and our strategic location provides logistical advantages to the highest per capita consumption markets in the Western United States.

Our strategic initiatives extend well beyond agriculture. We have our planned 50-50 organic recycling joint venture with [ Agroman ] that we expect to process 300,000 [ tons ] of organic waste annually and generate $4 million to $5 million in additional EBITDA beginning in fiscal year 2027. We also have our real estate development project Harvest at Limoneira. We continue to expect future distributions to total $155 million over the next 5 fiscal years. Phase 3 of the project consists of approximately 500 home lots and 300 apartments, plus we have an additional 35-acre East Area 2 medical pavilion development that we believe could be begin to be monetized in fiscal year 2026. Additionally, we have Limco Del Mar, our 221-acre agricultural property that is infill property within the City of Ventura which represents a strategic asset with potential for residential development and significant long-term value creation.

We are also unlocking value by divesting nonstrategic assets and monetizing our water rights to fuel this transformation and strengthen our balance sheet. We successfully completed the sale of our Chilean assets in November for $15 million. We are now advancing the monetization of our Windfall Farms Vineyard in Paso Robles and Argentina agricultural assets together valued at approximately $40 million, with completion targeted by the end of fiscal year 2026.

Simultaneously, our water monetization strategy is gaining momentum. We realized $1.7 million from the sales of the Santa Paula Basin pumping water rights this past year and are positioned to capture an additional $50 million to $70 million in value through fiscal year 2027 from our Class 3 Colorado River water rights and Santa Paula Basin conserved pumping rights. These represent a transformation of our business model, shifting from a focus on oversupplied lemons to higher-demand avocados, optimizing our asset base through strategic divestitures and partnerships and operating with a more asset-light structure across multiple profit centers.

Fiscal year 2026 will mark the beginning of this transformation's financial impact with multiple value drivers converging simultaneously. We expect to realize a 50% reduction in SG&A or approximately $10 million in savings in fiscal year 2026 from our operational restructuring initiatives completed in the fourth quarter of fiscal year 2025. Our expanding avocado production will begin contributing meaningfully in fiscal year 2027 as our 700 acres of nonbearing trees begin maturing.

Additionally, our diversification strategy gains momentum with our planned Agroman organic recycling joint venture moving toward its expected $4 million to $5 million EBITDA contribution beginning in fiscal year 2027. Combined with continued asset optimization and reduced commodity exposure, we expect fiscal year 2026 to deliver substantially improved financial performance. The proof points are clear. Our cost structure has dramatically improved, our customer access is enhanced, our product mix is optimized and our asset base is being monetized. These are strategic initiatives that we believe will drive financial results beginning in fiscal year 2026. As our cash generation improves, we will evaluate capital allocation opportunities, including share repurchases of our stock price doesn't reflect our operational improvements debt reduction and potential dividend increases as our diversified cash flows improve.

In closing, Limoneira today is fundamentally different from the company we were 18 months ago. we've transformed from a commodity lemon producer to a diversified agricultural and real estate company with multiple growth engines and a dramatically improved cost structure. Now let me turn it over to Mark for the financial details, and then we'll take your questions.

Thank you, Harold, and good afternoon, everyone. Before I begin, I would remind you, it is best to view our business on an annual, not quarterly basis due to the seasonal nature of our business. Historically, our first and fourth quarters have been the seasonally softer quarters, while our second and third quarters have been stronger, a pattern that has held true for the fiscal year 2025. However, Beginning in fiscal year 2026, our seasonal cadence will shift due to our Sunkist partnership transition. Under this new structure, we expect the cadence of the quarterly results to be as follows: the first and second quarters will be the seasonally softer quarters, while our third and fourth quarters now will be stronger.

This represents an important change in our quarterly rhythm that investors should factor into their modeling as we move forward. For the fourth quarter of fiscal year 2025, total net revenue was $42.8 million compared to total net revenue of $43.9 million in the fourth quarter of the previous fiscal year. Agribusiness revenue was $41.3 million compared to $42.5 million in the fourth quarter last year. Other operations revenue was $1.5 million in the fourth quarter of fiscal year 2025 compared to $1.4 million in the fourth quarter last year. Agribusiness revenue for the fourth quarter of fiscal year 2025 includes $19.2 million in fresh pack lemon sales compared to $8.4 million during the same period of fiscal year 2024.

Approximately 821,000 cartons of U.S. packed fresh lemons were sold during the fourth quarter of fiscal year 2025 at a $23.33 average price per carton compared to 470,000 cartons sold at a $17.95 average price per carton during the fourth quarter of fiscal year 2024. Brokered lemons and [ other ] lemon sales were $12.5 million and $14.7 million in the fourth quarter of fiscal years 2025 and 2024, respectively.

The company recognized $300,000 of avocado revenue in the fourth quarter of fiscal year 2025 compared to $8.9 million of avocado revenue in the same period of fiscal year 2024. Approximately 396,000 pounds of avocados were sold in aggregate during the fourth quarter of fiscal year 2025 at a $0.79 average price per pound compared to approximately 4.6 million pounds sold at a $1.92 average price per pound during the fourth quarter of fiscal year 2024. The California avocado crop typically experiences [ alternate ] years of high and low production due to plant physiology and was the primary reason for lower volume this year compared to last year. We achieved our avocado volume goal for fiscal year 2025.

