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Strategic Initiatives Position Company for Growth and Value Creation

Our company is enhancing its services across growing, packing, marketing, and distribution to drive higher margins. Since announcing our exploration of strategic alternatives, we’ve successfully monetized our water rights and certain real estate assets. We anticipate further land use conversion and water monetization opportunities to emerge in fiscal year 2025.

Additionally, we are gaining valuable insights from this process that sharpen our focus on key value drivers for sustainable shareholder returns. These insights enable us to implement improvements across our entire operation. For example, we’ve refined our approach to farm management services. Building on our century-long legacy of agricultural innovation, we are positioning ourselves as the premier technology and expertise partner in the sector. This strategy allows us to deliver specialized value-added services to both farm management companies and independent farms.

Our recent Federal Aviation Administration (FAA) approval for drone spray applications in California exemplifies our commitment to advancing innovative solutions. This capability brings precision, cost efficiency, and sustainability to our partners. It is just one addition to our suite of cutting-edge technologies, agronomic consulting expertise, and specialized field services, which span California and Arizona. By positioning ourselves as an essential resource that enhances—not competes with—farm management providers, we expect to achieve broader market penetration, more diversified revenue streams, and stronger collaborative relationships throughout the agricultural ecosystem. We also made a strategic decision to substantially expand our avocado production.

Currently, avocado pricing averages over $2 a pound, which is robust. Looking forward, we see a positive EBITDA outlook supported by plans to expand avocado production by 1,000 acres through fiscal year 2027, capitalizing on strong consumer demand trends. Ongoing discussions about potential new tariff legislation could create favorable conditions for our business, as our avocados are grown in California. Should these tariffs be enacted on imported avocados, we anticipate a beneficial impact on domestic pricing and market dynamics for our operations in the foreseeable future.

Turning to our residential joint venture with the Lewis Group for the Harvest Real Estate development project, this collaboration continues to excel. We expect to receive $165 million in proceeds over the next six fiscal years. Furthermore, we achieved approval from the Federal Emergency Management Agency (FEMA) to revise a flood zone area map effective May 15, 2025. This revision significantly reduces the number of property owners required to pay flood insurance within East Area 1, East Area 2, and other real estate in the flood zone west of Santa Paula Creek. Approximately 1,100 existing and future residents will not be subject to mandatory flood insurance due to this adjustment. This has been a time-intensive effort, as we have collaborated with various public agencies since 2020 to amend the FEMA flood zone insurance rate map.

The revision to the flood zone map is expected to enhance future interest in residential and commercial real estate in these areas by alleviating concerns over flooding and the associated costs of mandatory flood insurance. Despite recent non-strategic asset sales over the past year and a half, we continue to manage approximately 10,500 acres of land with around 21,000 acre-feet of owned water usage and pumping rights, representing significant long-term growth opportunities from our assets. Year-over-year improvements in agribusiness operating results during the first quarter illustrate the positive effects of our transition to an asset-light business model and our focus on optimizing asset use to enhance shareholder value.

We are generating substantial momentum heading into fiscal year 2025, as evidenced by our January announcement of three separate water right monetization transactions. Additional water monetization opportunities are expected to materialize later this year. We also anticipate further growth through enhanced sourcing of third-party lemons, expanded avocado production, and the ongoing monetization of our real estate assets. Our diverse portfolio of agricultural and real estate assets, combined with valuable water resources and a strong balance sheet, creates multiple pathways to build long-lasting shareholder value. With that, I’ll now turn the call over to Mark.

Mark Palamountain — Chief Financial Officer, Corporate Secretary, and Treasurer

Thank you, Harold, and good afternoon, everyone. I remind you it is best to evaluate our business on an annual, rather than quarterly, basis due to its seasonal nature. Historically, our first and fourth quarters are the seasonally softer periods, while our second and third quarters tend to perform stronger. In the first quarter of fiscal year 2025, total net revenue was $34.3 million, compared to $39.7 million in the same period last year.

Agribusiness revenue totaled $32.9 million compared to $38.3 million in the first quarter of the previous year. Other operations generated $1.5 million in revenue in Q1 2025, slightly up from $1.4 million in the prior year. The year-over-year decline in agribusiness revenue largely stems from a temporarily oversupplied lemon market, which has put downward pressure on prices. We expect these challenging market conditions to persist through Q2 but anticipate relief in the latter half of the year for reasons Harold previously outlined.

Our strategic investments to grow our citrus business through multiple channels, boost our avocado market presence, and monetize our assets have partially offset these challenges this quarter. Current market pressures validate our ongoing diversification strategy beyond raw commodity lemons, better positioning us to weather cyclical market fluctuations. Agribusiness revenue for Q1 2025 included $21.2 million from fresh-packed lemon sales, down from $23.9 million in the same period last fiscal year.

