Greetings, and welcome to Limoneira's Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Deirdre Thomson with ICR. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us for Limoneira's Third Quarter Fiscal Year 2025 Conference Call. On the call today are Harold Edwards, President and Chief Executive Officer; and Mark Palamountain, Executive Vice President and Chief Financial Officer. By now, everyone should have access to the third quarter fiscal year 2025 earnings release, which went out today at approximately 4:05 p.m. Eastern Time. If you've not had the chance to review 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. Before we begin, we'd 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 Form 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 a result of new information, future events or otherwise. Please note that during today's call, 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 its website. And with that, it is my pleasure to turn the call over to the company's President and CEO, Mr. Harold Edwards.

Thank you, Deirdre, and good afternoon, everyone. During the third quarter, we made significant strides in unlocking long-term value through our two-part value creation strategy: agriculture production optimization, and land and water value creation. As we enter the fourth quarter and turn our attention to fiscal year 2026, we're excited about the profitable growth opportunities ahead. In the third quarter, we continued to navigate challenging lemon market conditions with pricing pressures in the first 2 months, though we saw improvement in the final months as we captured higher prices for fruit held in storage. Our fresh utilization was lower due to the strategic timing, but we remain confident in achieving our volume goals for both lemons and avocados in fiscal year 2025. In addition, we expect pricing to improve in fiscal 2026 due to anticipated shortages in several international areas. Our strategic partnership with Sunkist for citrus sales and marketing remains on track to drive $5 million in annual cost savings and EBITDA enhancements starting in fiscal year 2026. This partnership will unlock access to new high-quality customers while creating the operational efficiencies we've discussed. We expect lemons to return to profitability with more normalized pricing and fresh utilization levels in fiscal year 2026. Our avocado business continues to expand, with pricing and volume on plan during the quarter. We anticipate a significant increase in avocado production as our newly planted acreage begins maturing in fiscal year 2027 and beyond. We have 700 acres of nonbearing avocados estimated to become full-bearing over the next 2 to 4 years, enabling strong organic growth. This will be a near 100% increase in avocado producing acreage. Our Real Estate Development continues to exceed expectations. Harvest at Limoneira is selling homes ahead of schedule, and we continue to expect future distributions from our real…

Thank you, Harold, and good afternoon, everyone. Before I begin, I would remind you it is best to view our business on an annual, not quarterly basis due to the seasonal nature of our business. Historically, our first and fourth quarters are the seasonally softer quarters, while our second and third quarters are stronger. For the third quarter of fiscal year 2025, total net revenue was $47.5 million compared to total net revenue of $63.3 million in the third quarter of the previous fiscal year. Agribusiness revenue was $45.9 million compared to $61.8 million in the third quarter last year. Other operations revenue was $1.5 million for the third quarter of fiscal year -- fiscal years 2025 and 2024. The decline in Agribusiness revenue stems primarily from continued pricing pressure in the lemon market during the first 2 months of the quarter, though we saw improvement in July. Additionally, our fresh utilization was lower as we held lemons longer in storage to capture higher prices during the final month of the quarter. Looking beyond this year, the citrus sales and marketing plan we announced with Sunkist is anticipated to enhance our resilience to market volatility by creating a more efficient cost structure, leading to an expected $5 million in EBITDA improvement during fiscal year 2026. Agribusiness revenue for the third quarter of fiscal year 2025 includes $23.8 million in fresh packed lemon sales compared to $25.8 million during the same period of fiscal year 2024. Approximately 1.4 million cartons of U.S. packed fresh lemons were sold during the third quarter of fiscal year 2025 at a $17.02 average price per carton compared to 1.4 million cartons sold at an $18.43 average price per carton during the third quarter of fiscal year 2024. Brokered lemons and other lemon sales were $3.8…

Thanks, Mark. We continue to expect fresh lemon volumes to be in the range of 4.5 million to 5 million cartons for fiscal year 2025, and avocado volume is approximately 7 million pounds for fiscal year 2025. Fiscal year 2025 avocado volume is lower than fiscal year 2024, primarily due to the alternate bearing nature of avocado trees. Looking beyond fiscal year 2025, we have strong visibility on multiple value drivers. First, we believe we are in a good position to divest additional real estate assets in fiscal year 2026. Second, we expect to receive an additional $155 million from our real estate projects over the next 5 fiscal years. Third, we have 700 acres of nonbearing avocados estimated to become full-bearing over the next 2 to 4 years, which we expect will enable strong organic growth in avocado production. Additionally, we plan to continue expanding our plantings of avocados over the next 2 fiscal years. Fourth, we expect lemons to return to profitability with more normalized lemon prices and fresh utilization levels in fiscal year 2026 in which we continue to estimate 4 million to 4.5 million cartons. Our partnership with Sunkist fundamentally strengthens our citrus business model, unlocking availability to new high-quality customers and driving an anticipated $5 million in annual cost savings beginning in fiscal year 2026. This partnership positions us for sustainable EBITDA growth and creates a strong foundation for long-term value creation. And fifth, the exploration of our Limco Del Mar property represents another significant value creation opportunity, addressing critical community needs with anticipated substantial returns for shareholders. In summary, we're executing on a comprehensive strategy across agricultural production optimization and asset monetization that positions us for both near-term resilience and long-term growth. We believe we have the asset base, strategic partnerships and operational improvements in place to deliver sustainable value creation while maintaining flexibility to capitalize on additional opportunities as they arise. Operator, we will now open the call to questions.

[Operator Instructions] Our first question comes from the line of Ben Klieve with Lake Street Capital Markets.

