Greetings, and welcome to Limoneira's Fourth Quarter Fiscal Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Mills with ICR. Thank you. You may begin.

Thank you, Doug. Good afternoon, everyone, and thank you for joining us for Limoneira's fourth quarter fiscal year 2023 conference call. On the call today are Harold Edwards, President and Chief Executive Officer; and Mark Palamountain, Chief Financial Officer. By now, everyone should have access to the fourth quarter of fiscal year 2023 earnings release, which went out today at approximately 4.00 PM Eastern Time. If you have not had a chance to view the release, it’s available on the Investor Relations portion of the Company's website at limoneira.com. This call is being webcast and a replay will be available on Limoneira's website as well. Before we begin, we would like to remind everyone that prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the Company's control, and could cause its future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risk details in the Company's 10-Qs and 10-Ks filed with the SEC and those mentioned in the earnings release. Except as required by law, we undertake no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events or otherwise. Please note that during the call today, we will be discussing non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater understanding of Limoneira's ongoing results of operations, particularly when comparing underlying results from period to period. We have provided as much detail as possible on any items that are discussed on an adjusted basis. Also within the Company's earnings release and in today's prepared remarks, we include adjusted EBITDA and adjusted diluted EPS, which are non-GAAP financial measures. A reconciliation of adjusted EBITDA and adjusted diluted EPS to the most directly comparable GAAP financial measures are included in the Company's press release, which has been posted to our website. And with that, it's my pleasure to turn the call to the Company's President and CEO, Mr. Harold Edwards.

Thanks, John, and good afternoon, everyone. I am pleased with our performance in fiscal year 2023, as we achieved our full year avocado and revised lemon volume guidance despite harsh weather conditions and softer lemon pricing throughout most of the year. Additionally, our company's strategic shift towards an asset lighter business model progressed this year and is reflected in our latest results with brokered lemons and other lemon sales growing year-over-year for the second quarter in a row, in the fourth quarter, and our farm management revenue reaching close to $10 million this fiscal year, compared to no revenue last year. We made progress monetizing or eliminating certain non-strategic assets with the sale of our Northern properties for $98 million in net cash proceeds, entering a water-following program in Yuma, Arizona for expected annual proceeds of $1.3 million and exiting our unprofitable farming operations in Cadiz. All these actions have positioned our company to be in a stronger financial position with our balance sheet right-sized and our net debt position at the lowest level since becoming a publicly traded company. Heading into fiscal year 2024, we are committed to advancing our strategic shift and believe the actions taken this past year have set us up to improve margins in fiscal year 2024. We also anticipate selling the remaining two identified non-strategic assets this next fiscal year for an expected $50 million in proceeds. While rising interest rates this past year caused a temporary slowdown in our harvest at the Limoneira project, we are encouraged to have seen sales pick back up at the end of the year, with the remaining 121 residential units in Phase 1 of the project selling out at a 40% premium to lot sales at the inception of the project. We have adjusted our cash flow projections to account for increased sales prices and now expect a 14% increase in total proceeds to $131 million spread out over nine fiscal years, with approximately $8 million received in fiscal year 2022 and $3 million expected in fiscal year 2024. Also in the fiscal fourth quarter, the overall lemon market has shown improvement with prices being higher for all grades and sizes. This is caused by the supply and demand curve being out of balance. On the supply side, the availability of fruit has been reduced. Californian and South American supply on the trees in combination with remaining volume in storage is much lower than at the same time last year. Weather events like flooding in Chile are having an impact on the quantity and quality of the lemon crop. Closer to the USA, in Mexico, excessive heat in July impacted the grade and size of the fruit. With good demand in this situation, prices should go up. We believe all these factors position us very well for expected higher lemon pricing in fiscal year 2024. The overall improvements we are making to our business are well aligned with our strategic asset lighter transition plan that we expect to be completed in this next fiscal year. We are working to pivot our business towards a model that will streamline our operations, sell non-strategic assets, improve the consistency of our earnings, increase EBITDA and dividends per share, reduce debt, right-size the balance sheet, and improve the return on invested capital. Debt less cash on hand as of October 31, 2023 was $37.4 million compared to $105 million at the end of fiscal year 2022. The benefits of all these improvements will begin to be fully realized in fiscal year 2024. Even after the recent non-strategic asset sales, we continue to manage approximately 11,100 acres of land with approximately 21,000 acre-feet of owned water usage and pumping rights. This year we announced that we entered into a second following program with the Yuma Mesa Irrigation and Drainage District and the United States Bureau of Reclamation that supersedes the initial program and will commit to follow owned land through at least calendar year 2025. We expect to receive approximately $1.3 million annually paid in quarterly installments for following approximately 600 acres out of our 1300 acres of farmland in Yuma, Arizona. Yuma Mesa Irrigation and Drainage District will refrain from diverting Colorado River water that otherwise would have been used to irrigate followed lands, so that the same water may be retained in Lake Mead as Colorado River system conservation water. This will result in increasing the supply and elevation of Lake Mead and help to avoid water shortages in Arizona and the lower basin. In fiscal year 2024 on the operational side of our business, you will continue to see our transition to an asset lighter business model and focus on the best use of our assets to enhance shareholder value. We have dramatically decreased interest expense, removed our pension obligation, we'll be receiving quarterly payments from the Yuma Mesa Irrigation and Drainage District for our following program, and we believe lemon pricing will be better this year compared to fiscal year 2023, positioning us well for strong improvements in fiscal year 2024. In addition to our operational improvements, our board and management team will continue to evaluate how to best leverage our expertise in farm management, packing, marketing, and distributing citrus combined with our valuable portfolio of agricultural lands, real estate properties, and water rights in order to enhance long-term shareholder value. This has led our board towards an additional process to explore potential strategic alternatives aimed at maximizing value for stockholders, including but not limited to a sale of all or parts of the Company, merger, and other potential strategic transactions. And with that, I'll now turn the call over to Mark.