The company recognized $2.9 million of orange revenue in the fourth quarter of fiscal year 2025 compared to $1.7 million in the fourth quarter of fiscal year 2024 and approximately 148,000 cartons of oranges were sold during the fourth quarter of fiscal year 2025 at a $19.67 average price per carton compared to approximately 91,000 cartons sold at an $18.99 average price per carton during the fourth quarter of fiscal year 2024.

Specialty [ citrus, wine grape ] and other revenues were $2.9 million in the fourth quarter of fiscal year 2025 compared to $3.5 million in the fourth quarter of fiscal year 2024. Due to the termination of our farm management agreement effective March 31, 2025, there was no farm management revenue in the fourth quarter of fiscal year 2025 compared to $2.9 million in the same period of fiscal year 2024.

Total cost and expenses for the fourth quarter of fiscal year 2025 were $53.9 million compared to $46.6 million in the fourth quarter of last year. Operating loss for the fourth quarter of fiscal year 2025 was $11.1 million compared to operating loss of $2.8 million in the fourth quarter of the previous fiscal year. Net loss applicable to common stock after preferred dividends for the fourth quarter of fiscal year 2025 was $8.8 million compared to net loss applicable to common stock of $2 million in the fourth quarter of fiscal year 2024.

Net loss per diluted share for the fourth quarter of fiscal year 2025 was $0.49 compared to a net loss per diluted share of $0.11 for the same period of fiscal 2024. The increase in net loss and net loss per share compared to the prior year reflects $6.7 million in strategic transformation costs, including expenses related to the Sunkist transition, tree disposals for the expansion of avocado production and other nonrecurring costs and expenses.

In addition, we incurred costs related to a power outage at our storage facilities, which we expect to recover through insurance proceeds in the first quarter of fiscal year 2026. Adjusted net loss for diluted EPS for the fourth quarter of fiscal year 2025 was $8 million or $0.45 per diluted share compared to adjusted net loss for diluted EPS of $1.6 million or $0.09 per diluted share in the same period of fiscal year 2024.

A reconciliation of net income or loss attributable to Limoneira Company to adjusted net income or loss for diluted EPS is provided at the end of the earnings release. Non-GAAP adjusted EBITDA for the fourth quarter of fiscal year 2025 was a loss of $7 million compared to income of $1.2 million in the same period of fiscal year 2024. A reconciliation of net income or loss attributable to Limoneira Company to adjusted EBITDA is also provided at the end of our earnings release.

Looking beyond this year, the citrus sales and marketing plan we announced with Sunkist is anticipated to enhance our resilience to market volatility by creating a more efficient cost structure. For the fiscal year ended October 31, 2025, total net revenue was $159.7 million compared to $191.5 million last year. The decrease was primarily driven by decreased agribusiness revenues from lemons, avocados, wine grapes and farm management, partially offset by increased agribusiness revenues from oranges.

Operating loss for fiscal year 2025 was $20.4 million compared to an operating loss of $6.2 million last year. Net loss applicable to common stock after preferred dividends was $16.5 million for fiscal year 2025 compared to net income of $7.2 million for fiscal year 2024. Net loss per diluted share for fiscal year 2025 was $0.93 compared to net income per diluted share of $0.40 in fiscal year 2024.

For fiscal year 2025, adjusted net loss per diluted EPS was $14 million compared to adjusted net income for diluted EPS of $11 million for fiscal year 2024. Adjusted net loss per diluted share for fiscal year 2025 was $0.79 compared to adjusted net income per diluted share of $0.62 for fiscal year 2024 and based on approximately 17.8 million and 17.7 million weighted average diluted common shares outstanding, respectively.

The effective tax rates for fiscal year 2025 and 2024, were 22.1% and 37.9%, respectively. For fiscal year 2025, adjusted EBITDA was a loss of $6.5 million compared to an income of $26.7 million for fiscal year 2024.

Turning now to our balance sheet and liquidity. Long-term debt as of October 31, 2025, was $72.5 million compared to $40 million at the end of fiscal year 2024. Debt levels as of October 31, 2025, less $1.5 million of cash on hand resulted in a net debt position of $71 million at the end of fiscal year 2025.

In April 2025, we received $10 million of our share of a $20 million cash distribution from our 50-50 real estate development joint venture with the Lewis Group of companies. The distribution came from the joint venture's available cash and cash equivalents, which is as of October 31, 2025, totaled $31.2 million.

Last week, we negotiated more favorable banking covenants that allow us to continue to use the full capacity of our $115 million credit facility of which we had $41.6 million of availability as of October 31, 2025.

Now I'd like to turn the call back to Harold to discuss our fiscal year 2026 outlook and longer-term growth pipeline.

Thank you, Mark. Looking ahead to fiscal 2026, we expect this to be the year of strategic transformation begins delivering measurable financial results. We entered fiscal 2026 with approximately $10 million in anticipated cost savings initiated in fiscal year 2025 that are expected to benefit fiscal year 2026, this includes the benefits of our Sunkist partnership, which will be visible in our fiscal year 2026 results through improved cost structure and enhanced customer relationships.

Our avocado expansion continues on schedule with significant production increases expected in fiscal year 2027 as our nonbearing acreage matures. For fiscal 2026, we are providing the following guidance: fresh lemon volumes of 4 million to 4.5 million cartons and avocado volumes of 5 million to 6 million pounds.

