Welcome to Alico's Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, today's conference is being recorded. Earlier today, the Company issued a press release announcing its results for the third quarter ended June 30, 2021. If you have not had a chance to view the release, it is available on the Investor Relations portion of the Company's website at alicoinc.com. This call is being webcast, and a replay will be available on the Alico's website as well. Before we begin, we would like to remind everyone that the prepared remarks today contain forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in these statements. Important factors that could cause or contribute to such differences include risk details in the Company's quarterly reports on Form 10-Q, annual reports on Form 10-K, current reports on Form 8-K and any amendments thereto filed with the SEC and those mentioned in the earnings release. The Company undertakes no obligation to subsequently update or revise the forward-looking statements made on today's call, except as required by the law. During this call, the Company will also discuss non-GAAP financial measures, including EBITDA and adjusted EBITDA. For more details on these measures, please refer to the Company's press release issued earlier today. With that, I would like to turn the call over to the Company's President and CEO, Mr. John Kiernan.

Thank you, Katie, and thank you, everyone, for joining us for Alico's Third Quarter 2021 Earnings Call this morning. As we've reported over the past several quarters, this has been a challenging year for Alico from a production and an average pound solids per product standpoint. We saw a decrease in production that was principally related to there being fewer pieces of fruit available on the citrus trees as well as the very high drop rate for citrus in Florida this past season. Our decline in harvested production was 15.9% this past season. However, this decline was substantially lower than the latest USDA forecast of a 21.7% decline for the total orange crop for the current harvest season as compared to the prior year. On the positive side, we did see a substantial increase in market pricing for both early and mid-season of Valencia fruit for the past season. So revenues despite the declines in production in pound solids did grow for the fiscal year. The increase in marketing pricing is largely due to the well-publicized increase in consumption of not-from-concentrate orange used by retail consumers since March of 2020, which resulted in decreased inventory supply levels at Florida citrus juice processors and thus helped to increase prices for our fruit this past season. Our average realized blended price per pound solid rose from $1.86 in the prior fiscal year to $2.45 in the current fiscal year, an increase of 31.7%. We are further encouraged because right now, consumption of not-from-concentrate orange juice is remaining strong and processor inventories reduce are at lower than normal levels. So we believe that market prices next year should remain near or above recent levels. In June 2021, we entered into new citrus supply agreements with Peace River Citrus Products, covering 3,614 gross citrus…

Thank you, John, and good morning, everyone. Due to the seasonal nature of our business, quarterly results for our third quarter are not indicative of our full year results. The majority of our citrus crop is harvested in the second and third quarters of the fiscal year, with the majority of our profit and cash flows also recognized in the second and third quarters. Total operating revenue for the quarter ended June 30, 2021, was $34.9 million compared to $26.1 million for the quarter ended June 30, 2020. Interest revenue was $34.3 million and $25.4 million for the quarters ended June 30, 2021, and June 30, 2020, respectively. The increase in revenue for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, was primarily due to an increase in the revenue generated from growth management services and the Valencia fruit harvested. We generated greater revenue from the growth management services primarily as a result of executing an agreement with an affiliated group of third parties in July 2020 to provide citrus grove caretaking and harvest and home management services for approximately 7,000 acres owned by such third parties. As a reminder, Alico records both an increase in revenues and expenses as and when the Company provides these grove management services. For the three months ended June 30, 2021, Alico recorded approximately $5.1 million of operating revenue relating to these grove management services, including its management fee. The increase from the Valencia fruit harvest was driven by an increase in the market price per pound sold as compared to the prior year. As mentioned earlier by John, the increase in the price per pound sold was due to increased consumption of not-from-concentrate orange juice as well as tighter supplies of citrus fruit, which in…

Thanks, Rich. During the third quarter, we made long-term business decisions such as significantly increasing our quarterly dividend, modifying our debt structure and continuing to sell off noncore assets, which we believe will generate greater returns for our shareholders. As we continue to generate cash flow, we will continue to evaluate the best ways to deploy it to continue to drive shareholder returns. And with that, we'll now open the line up to questions from industry analysts. Katie?

[Operator Instructions] We'll take a question from Gerry Sweeney with ROTH Capital.

Since a lot of the harvest is done for this year, maybe you could take the opportunity and discuss maybe the macro environment. Obviously, Brazil, largest producer of oranges, going through a pretty significant drought. I think grower inventories in Florida are down 25%, 30% from this year versus this time last year. Any thoughts, comments on how this is sort of setting up the playing field for next year?