Thank you, Harold, and good afternoon, everyone. As a reminder, due to the seasonal nature of our business, it is best to view our business on an annual, not quarterly basis. Historically, our first and fourth quarters are the seasonally softer quarters while our second and third quarters are stronger. For the fourth quarter of fiscal year 2023, total net revenue increased 4% to $41.4 million compared to total net revenue of $39.7 million in the fourth quarter of the previous fiscal year. Agribusiness revenue was $40.1 million compared to $38.2 million in the fourth quarter last year. Other operations revenue was $1.3 million, compared to $1.4 million in the fourth quarter last year. Agribusiness revenue for the fourth quarter of fiscal year 2023 includes $11.3 million in fresh lemon sales, compared to $13.1 million during the same period of fiscal year 2022. Approximately 550,000 cartons of fresh lemons were sold during the fourth quarter of fiscal year 2023 at a $20.39 average price per carton, compared to 680,000 cartons sold at a $19.33 average price per carton during the fourth quarter of fiscal year 2022. The industry experienced softer pricing for lemons throughout most of the year, because of the heavy rains in California from December until May, which delayed a portion of our lemon harvest and an industry-wide pest issue that lowered the grade of certain fruit. Beginning in August, we began to see a steady recovery in price for all grades and sizes that continued throughout the fourth quarter, leading us to record the highest fourth quarter lemon pricing since 2019. Brokered lemons and other lemon sales were $14.4 million and $12.7 million in the fourth quarter of fiscal years 2023 and 2022, respectively, representing 13% growth year-over-year. The Company recognized no avocado revenue in the fourth quarter of fiscal year 2023, compared to nominal avocado revenue in the fourth quarter of the previous fiscal year, due to the seasonal nature of this fruit. The Company recognized $1.9 million of orange revenue in the fourth quarter of fiscal year 2023, compared to $2.7 million in the fourth quarter of fiscal year 2022. Approximately 69,000 cartons of oranges were sold during the fourth quarter of fiscal year 2023 at a $28.32 average price per carton, compared to approximately 86,000 cartons sold at a $31.22 average price per carton during the fourth quarter of fiscal year 2022. Specialty citrus and other revenue was $5.4 million in the fourth quarter of fiscal year 2023, compared to $5.5 million in the fourth quarter fiscal year 2022. As a reminder, we sold the majority of our orange and specialty citrus acreage in the Northern Properties transaction during the first quarter of fiscal year 2023. Farm management revenues were $3.1 million in the fourth quarter of fiscal year 2023, and there were no farm management revenues in the fourth quarter of fiscal year 2022. Total costs and expenses for the fourth quarter of fiscal year 2023 were $51.1 million, compared to $41.5 million in the fourth quarter of last year. The increase of $9.6 million was primarily due to farm management costs expensed in fiscal year 2023, but capitalized as cultural costs in fiscal year 2022, and decreased gain on asset disposals. Operating loss for the fourth quarter of fiscal year 2023 was $9.7 million compared to an operating loss of $1.9 million in the fourth quarter of the previous fiscal year, primarily due to increased costs and expenses as described above. Net loss applicable to common stock after preferred dividends for the fourth quarter of fiscal year 2023 was $3.6 million compared to a net loss applicable to common stock of $2.8 million in