Beyond our core operations, we have several additional value creation opportunities progressing. Our real estate pipeline remains strong with $155 million in expected distributions over the next 5 fiscal years. The Limco Del Mar entitlement process represents another significant real estate development opportunity. And our planned organic recycling joint venture is expected to contribute meaningful EBITDA beginning in fiscal year 2027. We've built a more resilient business model that's less dependent on commodity lemon pricing while creating multiple engines for profitable growth. Operator, we'll now open the call to questions.

[Operator Instructions] Our first question comes from Pooran Sharma with Stephens.

Just wanted to start off with the partnership here. I know you just mentioned here $10 million of cost savings. Just wondering if you could just give us a little bit more granularity into kind of operationally how you kind of -- how you expect to get that $10 million?

And then also, you did quote better customer relationships in your prepared comments. Just wondering if you could parse that out a little bit more, maybe just give us a sense on how much of your lemon volumes are moving toward contracted versus open and maybe how this compares to your guys' business before the partnership?

Great. Thank you, Pooran . So I'll take the first part around the cost and the cost reduction and then Harold will go for your second question. So as you recall, back in our June quarter, we announced our transition to Sunkist that we expected to generate approximately about another $5 million of EBITDA, and that's the transition of our sales and marketing team, which most of those employees did go over to Sunkist and expand their program with all of our customers.

And as we analyze the rest of the structure in the program, we really took a deeper check at storage first and foremost, and all of our operational processes there. While our sales and marketing plan with Sunkist now has a new cadence, which requires more storage. We've successfully renegotiated some of our storage contracts and also utilize some of the Sunkist unused capacities, which have allowed us to lower transportation costs and also leasing costs. And so there's a pretty good split in the $10 million $5 million that we started with, which was the sales employees and all those going over and then another $5 million relative to storage and operational efficiencies as well as using the opportunity, so what we'll say, rightsize our own business, whether in every category from farming accounting, packing, just to make sure as we were going to become smaller to get bigger, we had the best platform to be able to do that. And as we go through '26 and start to see that and recognize that, and then pile on the new revenue opportunity is as well double plus our avocado production. I think that's what we're really trying to set ourselves up for.

And Pooran I might just follow up with that by saying that when we did a deep dive into our cost structure, and we held ourselves accountable to the entire team that we put together to advance the marketing and sales efforts we realized that we were spending all in, including all the administrative support and efforts that went behind the sales and marketing function, about $1.50 a carton for that sales and marketing effort. And by returning to Sunkist now, that is now fixed at $0.60 a carton. So if you multiply that over 4 million -- to 4.5 million cartons, you see where the savings comes from.

As to the second part of your question about stronger marketing and selling opportunities by returning to Sunkist, it's really driven by 2 things. Number one, we were beginning to face challenges in the retail segment of the market because as a single commodity supplier of just selling lemons we were really challenged competitively against the other big marketers and sellers like Sunkist who have the full category of citrus and as we all know, citrus buyers at retail like one-stop shopping. And so by us rejoining Sunkist and becoming part of that supply chain with lemons across their full category of citrus we now take advantage of much greater access to the top retail customers in the country but also a lot of their prices are fixed for a period of time, which versus the spot markets give us a great -- much greater pricing advantage, which should manifest itself in better grower returns for our grower partners but also in greater returns back to our own lemon production as a large lemon grower.

And then last part to the puzzle, which is 1 of the biggest reasons we returned is Sunkist has an exclusivity in supply to 1 of the largest food service buyers of fresh lemons. This 1 customer makes fresh lemonade in all of their quick-serve restaurants across the country. And they do that by using exclusively Sunkist lemons, and so for us to now become part of Sunkist lemon supply chain, it gives us access to some of the top food service customers at very excellent pricing, which gives us a greater opportunity for higher fresh utilization but ultimately, for higher pricing, not only for our grower partners but also for ourselves as a large lemon producer.

Great. Appreciate the color there. Maybe wondering if we could talk about some of the strategic assets or I should say, noncore assets that you're selling off. And I wanted to specifically focusing on water. It looks like you made some moves this quarter. I think you've mentioned in the past a range of valuation that you get per acre feet. How does this compare versus your expectations? And could you maybe go through some of the puts and takes in terms of trying to achieve a higher valuation? Do you get pushback from some of the local governments. I would just love to hear some color regarding your water assets.

Yes. Water is complex because it sort of follows that -- when you're dealing with water in water scarce areas the value of the water is much higher than when you're dealing with and managing water assets in areas where there's water abundance. We really have 2 dynamics where we're dealing with local scarcity. One is as we continue to operate our agricultural operations in the Santa Paula Basin, we're surrounded on both sides of our operations by municipalities to the west, the City of Ventura and to the east, the City of Santa Paula.

And as a result of the scarcity and the lack of water supply in both of those municipalities, the opportunity to monetize conserved water rights and pumping rights as we do a better job with conservation and sustainability in our own operations, creates opportunities periodically to monetize some of these conserved rights.

When a city is following an urban growth mandate, which all cities in California do there's a certain requirement for new development of residential, commercial or industrial development to bring water to any specific project. And typically, the developers of these projects don't have water, so they pay a fee in lieu to the city and the cities then need to go out and purchase the water rights. So we've put ourselves in a position to be one of the suppliers of some of these water rights for some of those opportunities as it relates to opportunities in the Santa Paula Basin.

