Limoneira(US:LMNR)2023-06-07 03:09Financial Data and Key Metrics Changes - Total net revenue for Q2 FY2023 was $48.1 million, compared to $46.8 million in Q2 FY2022, reflecting a year-over-year increase [61] - Operating loss for Q2 FY2023 was $3.9 million, compared to operating income of $2.6 million in the same period last year [3] - Net loss applicable to common stock for Q2 FY2023 was $1.7 million, compared to net income of $1.4 million in Q2 FY2022 [3] - Adjusted net income for diluted earnings per share for Q2 FY2023 was $3.9 million, or $0.21 per diluted share, compared to $1.9 million, or $0.11 per diluted share in Q2 FY2022 [4][5] - Adjusted EBITDA for Q2 FY2023 was $6.2 million, similar to the same period in FY2022 [6] Business Line Data and Key Metrics Changes - Approximately 88,000 cartons of oranges were sold in Q2 FY2023 at an average price of $15.72 per carton, down from 328,000 cartons sold at $7.98 per carton in Q2 FY2022 [1] - Specialty citrus and other revenue increased to $2.4 million in Q2 FY2023 from $1.4 million in Q2 FY2022 [1] - Agribusiness revenue for Q2 FY2023 was $46.7 million, compared to $45.4 million in the same period last year [61] - Lemon revenues in Q2 FY2023 included $26.6 million from fresh lemon sales, down from $27.3 million in Q2 FY2022 [64] Market Data and Key Metrics Changes - The company expects total lemon sales volume for FY2023 to be between 5 million and 5.4 million cartons, up from 4.9 million cartons in FY2022 [9] - Avocado revenue in Q2 FY2023 was $3.6 million, with approximately 900,000 pounds sold at an average price of $1.30 per pound, down from 1.9 million pounds at $1.90 per pound in Q2 FY2022 [68] - The avocado market is currently oversupplied, with significant pressure on prices due to increased imports from Mexico and Peru [69] Company Strategy and Development Direction - The company is transitioning to an asset lighter business model, aiming to streamline operations and sell non-strategic assets, with $180 million identified for sale [82][87] - The strategic plan includes leveraging grower partner fruit to reduce capital outlay and improve margins, targeting $2 to $2.50 per carton of margin [85] - The company has entered into an exclusive licensing relationship with Apeel Sciences to enhance lemon quality and shelf life through innovative coating technology [91][92] Management's Comments on Operating Environment and Future Outlook - Management noted that heavy rains in California delayed some lemon harvests but still expects to meet full fiscal year 2023 lemon volume guidance [80] - The company anticipates a slow rise in lemon prices in the second half of FY2023 due to industry-wide lower production [9][66] - Management expressed confidence in the long-term recovery of lemon pricing despite current oversupply conditions [23] Other Important Information - The company recorded a non-cash loss on the disposal of Cadiz Ranch assets amounting to $9 million, ceasing farming operations in that area [2][90] - A settlement agreement with Southern California Edison resulted in a total settlement of $9 million, with $6.1 million received net of legal costs [62][89] Q&A Session Summary Question: View on lemon markets and path to normalized earnings - Management discussed the challenges in the lemon market and the steps taken to improve profitability, particularly in unprofitable areas like Yuma, Arizona [18][20][22] Question: Avocado supply and demand dynamics - Management explained that the current oversupply is primarily driven by increased supply from Mexico, leading to lower prices and a lag in demand recovery [24][26] Question: Monetization of water rights - Management indicated potential for significant revenue from water rights, with discussions ongoing regarding the sale or leasing of water rights [27][29][31] Question: Asset light outlook and growth targets - Management outlined a target of 15 million cartons over the next three to five years, with a focus on third-party grower partnerships for growth [40][41] Question: Cadiz Ranch asset disposal impact - Management clarified that the $9 million loss from Cadiz Ranch was non-cash and part of a strategic decision to eliminate unprofitable operations [47][49]