An impressive 1,147,000 cartons of U.S.-packed fresh lemons were sold in the first quarter of fiscal year ’25, averaging $18.44 per carton, compared to 1,137,000 cartons sold at $21.06 per carton a year earlier. Brokered lemons and other sales totaled $2.2 million and $2.9 million, respectively, in Q1 2025 and 2024. The company recognized $162,000 in avocado revenue for Q1 2025, whereas there was no revenue from avocados in the same period of FY 2024, reflecting harvest timing. A noteworthy 73,000 pounds of avocados were sold during this quarter at an impressive average price of $2.25 per pound.

In terms of orange revenues, the company reported $1.6 million for Q1 2025, compared to $1.1 million in the previous fiscal year. About 75,000 cartons of oranges were sold at an average price of $20.91 per carton—down from approximately 80,000 cartons sold at $14.26 in the first quarter of 2024. The company also leverages buy-sell arrangements for orange orders with retail and food service.

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Limoneira Reports Fiscal Q1 2025 Financial Results and Future Outlook

In the first quarter of fiscal year 2025, Limoneira Company recorded specialty citrus and wine grape revenue at half a million dollars, a decline from $1.1 million in the previous year’s first quarter. The timing of harvest impacted the wine grape revenue, which was notably absent in Q1 2025, compared to $600,000 earned in Q1 2024.

The farm management segment earned $1.2 million this quarter, down from $2 million during the same period last year, reflecting consistent acreage but influenced by management decisions amid variable weather and crop conditions. CEO Harold S. Edwards noted that the company is reshaping its farm management services to act as a value-added partner in the agricultural sector, rather than a competitor.

This shift allows Limoneira to utilize its agricultural technology and over a century of experience to support a wider customer base while forming beneficial partnerships with other farm management service providers. This collaborative strategy not only broadens their market presence but also optimizes the advanced farming techniques already honed in their operations.

On the cost front, total expenses for this quarter decreased by 16%, amounting to $39.7 million compared to $47.5 million a year ago. The operating loss was reduced by $2.4 million, showing an improvement to a $5.3 million loss from $7.7 million in Q1 2024.

Common stock net loss after preferred dividends for the first quarter of 2025 amounted to $3.2 million, a slight improvement from the $3.7 million loss reported in Q1 2024. The net loss per diluted share stood at $0.18 this quarter, down from $0.21 the previous year. Adjusted net loss was noted at $2.5 million compared to $3.2 million last year, with adjusted net loss per diluted share improving from $0.18 to $0.14.

A detailed reconciliation of net loss attributed to Limoneira Company and the adjusted net loss for diluted earnings per share (EPS) is included at the end of our earnings release. Adjusted EBITDA for the first fiscal quarter of 2025 recorded a loss of $2.3 million, improving from a loss of $4.8 million the previous year. Additional reconciliation of net loss to adjusted EBITDA is available in the earnings release as well.

Limoneira sold water pumping rights in the Santa Paula basin for $30,000 per acre foot, totaling $1.7 million with a $1.5 million gain recognized in these transactions. Looking at the balance sheet, the long-term debt stood at $57.9 million as of January 31, 2025, an increase from $40 million at the end of fiscal year 2024. After accounting for $1.1 million in cash, the net debt was reported at $56.8 million.

Furthermore, the company’s 50-50 joint venture with the Lewis Group had cash and equivalents valued at $62.4 million as of January 31, 2025, providing approximately $31.2 million in additional liquidity. This partnership enhances Limoneira’s financial flexibility in light of the net debt figures at quarter-end.

Now, I’ll turn the call back to Harold to share insights on our fiscal year 2025 outlook and anticipated growth.

Harold S. Edwards — President, Chief Executive Officer, and Director

Thanks, Mark. We remain optimistic about fresh lemon volumes reaching between 5 million to 5.5 million cartons in fiscal year 2025. Similarly, we anticipate avocado volumes around 7 million to 8 million pounds for the same period. We also expect to generate $165 million from our projects over the next six fiscal years.

Looking forward, we forecast robust EBITDA growth facilitated by plans to expand avocado production by 1,000 acres by fiscal year 2027, in response to rising consumer demand. Although we expect lower avocado volumes in fiscal year 2025 due to the alternate-bearing nature of the trees, these initial operational results do not incorporate potential gains from asset monetization.

Overall, we are satisfied with our fiscal year 2025 start and anticipate sharing further progress during our upcoming second-quarter earnings call. Operator, we now welcome questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Ben Klieve at Lake Street Capital. Please go ahead.

Ben Klieve — Analyst

Thank you for fielding my questions. I apologize for any background noise, as I’m traveling today. My first query pertains to the water rights transaction. It was encouraging to observe the per acre foot pricing.