The other interesting water monetization opportunity relates to our assets that we own in Yuma, Arizona, which have Class III Colorado [ River reparion ] water rights. And as the Department of Interior, the Bureau of Reclamation have mandated that 1/3 of the consumptive use of the Colorado River be cut, we have put ourselves into position to take advantage of following programs where entities like the Central Arizona project, like the Bureau of Reclamation actually pay farmers to not use the water so that water can be diverted off for higher and better uses, which, in this case, typically is for urban use.

And so as a result, those following programs have become very, very valuable. The Colorado River has just ended its 25-year [ a cord ] that was on the river, and is now looking to put the next 25 years of following [ per ] together, we believe that those programs will be put into place by the end of 2026, and we're negotiating and working with other agricultural water owners to figure out the best way to monetize those water rights. But fundamentally, those water rights are very, very valuable, and most likely will be contributed to following programs, of which will be paid to not use that water.

Our next question comes from Gerry Sweeney with ROTH Capital Partners.

Just following up on the water side. Obviously, the renegotiation of the Colorado River Compact is underway starting. I think there was a big [ comp fab ] in Vegas last week discussing this. I would imagine -- my sense is -- or what I'm hearing is that there's going to be a lot of cuts along the river and less allocation. So specifically impacting Arizona and Southern California. I would believe this would be a strong positive for your water rights strategy. Is this -- can you confirm that and maybe provide a little bit of details around it.

Yes, you bet. So as Harold alluded to, we have Class III Colorado River water rights. And there's 8 different classes throughout the system which start with the American Indians, the Mexican government. And then third is ours, which are original generation farms that were formed in the early to mid-1900s.

Following that, subsequently 4, 5, 6, 7, 8, you have Phoenix, Tucson, Scottsdale, Las Vegas, California in all of the western states that have their piece of that pie. It was recently as we've all watched Lake Mead in the last 2 to 3 years with all of the drought, federally mandated that 1/3 of the water needs to come off the river and getting everyone in agree. So everyone has been in the back room, all of the federal, state and local agencies paired with local agricultural growers and commercial water users.

And I think, as you mentioned, that water conference last week was a big step forward. We weren't there, but we did have her a lot of it and a lot of the people that were working negotiations that we're thinking about contributing our water for the better good of that, we're going very well.

Now 12/31/26 is the deadline when everybody needs to agree, which means everyone needs to agree before the summer starts. And as we see, it's obviously -- it's been -- it's raining in California and it's about to rain a lot more, and sometimes that makes people complacent. But the water values that people are talking about just sort of in the back rooms have been double per acre foot of the current filing programs and allowing more use of your total acreage.

The 1 part that we're very conscious about is the social aspect of it and the conserved nature of the water, so not just walking away from the water and the community like, for example, Yuma, Arizona, where we have farmers and jobs and local communities. Part of the whole plan will need to incorporate that. So really going to, as an example, a low use water crop like an agave you can still have jobs, you can still have economies and then also have the rest of those that need, whether it's California, Arizona or other Western states to have that water.

So I think the answer is yes, yes and yes. there's going to get a deal that's going to need to be done. People are starting to come to the table and agree and they'll be at higher values.

Just curious on that front [ cluster ], right? So most people -- I don't know understand that it's first in time in place. So Class 1, the American Indians, they have the most senior water rights in Class III is very senior as well, so that's where you're standing. Is there any talk of cut down to Class III? Or would the cuts come in classes that are below you or later in time?

No, that's a great question because we've always had our eye on that, Gerry. The -- as you know, there's 8 tiers and in times of scarcity or cuts, they cut Tier 8 first and 7, 6, 5, 4, 3 so on. All of the discussions that have been held to our level of awareness have been below Class 3 down to Class 5 is what we've heard. A lot of the Central Arizona projects, so all the housing that Mark was talking about from Phoenix to Tucson and all of Las Vegas. Those are Class V water rights. And so that's really where the demand is coming is for all the urban uses of Class V water that needs to be replaced with a more senior class, and to your earlier point, that puts us in a great spot to take advantage of that. Exactly.

Got you. Super helpful. couple more questions. I just -- before I go to the asset, but Limco Del Mar, obviously, that's infill land right in the town. Any ideas on how that develops? And I would imagine that acreage is highly valuable. And when I say how it develops, I'm just curious if you've come up to a conclusion whether or not I mean, do you sell it? Do you self-develop it? Do you partner again and take a similar track with like you did at the Harvest of Limoneira?

No, that's a great question. So there's 2 pieces to this. The first part, which is the heavy lift is the entitlement piece. As you know, Jerry, in Ventura County, there's legislation that mandates a public vote to convert an agricultural piece of land into an urban development piece of land. And it follows that people would much rather look at a beautiful orchard than a strip mall and a bunch of condos and houses. And so the trick to gaining entitlements is to build development agreements that have enough benefit to the local communities that they're willing to vote to endure the cost of the loss of the beautiful agriculture and the and the traffic that they'll have to endure and just the general inconvenience of development -- so there's an art to it. And so what that art involves is a lot of outreach and public charettes, where we'll be listening to the local community members tell us what they really want incorporated into this project. And following that as these public threats, which will take place throughout most of 2026. We'll then take the ideas that we've pulled together and incorporate them into a specific plan.

We will then do all of the environmental impact review and sequel work, which is arduous and comprehensive and there's just a lot of work we want to study. And then once that's done, we'll sit down with the city officials in the City of Ventura to create a development agreement that provides a lot of the benefits that we hope to bring to the community in terms of types of housing and parks and recreation and schools and all kinds of things that will be contemplated, and then once all of that is put together, then we have to go to the poles and have a public vote.

