Gladstone Land(LAND) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial & Operational Highlights Gladstone Land reported a significant net loss and negative AFFO for Q2 2025, a sharp decline from the prior year, primarily driven by a strategic shift in lease structures. The company modified several leases to reduce fixed base rents in favor of higher participation rents, causing a delay in revenue recognition to later in the year. This led to a 42.3% decrease in total operating revenues and a $12.0 million drop in cash flows from operations. Key activities included refinancing debt at a higher interest rate and acquiring additional water assets in California Financial Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Loss | ~$7.9 million | ~$823,000 | Increased Loss | | Net Loss to Common Stockholders | ~$13.9 million | ~$6.7 million | Increased Loss | | Net Loss per Share | $0.38 | $0.19 | Increased Loss | | AFFO | ~$(3.5) million | ~$3.7 million | Negative Swing | | AFFO per Share | $(0.10) | $0.10 | Negative Swing | | Common Stock Dividends Declared | ~$0.14/share | ~$0.14/share | Unchanged | - Total cash lease revenues decreased, mainly due to a $6.8 million reduction in fixed base cash rents from lease modifications and vacancy issues. Participation rents also fell by approximately $975,000 due to accelerated revenue recognition in the prior year[6] - Cash flows from operations saw a significant decrease of approximately $12.0 million compared to the prior-year quarter. This was primarily caused by reduced cash from fixed lease payments following lease modifications and lower collections from vacant or direct-operated farms[10] - Cash operating expenses (excluding related-party fees) decreased by about $135,000, driven by lower general and administrative costs. However, this was partially offset by higher property operating expenses, including costs to protect water rights and manage vacant properties[7][9] Key Activities and Subsequent Events - Executed four new lease agreements expected to increase annual net operating income by approximately $166,000, a 9.3% increase over prior leases[8] - Secured a new $10.6 million loan at a fixed rate of 6.31% for three years to repay a maturing $10.3 million loan that had a 3.85% interest rate[8] - Subsequent to quarter-end, the company purchased 1,530 gross acre-feet of water for approximately $583,000 and repaid a $10.4 million maturing bond that had a 4.45% interest rate[12] - Declared monthly cash distributions of $0.0467 per common share for July, August, and September 2025, totaling $0.1401 for the third quarter[12] Management Commentary and Outlook - The company modified lease agreements on six farms, reducing or eliminating fixed base rent in exchange for significantly higher participation rent components. This strategic shift will delay revenue recognition, with the majority of 2025 revenue and earnings expected in the fourth quarter[8] - CEO David Gladstone stated that 2025 earnings will be more dependent on participation rents, viewing the lease modifications as a temporary but profitable measure for the 2025 crop year. The company may consider selling certain farms if satisfactory standard lease terms are not reached in the near future[11] - Market trends for key crops like pistachios and almonds are viewed as mostly positive. Pistachio prices are steady, while almond prices are currently 5% to 10% higher than the same time last year[11] - The company maintains a strong balance sheet with nearly 100% of debt at fixed interest rates and strong liquidity, including over $150 million in immediately-available capital[11] Detailed Financial Data The company's detailed financials for Q2 2025 show a significant year-over-year decline across key metrics. Total operating revenues fell 42.3% to $12.3 million, while net loss widened to $7.9 million from $0.8 million. Non-GAAP measures also deteriorated, with FFO and AFFO turning negative. The balance sheet contracted, with total assets and total indebtedness decreasing by 6.9% and 8.7% respectively. Operational metrics also weakened, with farm ownership down by 18 properties and the occupancy rate dropping to 95.9% from 99.3% Operating Data & Per-Share Metrics Q2 2025 vs Q2 2024 Operating Results (in thousands) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total operating revenues | $12,296 | $21,297 | (42.3)% | | Total operating expenses | $(12,510) | $(13,433) | (6.9)% | | Net loss | $(7,878) | $(823) | 857.2% | | FFO available to common stockholders | $(3,346) | $4,974 | (167.3)% | | CFFO available to common stockholders | $(3,562) | $5,011 | (171.1)% | | AFFO available to common stockholders | $(3,450) | $3,703 | (193.2)% | Q2 2025 vs Q2 2024 Per-Share Results | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Diluted net loss per common share | $(0.384) | $(0.186) | 106.6% | | Diluted FFO per common share | $(0.092) | $0.139 | (166.6)% | | Diluted CFFO per common share | $(0.098) | $0.140 | (170.4)% | | Diluted AFFO per common share | $(0.095) | $0.103 | (192.3)% | Balance Sheet & Other Metrics Balance Sheet Data as of June 30 (in thousands) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total assets | $1,258,585 | $1,352,553 | (6.9)% | | Total indebtedness | $558,917 | $612,465 | (8.7)% | | Total equity | $670,073 | $708,469 | (5.4)% | Operational Data as of June 30 | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Farms owned | 150 | 168 | (10.7)% | | Acres owned | 103,001 | 111,836 | (7.9)% | | Occupancy rate | 95.9% | 99.3% | (3.4)% | | Acre-feet of water assets owned | 55,306 | 53,975 | 2.5% | About the Company & Shareholder Information Gladstone Land is a publicly traded REIT founded in 1997 that owns farmland and related properties across the U.S. As of the report date, the company owns 150 farms totaling approximately 103,000 acres in 15 states, along with significant water assets in California. The company focuses on farms growing fresh produce and permanent crops and pays monthly distributions to stockholders. An earnings conference call is scheduled for August 8, 2025, at 8:30 a.m. Eastern Time - Gladstone Land is a REIT that owns 150 farms, comprising approximately 103,000 acres in 15 states, and over 55,000 acre-feet of water assets in California[17] - The company's portfolio includes farms for annual row crops (berries, vegetables) and permanent crops (almonds, pistachios, wine grapes). A significant portion of its acreage is organic or in transition to organic[17] - The company has paid 150 consecutive monthly cash distributions on its common stock since its IPO in January 2013. The current monthly distribution is $0.0467 per share[17] - A conference call to discuss the earnings results will be held on Friday, August 8, 2025, at 8:30 a.m. (Eastern Time)[16] Non-GAAP Financial Measures & Disclosures The report utilizes non-GAAP financial measures including Funds from Operations (FFO), Core FFO (CFFO), and Adjusted FFO (AFFO) to provide supplemental information on operating performance. FFO, defined by NAREIT, excludes gains/losses from property sales and real estate depreciation. CFFO further adjusts FFO for non-recurring items to enhance period-over-period comparability. AFFO adjusts CFFO for certain non-cash items like straight-lining of rents to reflect performance on a cash basis. The company also includes a standard forward-looking statements disclaimer, cautioning that actual results may differ materially from projections - FFO (Funds from Operations) is a non-GAAP measure used to evaluate REIT performance, excluding gains/losses from property sales and real estate depreciation[19] - CFFO (Core FFO) adjusts FFO for non-recurring items to provide a measure of sustainable operating performance[23] - AFFO (Adjusted FFO) adjusts CFFO for certain non-cash items, such as the straight-lining of rents, to measure sustainable operating performance on a cash basis[24] - The press release contains forward-looking statements that involve risks and uncertainties. The company cautions readers not to place undue reliance on these statements, which are subject to various factors disclosed in SEC filings[26]