Not just next year. I think the near term, you're seeing obviously a contraction in the supply base. The output from Brazil is going to be a little higher year-over-year, but it's lower than it normally is expected to be next year. They've got some weather conditions like a drought that's affecting basically their forecast. And then clearly you saw some weather related and some greening related impacts to the Florida crop this past season where you had, I think, a historically bad drop rate. There was just 52.7 million boxes of fruit that was able to be produced. So the supply base clearly has shrunk. The other side of that on the demand side is demand clearly rebounded during the COVID year and it's somewhat holding steady. Most likely it's going to erode a bit, but it's well above the pre-COVID levels at this point. So where does that position Alico? Well, Alico has been significantly investing in the density of our growth. So we just have more trees four years ago than -- more trees now than we did four years ago because we've been aggressively planting. Those trees are bearing fruit starting next season. And we believe Alico is going to solidify its leadership position as a grower because of those investments. And relative to the competition, both here and in Brazil, we think our market share position is going to continue to increase simply because we're as strong or stronger than anybody, and we've actually been making investments to generate greater fruit going forward.

Okay. Got it. Switching gears to care taking, obviously, it's been in place now, I think, for a good solid year. You sound pretty confident on your ability to grow that business. Do you have some metrics in terms of cost savings that you present to other grower that you could -- for the selling process and maybe explain some of the opportunity, I think, that potentially lies in that business?

I'll start and then Rich will jump in. I think we've walked you through, and I think we've discussed at some of our investor conferences. We're very selective of potential partners for the caretaking business. They have to meet some criteria. It's got to be sizable enough scale. And it's going to be somewhat adjacent or large enough to have its own critical mass where we can conduct a profitable operation. Because what we really do is we step in and we kind of run their business end to end. Almost always, we take their employees on board. They become Alico employees. We get reimbursed for all those costs. And it sounds like a daunting task. But where it starts really is we take basically our financial operations information and we sit down and go line by line and compare that with the prospective customer and show them basically dollar for dollar where they could save if they were under our roof, from the labor side, chemicals, fuel, fertilizer, just because we've got better economies of scale most likely. We walked through kind of our horticulture practices. We work with their kind of existing managers and supervisors and really get them fully on board with how we're going to conduct a business. And more often than not, we're able to do it much more economically even with an additional management fee on top of that and it's a win-win. We think that's what Barron Collier has experienced over the past year or so. And that really is kind of the rule of thumb as we look at new businesses. If someone is as competitive as we are, stepping in and getting a management fee is going to be incremental cost for them. They're going to be a little worse off. So that's probably not a customer that's going to work with us. But more often than not, when we're sitting and talking, it's customers that have cost structures that are a little looser and a little bigger than what we have, and we're able to instill that discipline in our core corporate practices. And certainly, the leverage that we get from our back office and the data that we drive to create a value proposition for those customers. Rich, anything to add there?

No, John. I think you covered it. I think one of the things, Gerry, to report on John talked about, we sit with our partners and go through cost. You do know that during 2017 through '19, we did go through the modernization program and really looked at our program. And as we work with our partners here, we get to see that we are, in fact, one of the low-cost producers and can be very successful at it. I will add that our partnership has been together a year now and it is very strong and going solid. So it has really turned out from both sides to be very beneficial.

Got it. And as much as you can see on this front, obviously, you're out there, you're selling this program. Any commentary on leads in the pipeline? There was -- there's confidence in your projections to grow it. I'm just curious about that -- how do we look at that as much you can say on that front.

So it is a relatively short list of prospective customers, and we're talking to a handful at any given time. And usually, there's a long lead time particularly season to season. But we can't go into any more specific detail. As I said previously, this tends to be a lumpy business to kind of announce a win since we're talking about thousands and thousands of acres at a time as opposed to just rolling up smaller customers, a few acres here and a few acres there.

Got it. Then final question for me, and I'll jump back in line. Land sales obviously been very good this past year. You have Florida Forever, but as importantly -- I mean, you've taken great care to highlight that all the land have remained at 35,000 acres. All of it is unencumbered and none of it is wetlands anymore. Does this change the value proposition of that land versus what you've discussed in the past or that remaining land versus what has been discussed in the past?

Sure. As we've said in our investor presentations previously, I think when we've discussed the hypothetical or potential net asset value, historically, we've given ranges on the ranch win that management estimates were potentially realizable. The 11,700 acres that was under that restricted easement was factored in there. So we kind of had a lower average price point. With those acres now in hands of a cattle grazer is going to do a great job with that property. He knows the land very, very well, and he's going to put it to good use and really keep it in the same pristine condition that we've been trying to do for the last 100 years or so. We think the average price for the remaining 35,000 acres that we have is going to be significantly higher than the range that we had stated previously because we've taken that restricted land out of the picture.

We have reached the end of today's question-and-answer session. I would like to turn the call back over to Mr. Kiernan for closing remarks.

Thank you, and thank you, everyone, for joining our call today and for your support of Alico. We look forward to speaking with you again about our fourth quarter and our fiscal year end results in December. And we appreciate your time today very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.