If we win that vote, then at that point, that property becomes entitled to convert at which point then we go through another agency, which is called LAFCO for the annexation of that property into the city of Ventura, and then we can start the second phase where the biggest value or a lot of the value is created which is the development phase.

Your question related to how we would go about developing. And I think we're not there yet. We're not sure -- we have great relationships with our development partner at Harvest at Limoneira. We're in discussions with them about the potential of moving forward with Del Mar, but there's a lot of heavy lifting to be done with the entitlement part of the project. So that's really what we're focusing on right now.

I would imagine there's a pretty hefty increase in value of the land as well when it moves from the entitlement, if you would win the entitlement vote, that's a pretty heavy lift itself, correct?

Yes. And it's a heavy lift. If you get the vote anecdotally, the value of the land goes from $100,000 an acre to $1 million an acre.

Well, that's good to know. good number.

It's a good vote to get.

Yes. And I know [indiscernible] Is not easy too. That's a process.

That's right. And I don't mean to be [ flipping ] about it. It's a very arduous and challenging process -- and you only win that vote if you truly have connected with the local community. So that's really what we're really trying to do.

Got it. Switching gears, I don't want to take this over, but switching gears real quick just to the avocado. So 2 questions on that front. The cadence of the 700 acres coming into production and in calls past, we've talked about the operating income per acre for avocados, if we could touch upon that again.

Yes. So right now, we've got 700 acres that are nonbearing at the moment. We have another 250 to 300 acres to plant this year and then the same the following year. So as you see, and it's still the same in our deck, and I think it's most people have that and it's up to date. But next year will be our first year of our first planting. So think about 4 to 5 total plantings of 250 acres a year starting in '27 and going all the way through 2021 maturing equally.

So as we have -- as you know, avocados are alternate bearing. And so as we go through those years, we think we will still have increasing volumes even with those alternate bearing acres. And remember, the new plantings are twice as debt. So instead of 93 per acre there are 120 trees per acre. So we're expecting an average of about 17,000 pounds an acre. If you consider the alternate bearing going forward over a 10-year period, you'll have the lows 10 to 12 and the highs to 25-plus pounds per acre.

And we expect anywhere if we use historical pricing, over the last 10 years was about $1.33 a pound. This year was a little bit of anomaly. You saw a bigger heavy crop this late summer which took the price below $1 -- we're starting to see that recover and then you obviously get the infamous Super Bowl time and [ Cinco de Mayo ] and when the prices come back. So we're really comfortable with the long-term price of $1.30 plus and using anywhere from $12,000 to $14,000 in operating profit per acre, it ends up costing us about $5,000 to farm it per acre. And currently, right now, it's about $3,500 to pick and haul it. So the math off of that $20,000 an acre or $12,000 an acre, ends up being about $12,000 to $14,000 of operating profit.

[Operator Instructions] Our next question comes from Mark Smith from Lake Street Capital Markets.

I want to look First, at kind of the expense side of things. You guys talked about streamlining operations and potential cost cutting. And I think you gave some the potential SG&A savings next year on the work that you've already done. Can you just give us more update on that? How much of that has worked in, in the transition to Sunkist and how much is kind of other projects that you've been working on?

So good question. It's pretty complex. So really, November 1 was the start, right? And so it's never a perfect cut off line. We had a transition of the sales force go over -- actually some of them left a little bit before, some of them are left a little bit after.

And then some of the ancillary accounting positions, we did if you remember, transition our whole brokerage business, which is why we'll have the large drop in revenue, which was that 6% to 8% commission business, about $30 million. And so that closed out. We actually just finished selling the brokerage business. So you'll have some of that cleanup. If you looked at a full calendar year 12 months, probably is the realistic conservative $10 million.

But we also think that in that number, transportation, we used to have a packing house up in the Central Valley. We packed [indiscernible] fruit with about $0.5 million of transportation costs. there's just going to be a number of new items that are shut down and no longer this year that are not included and from our budgetary purposes or guidance.

So I think we'll be surprised. It will be as we see it and prove it out. And then really, we get through January, we just are finalizing integrating all the computer systems. Sunkist has a different system, obviously, and we're -- we just finalized implementing a system of our own. So those are starting to work well together.

So a lot of those operational efficiencies another specific 1 was we renegotiated our lease at Oxnard Lemon that saved us about $700,000 in that 1 respect. And so we've got some more work to do around storage. So we're going to be learning the transition in Sunkist and being asked to store fruit longer. So we got to have mother nature as our friend always working with that. But the value proposition from the new Sunkist plan and holding that fruit longer into a higher-priced market into those Chick-fil-A and [ raising cans ] kinds of customers. makes a lot of sense to us. And so that's why you saw in our fourth quarter this year, we had our first glimpse into those customers and an average price of over $23. So bottom line is a lot of the people costs have moved out. There will be a little bit of dragging through December. And then it's all right straight into operational and that's going to be our focus.

Okay. And then just you mentioned some lemon pricing. Just any insights you can give us into your outlook for kind of lever pricing here near term or even through the fiscal year?

Yes. So that's the $10 million question. So last year, we had the [ Chair Noble ] market, which I hadn't seen in my 15 years here where we had a -- 1 of the packing houses left Sunkist and with the home with 4 million cartons without a home. And so the only way you sell lemons without a home and real good customers and it was with price.