the fourth quarter of fiscal year 2022. Net loss per diluted share for the fourth quarter of fiscal year 2023 was $0.20 compared to net loss per diluted share of $0.16 for the same period of fiscal year 2022. Adjusted net loss for diluted EPS for the fourth quarter of fiscal year 2023 was $2.6 million compared to $5.7 million in the same period of fiscal year 2022. Adjusted net loss per diluted share for the fourth quarter of fiscal year 2023 was $0.15 compared to an adjusted net loss per diluted share of $0.32 for the fourth quarter of fiscal year 2022. A reconciliation of net loss attributable to Limoneira Company to adjusted net loss for the diluted EPS is provided at the end of our earnings release. Adjusted EBITDA was a loss of $1.3 million in the fourth quarter of fiscal year 2023 compared to a loss of $3.8 million in the same period of fiscal year 2022. A reconciliation of net loss attributable to Limoneira Company to adjusted EBITDA is also provided at the end of our earnings release. For the fiscal year ended October 31, 2023, revenue was $179.9 million, compared to $184.6 million in the same period last year. Operating income for fiscal year 2023 was $10.8 million compared to operating income of $2.2 million in the same period last year. Net income applicable to common stock after preferred dividends was $8.9 million for fiscal year 2023 compared to a net loss applicable to common stock after preferred dividends of $737,000 for fiscal year 2022. Net income per diluted share for fiscal year 2023 was $0.50 compared to net loss per diluted share of $0.04 in fiscal year 2022. For fiscal year 2023, adjusted net loss for diluted EPS was $7.6 million compared to an adjusted net loss for diluted EPS of $1.3 million for fiscal year 2022. Adjusted net loss per diluted share was $0.43, compared to adjusted net loss per diluted share of $0.08 for fiscal year 2022 based on approximately $17.6 million and $17.5 million weighted average diluted common shares outstanding for fiscal years 2023 and 2022, respectively. We recorded a provision for income tax of $4.2 million on pre-tax income of $13.4 million for fiscal year 2023. The tax provision recorded for fiscal year 2023 differs from the U.S. Federal statutory tax rate of 21%, due primarily to foreign jurisdictions which are taxed at different rates, state taxes, tax impact of stock-based compensation, non-deductible tax items, and valuation allowances on certain deferred tax assets of foreign subsidiaries. The effective tax rate for fiscal year 2023 and 2022 was 31.8% and 234.8%, respectively. For fiscal year 2023, adjusted EBITDA was a loss of $224,000 compared to income of $11.9 million for fiscal year 2022. Turning now to our balance sheet and liquidity. At the beginning of the year, we sold our Northern properties which resulted in total net proceeds of $98.4 million. The proceeds were used to pay down all of our domestic debt except the AgWest Farm Credit $40 million non-revolving line of credit which has a fixed interest rate of 3.57% until July 1, 2025. Long-term debt as of October 31, 2023 was $40.6 million compared to $104.1 million at the end of fiscal year 2022. Debt levels as of October 31, 2023 minus $3.6 million of cash on hand resulted in a net debt position of $37.4 million at the end of fiscal year 2023. As a reminder, we have $50 million of remaining non-strategic assets for monetization over the next fiscal year and their sales combining with approved EBITDA may provide an opportunity to further reduce our net debt position by this time next year. Now, I'd like to turn the call back to Harold to discuss our fiscal year 2024 outlook and longer-term growth pipeline.