Can you provide insights into the total volume of acre feet in this agreement? It seems relatively small compared to your overall asset base. Could you shed light on how the number 55 was determined? Were you holding back from a broader sale to retain these assets longer, or were your customers simply not seeking more water rights in this transaction? Any context would be appreciated.

Harold S. Edwards — President, Chief Executive Officer, and Director

Hi, Ben. Happy to clarify. Our decisions were largely influenced by opportunistic demand. The chance to engage buyers at favorable values arises intermittently.

We benchmarked the $30,000 per acre foot price against fees developers are paying to municipalities in the area where our resources are sourced. This valuation was derived from two distinct types of buyers: one from a development background and the other from agricultural needs. We view this successful monetization of 58 acre feet against our extensive holdings of approximately 9,500 acre feet as a significant move. Expect to see more of these transactions occurring in 2025 as additional demand for our pumping rights emerges.

Limoneira’s Water Asset Monetization and Avocado Expansion Plans

The discussion highlighted the dual avenues for enhancing revenue through water resource management. This can occur via actual sales of pumping rights and long-term water leases at municipal rates. Analysts noted that when these leases are analyzed using net present value, the findings indicate substantial long-term value and sustainable cash flows.

Ben Klieve — Analyst

Thanks for the clarification. Could you elaborate further on your optimism for additional transactions involving this asset within the current fiscal year? Is this based on existing partnerships, or are you reaching out to new entities? I would like to gauge your current progress with this initiative.

Harold S. Edwards — President, Chief Executive Officer, and Director

Certainly, our confidence stems from both established buyers and two new opportunities we anticipate announcing in 2025. Additionally, we are exploring the creation of a water utility. This utility would aggregate our water resources to supply our workforce housing and agricultural operations, thereby ensuring a long-term supply of “wet water” for our operations.

Ben Klieve — Analyst

Got it, that’s intriguing. We’re looking forward to updates on that. On another note, your avocado initiative seems to grow increasingly appealing with each quarter. Congratulations on what appears to be a strategic decision in the avocado market. My question involves the potential for expanding this initiative. Specifically, how much of the acreage you currently dedicate to lemons and other crops could feasibly be converted to avocados? Furthermore, considering the current market challenges with permanent crops, are you seeing other California growers making similar shifts?

Mark Palamountain — Chief Financial Officer, Corporate Secretary, and Treasurer

Thank you, Ben. In terms of expanding avocado production, we could consider an additional 250 to 500 acres beyond the 2,000 acres currently designated for that purpose. However, certain regions are less feasible due to colder climates which necessitate protective measures like wind machines. Therefore, we estimate a potential maximum of around 2,500 acres for avocado production.

Historically, San Diego County was a significant avocado producer, but water scarcity has curbed that. Currently, Ventura and parts of Santa Barbara Counties represent the most suitable areas due to favorable temperature conditions. We’ve observed a shift from lemons to avocados in Ventura County, benefitting from consistent water supply and proper climatic zones.

While California produces approximately 300 to 400 million pounds of avocados, reaching 500 to 600 million pounds in the future would still capture only 10% to 15% of U.S. consumption. This suggests substantial growth potential in this sector.

Harold S. Edwards — President, Chief Executive Officer, and Director

To expand on Mark’s points, not all areas in Ventura County are suitable for avocado cultivation. We are focusing on warmer locations within the region to mitigate risks associated with future freezes, which pose a significant threat to avocado crops. The trend of lemon growers exiting the lemon market could lead some to consider avocados. However, their ability to do so will depend on local temperature conditions.

A current limitation on avocado expansion is the availability of nursery stock. There’s already a backlog of four to five years for new avocado trees from nurseries. Thus, while some growers may wish to transition from lemons to avocados, acquiring the necessary trees is a barrier at this time. We are contributing to this backlog due to our growth activities.

Ben Klieve — Analyst

Thank you for the insights. I look forward to further updates as the year progresses.

I’ll yield my time back for now.

Harold S. Edwards — President, Chief Executive Officer, and Director

Thank you, Ben.

Mark Palamountain — Chief Financial Officer, Corporate Secretary, and Treasurer

Thank you, Ben.

Operator

This concludes the question-and-answer session. Please welcome back Harold Edwards for closing remarks.

Harold S. Edwards — President, Chief Executive Officer, and Director

Thank you all for your questions and continued interest in Limoneira. Have a great day.

Operator

This concludes today’s teleconference. [Operator signoff]

Duration: 0 minutes

Call Participants:

John Mills — Head of Investor Relations

Harold S. Edwards — President, Chief Executive Officer, and Director

Mark Palamountain — Chief Financial Officer, Corporate Secretary, and Treasurer

Ben Klieve — Analyst

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