And so we saw an imbalance in the market that took pricing in January, February last year, sometimes below $10. Right now, the price is somewhere just below $20. Typically, we see a dip go into the '16, '17 range in sort of February, January, February, March, and it's -- a lot of it's contract based. And so if you don't have any much of the market fruit, which now being in the Sunkist system, we don't you really get that floor protection. And so then going into the summer is what's going to happen again, which we think will be a repeat of next summer because Turkey and Spain had a really tough freeze last year, which will turn into a 2-year event.

And what happens there is, again, it's all about balance of supply as most of the southern hemisphere fruit will go to Europe this summer instead of come to the U.S. And so our fruit, which we'll be holding will be in a better balance. So at the end of the day, I'd like to say there'd be a 2 in front of the average price this year. We're not going to put a formal forecast out. But if it plays out like last year, and we don't get the low lows in February, then we should have a good opportunity to try to hit that.

Excellent. And I think the last question is just kind of comfort around the balance sheet. You guys talked about kind of reworking some covenants and stuff. Just any update and thoughts around the debt and kind of your comfort levels?

Yes. So first thing we want to do is pay down debt when we can get to. I think $40 million is a good number. We've always had our target on. This year was elevated, obviously, with the operating loss and then the continued foot on the gas for the CapEx, we also, as you might have seen, we had -- our loan was up at term this summer, and so we had to put a new term out there in new conditions. And 1 of the new conditions was this [ MAX ] leverage debt ratio that came out. And it was new for the bank, it was new for us, and it was backward looking 4 quarters, which -- and on the face of it looks good but as a company that's in development, i.e., 40% of our acreage is nonbearing but with the continued expense it was challenging to have a backward-looking measurement.

And while you don't breach it until you breach it, obviously, not from the accounting side in Deloitte, you have to forecast out what looks forward. And so being in that position was something that we weren't comfortable with. And the bank, we sat down with everybody at the bank. We went through a good forecast.

And we have a new ratio which is basically a capitalization ratio or balance sheet based which we forecasted out as far as at the end of '27 and looks like it's in good shape. So it's basically debt divided by assets minus liabilities and a ratio there. So -- and then the other ratio that we have, which is the debt service coverage ratio which is basically computing interest expense and your ability to pay they suspended that measurement until the end of fiscal '27. So really gave us free rein to open up and use our capacity. We've had a great lender in Farm Credit Ag West, and they just showed up again. So that's -- it was just very helpful. And it was a real, real positive.

Mark, the oversimplified way to try to explain this is that putting all of the efforts we're working on with the avocados, the organic recycling is to -- and our return back to Sunkist is to get our core operating agricultural business to generate consistently more EBITDA while at the same time, then using asset monetization and real estate development as the stop gap between now and when that core business is really generating consistent growing cash flows to pay down debt and to delever that way. So EBITDA up, debt down with a core business that then can operate sustainably and very profitably and begin to generate free cash flow that then at that point, the world is our oyster, and then we'll have some great sort of capital allocation decisions to make.

This now concludes our question-and-answer session. I would like to turn the call back over to Harold Edwards for closing comments.

So I'd like to thank you all for your questions and your interest in Limoneira. And finally, I'd like to wish you all a very happy holidays. Thank you for your time.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. Please disconnect your lines and have a wonderful day.

Greetings, and welcome to Limoneira's Third Quarter 2025 Financial Results Conference Call. [Operator Instructions]

It is now my pleasure to introduce your host, Deirdre Thomson with ICR. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us for Limoneira's Third Quarter Fiscal Year 2025 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer; and Mark Palamountain, Executive Vice President and Chief Financial Officer. By now, everyone should have access to the third quarter fiscal year 2025 earnings release, which went out today at approximately 4:05 p.m. Eastern Time. If you've not had the chance to review 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.

Before we begin, we'd 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 Form 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 a result of new information, future events or otherwise.

Please note that during today's call, 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 its website.

And with that, it is my pleasure to turn the call over to the company's President and CEO, Mr. Harold Edwards.

Thank you, Deirdre, and good afternoon, everyone. During the third quarter, we made significant strides in unlocking long-term value through our two-part value creation strategy: agriculture production optimization, and land and water value creation. As we enter the fourth quarter and turn our attention to fiscal year 2026, we're excited about the profitable growth opportunities ahead.

In the third quarter, we continued to navigate challenging lemon market conditions with pricing pressures in the first 2 months, though we saw improvement in the final months as we captured higher prices for fruit held in storage. Our fresh utilization was lower due to the strategic timing, but we remain confident in achieving our volume goals for both lemons and avocados in fiscal year 2025. In addition, we expect pricing to improve in fiscal 2026 due to anticipated shortages in several international areas.

Our strategic partnership with Sunkist for citrus sales and marketing remains on track to drive $5 million in annual cost savings and EBITDA enhancements starting in fiscal year 2026. This partnership will unlock access to new high-quality customers while creating the operational efficiencies we've discussed. We expect lemons to return to profitability with more normalized pricing and fresh utilization levels in fiscal year 2026.

Our avocado business continues to expand, with pricing and volume on plan during the quarter. We anticipate a significant increase in avocado production as our newly planted acreage begins maturing in fiscal year 2027 and beyond. We have 700 acres of nonbearing avocados estimated to become full-bearing over the next 2 to 4 years, enabling strong organic growth. This will be a near 100% increase in avocado producing acreage.