Thanks Mark. For fiscal year 2024, we expect fresh lemon volumes to be in the range of 5 million to 5.5 million cartons and avocado volumes to be in the range of 7 million to 8 million pounds for fiscal year 2024. We have 700 acres of non-bearing lemons and avocados estimated to become full bearing over the next four to five years, which we expect will enable strong organic growth in the coming years. Additionally, we plan to expand our plantings of avocados over the next three years and also expect to have a steady increase in third-party grower fruit. Turning to our real estate projects, harvest at Limoneira, Limoneira Lewis Community Builders II and East Area II, we have increased our expected total proceeds by 14% to $131 million over nine fiscal years. The increase is primarily due to increased lot pricing based on our 121 lot sales in October of 2023. Lastly, as a reminder based on our asset lighter model transition, we anticipated an additional $50 million of asset sales during the next fiscal year. And with that, I'd like to turn it over to the operator.

Our first question comes from Ben Bienvenu with Stephens. Please proceed with your question.

I want to ask, Harold, you talked a little bit about the supply-demand setup for lemons as it looks right now heading into 2024. It looks pretty constructive. The supply backdrop, in particular, looks constrictive and I think the way you put it was if the demand is there, it could be a more favorable environment in 2024 than in 2023. What are you seeing with respect to demand? And is there any demand sensitivity to higher prices? Or have we not crossed a threshold of pricing that starts to trigger demand sensitivity?

I think we're really pleased with the demand structure and where we are today and what we see for the rest of the fiscal year. I think it would be fair to say that we are back to pre-pandemic demand levels. The one area where we continue to struggle a little bit is in the export markets, where the strong foreign exchange rates and the very strong dollar price some of our products out of those markets. And so, we have seen demand drop due to the high pricing related to the foreign exchange rates and the strong dollar. But other than that, I think we are cautiously optimistic that, heading into the rest of this fiscal year, we will see continued strong pricing, which should give us considerable help with the margins, which we really haven't seen since 2018.

Okay, great. My second question is related to Harvest at Limoneira. You have increased the total proceeds you expect from that program. The timeline has extended. When we look at where that program sits now with the prospect of falling interest rates as well into next year, how much variability is there yet in that program around both the amount and the timing of the receipt of those proceeds?

Brad, that's a great question. So, as you know, we had an 18-month hiatus, where interest rates started going up and we were close to getting Phase 2 done. Now, we finished those 121 lots at prices that were exceeding our expectations at over 40% up from where we started this project putting lots out in 2019. Now, as you know, we have partners, and we make budgets every December. So, that cash flow basically reflected an 18-month push out, but also the increase in the recent lot sales that we saw. I think we will see opportunities to potentially move quicker with Phase 2. We are fully attacking that right now and negotiating with all of the large homebuilders now that we closed that. Our goal is to try to get something in '24 or if not '25, but the numbers you see for Phase 2 is in '26. We have got plenty of opportunity with that conservatism to try to pull that forward, and we are working hard to do that.

Our next question comes from the line of Ben Klieve with Lake Street Capital Markets. Please proceed with your question.

First question about your margin expectations going into '24. I hear you loud and clear that the pricing environment is, knock on wood, more favorable today than it has been for some time. Harold, you commented though in your prepared remarks about some of the operational changes that you have made, being realized in the margin line here in 24%. And so irrespective of pricing, can you talk about the level of costs that were included in cost of goods sold or OpEx in '23 that you expect will not be repeated here in '24?