First, a couple of questions on the Limco Del Mar opportunity here. It's great to hear that, that's progressing. One very specific question on, is there any kind of expectations of costs flowing through the income statement on this, say, through '26, maybe associated with regulatory costs or consulting costs, anything of that nature? And then second, on a higher level, what's your vision for how this will get developed over the long term in terms of what Limoneira's role will be? I mean, are you going to be looking for kind of a Lewis Group type 50-50 partner? Do you want to maybe offload more of the kind of developmental burden on a partner? Kind of how are you thinking about that on a -- from a big picture perspective?

Great question, Ben. Thank you. So multiple pieces to that. So we'll start with the cost and the income statement. So as you know, we recently tendered from our position, we had 28% as the general partner and achieved up to 55%. It's good to know we have a bunch of local still involved in this. And so we've got support from all around. From a cost perspective, it will be similar to how we developed Harvest and the entitlement period. We're trying to be conservative, thinking 3 years on a minimum, 5 years out and $3 million to $5 million depending on that time frame. But the majority of those costs will be capitalized and will not run through the income statement and then as we develop the project. Now Limoneira being the community player behind all this, and Lewis has been a great partner and we'd love to have them involved at that point. Right now, it's just Limoneira running with the ball, and we've put together a great team of legal experts and development experts and county experts to really figure out what the community benefit is going to be and how we make this a benefit for everybody so we can move it across the line. And so at the end of the day, I think the $3 million to $5 million is a good number to hold on to. And we're working really hard. We've already started and had some good progress and good support as well.

So Ben, I would also just add that there'll be two value triggers that happen along this journey. The first real value-creating opportunity will become evident upon entitlement. And so as mentioned in the description earlier, we'll go through a comprehensive CEQA review, a comprehensive SOAR vote. And then assuming that we are successful in winning a SOAR vote, and that vote will be comprised of the City of Ventura citizens voting to support the project. Assuming a majority of the citizens vote yes, then we'll work with the Local Agency Formation Commission to annex the 220 acres into the City of Ventura. And at that point, it would become entitled. At that point, the value creation will be significant. But then the second chapter of that value creation will be in the actual development of the project. And as Mark pointed out, we've had a great relationship with the Lewis Group. The way that we've developed Harvest at Limoneira and Santa Paula has been extremely successful. But I would say when we get to the point of development, we'll assess what the best options are for the community of Ventura, but also for the Limoneira Company and decide at that point.

Got it. That makes plenty of sense. Very good. We'll stay tuned for updates on that in quarters to come. I've got a question on the lemon side. Great to see fresh lemon prices rebound sequentially from a difficult second quarter. You guys talked about kind of a normalization of pricing going into next year as there's maybe some industry supply constraints that should be supportive. Given the reset that lemons -- the lemon market has had over the past few years, how do you kind of think about what normalized pricing is in this business today? And then kind of what are the different kind of sources of supply constraints that you see out there that are going to be helpful as you look into next year?

Yes. So Ben, we were pleasantly surprised into August into the lemon pricing. So as we mentioned, it lasted a little longer. Our average price in the quarter was -- in Q3 was just over $17. August, we saw prices in the low 20s, so almost a $4 to $5 jump. There was a bit of a shortage around on the East Coast. A lot of the imports that usually came to the U.S. went to Europe. And you mentioned some of those issues. And Turkey had a really challenging freeze, which it's always hard to get the best assessment, but could have gone all the way down to damaging trees, which would be 2 years of crop. And so -- and then also Spain had their own set of weather issues. So next year, we see Spain and Turkey being short, call it, 20% to 30%, which then, again, will allow some of our Southern Hemisphere friends to move fruit there. And all of our market is about balance, right? And so when us -- Limoneira coming back into the Sunkist, there's a lot more contracted business. And we've got those new customers in the quick-serve restaurant business, along with our existing customer base, we see a lot more potential for stability. And I think you'll see a price with a two in front of it. Right now, as I said, August was in the low 20s, call it, $23. And if you keep a higher price, and this has been historical since as long as I've been here, coming into the fall, you always have a dip into that winter. But if you have a higher entry point, obviously, you're going to have a lower low theoretically. And so that's sort of what is setting up. And we're at year 7 going into year 8 of a really challenging lemon environment. And usually, those cycles last that long. Will we have a mother nature event? We're not sure about that. But for the most part, that's what gives us confidence is the balance around the world, the lemons we've seen come out, including our own at a higher starting point going into next year.

Got it. That would be great to see. Very good. One more for me, and I'll get back in queue. And it might be a little premature on the '26 outlook for avocados. But given the kind of biannual nature of the crop and the California harvest complete at this point, do you have any kind of rough ideas of what your expectations are for avocado volumes here looking into '26?

So it's a little premature, but we're looking up into the trees right now. You're seeing a set. I would say that as this -- as we're counting pieces and assuming we hold on to the fruit, I would expect it to not be greater than this year. It looks like it's going to be similar to this year to less, but it's too early to really know that. So I wouldn't count on a big rebound in production. It's why we made our forward-looking comments that we believe our first big breakout year with volume improvement will be 2027. But more to come. Let's see what we come up with. And when we talk in the next call, we'll have a much better idea of what we're looking at for 2026 with avocados.

[Operator Instructions] And we have reached the end of the question-and-answer session. I would like to turn the floor back over to CEO, Harold Edwards, for closing remarks.

Thank you. I'd like to point out that as of this afternoon, we have updated our investor deck and it is now available on our website at limoneira.com. I'd like to thank you all for your questions and your interest in Limoneira. Have a great day.

And ladies and gentlemen, this concludes today's conference, and you may disconnect your line at this time. We thank you for your participation. Have a great day.