Our Real Estate Development continues to exceed expectations. Harvest at Limoneira is selling homes ahead of schedule, and we continue to expect future distributions from our real estate projects to total approximately $155 million over the next 5 fiscal years. Today, I'm also excited to announce our exploration of development options for our Limco Del Mar property. This 221-acre agricultural infill property bordered by developed areas in the city of Ventura presents an opportunity for residential development that directly addresses Ventura County's critical housing shortage. As a historically local company, Limoneira is dedicated to helping solve this housing crisis. We believe that a strong community needs homes for everyone, and we're ready to do our part.

The Limco Del Mar Ranch is ideally suited for efficient, well-planned infill development that may stimulate economic growth, create jobs and contribute to vibrant livable communities. We're committed to conducting a comprehensive community-based planning process, including complete CEQA, which is the California Environmental Quality Act review, City of Ventura City Council Review, a SOAR, Save Open-space and Agricultural Resources vote and the LAFCO, Local Agency Formation Commission, review process for annexation to the City of Ventura. Our goal is to create a pathway to design, permit and develop new homes that will meet the needs of Ventura County's residents.

We continue to advance our water monetization efforts. In January 2025, we sold water pumping rights in the Santa Paula Basin for $30,000 per acre foot across three transactions, generating $1.7 million in proceeds and recording $1.5 million of gains. In summary, we're executing a comprehensive strategy that positions us for long-term growth. Our citrus operational enhancements through the Sunkist partnership, expanding avocado production, accelerating real estate development, adding new housing development opportunities and ongoing water value creation, all contribute to building sustainable long-term shareholder value.

And with that, I'll now turn the call over to Mark to discuss our third quarter results.

Thank you, Harold, and good afternoon, everyone. Before I begin, I would remind you it is best to view our business on an annual, not quarterly basis due to the seasonal nature of our business. Historically, our first and fourth quarters are the seasonally softer quarters, while our second and third quarters are stronger. For the third quarter of fiscal year 2025, total net revenue was $47.5 million compared to total net revenue of $63.3 million in the third quarter of the previous fiscal year. Agribusiness revenue was $45.9 million compared to $61.8 million in the third quarter last year. Other operations revenue was $1.5 million for the third quarter of fiscal year -- fiscal years 2025 and 2024. The decline in Agribusiness revenue stems primarily from continued pricing pressure in the lemon market during the first 2 months of the quarter, though we saw improvement in July. Additionally, our fresh utilization was lower as we held lemons longer in storage to capture higher prices during the final month of the quarter.

Looking beyond this year, the citrus sales and marketing plan we announced with Sunkist is anticipated to enhance our resilience to market volatility by creating a more efficient cost structure, leading to an expected $5 million in EBITDA improvement during fiscal year 2026. Agribusiness revenue for the third quarter of fiscal year 2025 includes $23.8 million in fresh packed lemon sales compared to $25.8 million during the same period of fiscal year 2024. Approximately 1.4 million cartons of U.S. packed fresh lemons were sold during the third quarter of fiscal year 2025 at a $17.02 average price per carton compared to 1.4 million cartons sold at an $18.43 average price per carton during the third quarter of fiscal year 2024. Brokered lemons and other lemon sales were $3.8 million and $9.8 million in the third quarter of fiscal years 2025 and 2024, respectively.

The company recognized $8.5 million of avocado revenue in the third quarter of fiscal year 2025 compared to $13.9 million of avocado revenue in the same period of fiscal year 2024. Approximately 5.7 million pounds of avocados were sold in aggregate during the third quarter of fiscal year 2025 at a $1.50 average price per pound compared to approximately 8.9 million pounds sold at a $1.57 average price per pound during the third quarter of fiscal year 2024. The California avocado crop typically experiences alternating years of high and low production due to plant physiology and was the primary reason for lower volume this year compared to last year. Both avocado pricing and volume were on plan, and we achieved our volume goals for fiscal year 2025.

The company recognized $1.7 million of orange revenue in the third quarter of fiscal year 2025 compared to $1.2 million in the third quarter of fiscal year 2024. Approximately 94,000 cartons of oranges were sold during the third quarter of fiscal year 2025 at an $18 average price per carton compared to approximately 43,000 cartons sold at a $26.98 average price per carton during the third quarter of fiscal year 2024. Specialty citrus and wine grape revenue were $600,000 for the third quarter of fiscal years '25 and '24.

Farm management revenues were $100,000 in the third quarter of fiscal year 2025 compared to $3.2 million in the same period of fiscal year 2024. The decline was due to the termination of our farm management agreement effective March 31, 2025. Total costs and expenses for the third quarter of fiscal year 2025 decreased to $48.1 million compared to $54.3 million in the third quarter of last year. Operating loss for the third quarter of fiscal year 2025 was $600,000 compared to operating income of $9 million in the third quarter of the previous fiscal year.

Net loss applicable to common stock after preferred dividends for the third quarter of fiscal year 2025 was $1 million compared to net income applicable to common stock of $6.5 million in the third quarter of fiscal year 2024. Net loss per diluted share for the third quarter of fiscal year 2025 was $0.06 compared to net income per diluted share of $0.35 for the same period of fiscal year 2024. Adjusted net loss for diluted EPS for the third quarter of fiscal year 2025 was $400,000 or $0.02 per diluted share compared to adjusted net income per diluted EPS of $7.8 million or $0.42 per diluted share in the same period of fiscal year 2024. A reconciliation of net income or loss attributable to Limoneira Company to adjusted net income or loss for diluted EPS is provided at the end of our earnings release.