Two things to point out, Ben. Thanks for that question. One is we expect higher utilization rates this coming year versus last year. We had a lot of challenges with pest and the weather influence on the fruit, which lowered for at least a part of the year the fresh utilization rates. When that happens, that drives your packing costs up because you still put the same number of costs into the fruit but just sell less of it fresh. So that's one negative impact on cost. The other is, we made a lot of progress getting rid of some of the less-profitable to non-profitable parts of the business, specifically in Cadiz, which were having hugely negative impacts on our cost structure. We think the benefit of that in 2024 will not only be felt but will be recognized in higher margins.

And also I just want to add. So if you notice the differences between fiscal year 2022 and '23 for the fourth quarter and actually full year. As we picked up the farm services management business, all of those costs used to be on the balance sheet for most of the year depending on the harvest period because those were our own properties. And now as that transitioned to Prudential and outside ownership, all of those costs are expensed as incurred. So, that $10 million of expense that came this year came quarter to quarter relative to prior years where we had gaps in that until harvest periods. You'll see going forward and then, as you see us increase our brokerage business, the agency 8% commission net business, you'll see actual percentage margins go down, but overall gross dollars going up. So, not a declining margin business, but gross dollars improving.

And then Harold, you talked about your intention to increase avocado acreage here over the next few years. I'm wondering a couple of things on this one: can you comment on the level of acreage you expect to plant here over the next few years, and then, the relationship between your intent to plant additional acreage versus potentially adding any kind of avocado processing capabilities as well?

No, I'd be pleased to do that. Avocados have a very bright future, we believe, here in California. Their seasonality comes out in a window that is very opportunistic in the marketplace and really not very crowded from a foreign competition standpoint. Avocados start to be harvested typically around May and carry forward until approximately March here in California. That's a nice little window where you're not having a lot of pressure from Mexico or from Peru at that time. California fruit captures a nice little niche in the market where it actually trades at a premium to fruit from other origins. So, we're very bullish on that, and we believe that Ventura County provides the ideal opportunity to produce avocados. As such, our portfolio historically of 3,000 acres of Ventura County production has been heavily weighted towards lemons with 2,000 acres of lemons and 1,000 acres of avocados. You’ll see that begin to invert, where older lemons that are less productive will be pulled and replaced with avocados. It won't be exactly this, but will invert to be more closely resembling 1,000 acres of lemons and 2,000 acres of avocados.

Our next question comes from Raj Sharma with B. Riley Securities. Please proceed with your question.

I just wanted to understand the strategic review that was announced. What does that imply in terms of the expansion of the One World of Citrus and also your farm management business? Would you be trying to get new customers? Could you expand a little bit on that?

Yes, happy to do that. The exploration of the strategic alternatives process, and we've stayed away from estimating a timeframe on how long that process will take, but the Board and management will be working on that over the next fiscal year. As far as the operations go in the Company of increasing or expanding our farm management services business and expanding our grower partner business and also expanding our agency business with outside supplier partners, we will be in full-speed ahead and fully in expansion mode. We will be working as hard as we can internally to expand each of those three parts of our business. We've just established our business plans for this fiscal year and have the entire Limoneira management team focused on the strategic goals of expansion in each of those three areas.

And then I just wanted to understand, Phase 1 on the harvest side. So if that's over, the extra dollars that you get as a result of it, would those show up as cash flow for the Company? Or would those be rolled into as equity in Phase 2?

Great question. So, the answer is depending on how the Phase 2 deal gets structured. We had an opportunity to have a homebuilder do the upfront costs and grading before the interest rate environment changed. We would certainly seek to try to do that again. But if we have to do the infrastructure ourselves, which is about $30 million to $40 million of grading, it’s on the hillside and whatnot, that will take a little longer, and that will be the equity role. It’s too early to tell really what that is. But the first moment that the JV gets cash will be the first moment that you guys hear about it and we’ll be putting it up. I think you know, Lewis is conservative in their nature. We still have a bridge to build out there, which is about $15 million, and we're just finishing up a sports park. That’s why you constantly see these types of projects back-end loaded, but we're still very optimistic and think we're conservative on pricing and cash flows going forward.

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Thank you very much for all of your questions and your interest in Limoneira. Happy holidays, and have a great rest of your day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.