Non-GAAP adjusted EBITDA for the third quarter of fiscal year 2025 was $3 million compared to $13.8 million in the same period of fiscal year 2024. A reconciliation of net income or loss attributable to Limoneira Company to adjusted EBITDA is also provided at the end of our earnings release.

Turning now to our balance sheet and liquidity. Long-term debt as of July 31, 2025, was $63.3 million compared to $40 million at the end of fiscal year 2024. Debt levels as of July 31, 2025, less the $2.1 million of cash on hand resulted in a net debt position of $61.3 million at quarter end. In April of 2025, we received $10 million of our share of a $20 million cash distribution from our 50-50 real estate development joint venture with The Lewis Group of Companies. The distribution came from the joint venture's available cash and cash equivalents, which as of July 31, 2025, totaled $36.4 million.

Now I'd like to turn the call back to Harold to discuss our fiscal year 2025 outlook and longer-term growth pipeline.

Thanks, Mark. We continue to expect fresh lemon volumes to be in the range of 4.5 million to 5 million cartons for fiscal year 2025, and avocado volume is approximately 7 million pounds for fiscal year 2025. Fiscal year 2025 avocado volume is lower than fiscal year 2024, primarily due to the alternate bearing nature of avocado trees.

Looking beyond fiscal year 2025, we have strong visibility on multiple value drivers. First, we believe we are in a good position to divest additional real estate assets in fiscal year 2026. Second, we expect to receive an additional $155 million from our real estate projects over the next 5 fiscal years. Third, we have 700 acres of nonbearing avocados estimated to become full-bearing over the next 2 to 4 years, which we expect will enable strong organic growth in avocado production. Additionally, we plan to continue expanding our plantings of avocados over the next 2 fiscal years.

Fourth, we expect lemons to return to profitability with more normalized lemon prices and fresh utilization levels in fiscal year 2026 in which we continue to estimate 4 million to 4.5 million cartons. Our partnership with Sunkist fundamentally strengthens our citrus business model, unlocking availability to new high-quality customers and driving an anticipated $5 million in annual cost savings beginning in fiscal year 2026. This partnership positions us for sustainable EBITDA growth and creates a strong foundation for long-term value creation. And fifth, the exploration of our Limco Del Mar property represents another significant value creation opportunity, addressing critical community needs with anticipated substantial returns for shareholders.

In summary, we're executing on a comprehensive strategy across agricultural production optimization and asset monetization that positions us for both near-term resilience and long-term growth. We believe we have the asset base, strategic partnerships and operational improvements in place to deliver sustainable value creation while maintaining flexibility to capitalize on additional opportunities as they arise.

Operator, we will now open the call to questions.

[Operator Instructions] Our first question comes from the line of Ben Klieve with Lake Street Capital Markets.

First, a couple of questions on the Limco Del Mar opportunity here. It's great to hear that, that's progressing. One very specific question on, is there any kind of expectations of costs flowing through the income statement on this, say, through '26, maybe associated with regulatory costs or consulting costs, anything of that nature? And then second, 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? Kind of how are you thinking about that on a -- from a big picture perspective?

Great question, Ben. Thank you. So multiple pieces to that. So we'll start with the cost and the income statement. So as you know, we recently tendered from our position, we had 28% as the general partner and achieved up to 55%. It's good to know we have a bunch of local still involved in this. And so we've got support from all around. From a cost perspective, 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. And so at the end of the day, I think the $3 million to $5 million is a good number to hold on to. And we're working really hard. We've already started and had some good progress and good support as well.

So Ben, I would also just add that there'll be two value triggers that happen along this journey. The first real value-creating opportunity will become evident upon entitlement. And so as mentioned in the description earlier, we'll go through a comprehensive CEQA review, a comprehensive SOAR vote. And then assuming that we are successful in winning a SOAR vote, and that vote will be comprised of the City of Ventura citizens voting to support the project. Assuming a majority of the citizens vote yes, then we'll work with the Local Agency Formation Commission to annex the 220 acres into the City of Ventura. And at that point, it would become entitled.

At that point, the value creation will be significant. But then the second chapter of that value creation will be in the actual development of the project. And as Mark pointed out, we've had a great relationship with the Lewis Group. The way that we've developed Harvest at Limoneira and Santa Paula has been extremely successful. But I would say when we get to the point of development, we'll assess what the best options are for the community of Ventura, but also for the Limoneira Company and decide at that point.

Got it. That makes plenty of sense. Very good. We'll stay tuned for updates on that in quarters to come. I've got a question on the lemon side. Great to see fresh lemon prices rebound sequentially from a difficult second quarter. You guys talked about kind of a normalization of pricing going into next year as there's maybe some industry supply constraints that should be supportive. 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?

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.

Got it. That would be great to see. Very good. 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?

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.

[Operator Instructions] And we have reached the end of the question-and-answer session. I would like to turn the floor back over to CEO, Harold Edwards, for closing remarks.

Thank you. I'd like to point out that as of this afternoon, we have updated our investor deck and it is now available on our website at limoneira.com. I'd like to thank you all for your questions and your interest in Limoneira. Have a great day.

And ladies and gentlemen, this concludes today's conference, and you may disconnect your line at this time. We thank you for your participation. Have a great day.