Alico Q1 2024 Earnings Call Transcript

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February 8, 2024

There are 4 speakers on the call.

Operator

Welcome to Alaco's First Quarter 20 24 Earnings Conference Call. And as a reminder, today's conference is being recorded. Last If you have not had the chance to view the release, it is available on the Investor Relations portion of the company's website This call is being webcast and replay will be available on Allico'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 may cause actual results to differ materially are those expressed or implied in these statements.

Operator

Important factors that could cause or contribute to such differences include risks detailed in the company's quarterly reports on Form 10 2Q and annual reports on Form 10 2 ks, current reports Form 8 ks and any 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 adjusted EBITDA and net debt. 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 conference call over to the company's President and CEO, Mr.

Operator

John Keardon. Please go ahead.

Speaker 1

Thank you, Kelsey, and thank you everyone for joining us for Aliko's 1st Quarter 2024 Earnings Call this morning. As previously announced, on September 18, 2023, Oweco signed a contract in the state of Florida to sell the remaining 17,229 Acres of the Aliko Ranch. And on December 21, 2023, we closed on the sale for $77,600,000 in gross proceeds. A portion of the proceeds from this sale were used to repay the outstanding balance on our working capital line of credit and $19,100,000 of MetLife variable rate term loans were disappointing, resulting in an inventory write down of approximately $10,800,000 in the Q1 of fiscal year 2024. We believe that the early and mid season box production was affected by the continued impacts of Hurricane Ian.

Speaker 1

We are cautiously optimistic that our Valencia crop, which will begin harvesting soon, will show a stronger rate of recovery. That harvest is expected to begin in another week or so. In January 2024, the company received funding from the Citrus are in the field trial foundation to support our use of oxytetracycline to combat the effect of greening in the citrus trees. Last year, beginning in January 2023, over 35% of our producing trees were treated with an OTC trunk injection with the expectation that it would improve fruit quality and decrease the rate of fruit drop. We expect that the full extent of the benefits of these prior year OTC treatments will not be measurable until the full 2023, 2024 harvest is completed.

Speaker 1

Also last month, we published our 2023 annual sustainability report, We believe that our balance sheet remains one of our greatest strengths as we continue to operate in a challenging citrus industry. Because of the sale of the remaining acreage of Lico Ranch, we have been able to reduce our total debt by $44,000,000 and our net debt by almost $62,000,000 representing a decrease of 34% in our total debt And a decrease of 48% in our net debt in each case from September 30, 2023 to December 31, 2023. Even more importantly, we have the full $95,000,000 available of undrawn credit, Which is comprised of approximately $70,000,000 on our working capital line, which matures in November 2025, As well as $25,000,000 of undrawn credit on the revolving line of credit, which matures in November of 2029. We believe that these credit facilities provide Aliko with ample liquidity, while the company continues to recover from the impact of recent weather events. With that, I will turn the call over to Brad to discuss our more detailed financial results.

Speaker 2

Thank you, John. Good morning, everyone. I'd like to remind everyone that our business is seasonal and the majority of our citrus crop is are in the 2nd 3rd quarters of the fiscal year, with the majority of our profit and cash flows also recognized in the 2nd 3rd quarters. Further results for the Q1 are not indicative of our full year results. The $3,300,000 increase in revenue for the 3 months ended December 31, are in the range of 2023 as compared to the 3 months ended December 31, 2022 was primarily due to a 24.9% increase in pound solids, Driven by a 30.1% increase in processed box production as we begin to recover from the effects of Hurricane Ian.

Speaker 2

Our fruit production for the 3 months ended December 31, 2022 was adversely impacted by the fruit drop caused as a result of the impact of Hurricane Ian in September are in the range of 20 2. And although hurricane initially impacted the fiscal year 2023 harvest, we expect it to take another season or more for the growth to recover to are in the range of 3.4% for the 3 months ended December 31, 2020 are in the same period in the prior year as a result of more favorable pricing in one of our contracts with Tropicana. Total operating expenses were $28,200,000 $14,400,000 for the fiscal 1st quarters ended are in the range of $1,000,000 in the range of $1,000,000 in the range of $1,000,000 in the range to the $10,800,000 adjustment to reduce our inventory to its net realizable value as a result of significantly lower than anticipated box production from our early and mid season crop due to the ongoing effects of our Canadian, as well as an increase in harvest and haul costs driven by our increased box production and approximately $1,300,000 we received in the quarter ended December 31, 2022, which was the last installment of the Florida Citrus Block Grant Program for the 2017 storm Hurricane Irma.

Speaker 2

General and administrative expenses for the 3 months ended December 31, 2023, 2022 were $3,300,000 $2,500,000 respectively. The increase was primarily due to an increase in salary and wages of $600,000 and consulting fees principally related to real estate entitlement activities of 300,000 Other income expense net for the 3 months ended December 31, 2023, 2022 was $75,500,000 $2,000,000 respectively. The increase is primarily due to the sale of 17,229 Acres of the Aliko Ranch to the State of Florida. For the 1st fiscal quarter ended December 31, 2023, the company reported net income attributable to common are attributable to Aliko common stockholders of $42,900,000 compared to a net loss of $3,200,000 for the 1st fiscal quarter ended December 31, 2022, Driven by the aforementioned sale of the Aliko Ranch. I will now pass the call back to John.

Speaker 1

Thanks, Brad. Although the first part of our harvest season was off to a slow start, which we believe was because of Hurricane Ian, we remain cautiously optimistic that our upcoming Valentia will show stronger improvement from the effects of Hurricane Ian. WeCo has over 125 years of experience As a leader in Florida Agriculture and Land Management, since 2017, we've planted over 2,200,000 new trees And we remain committed to the Florida citrus industry for the long term. We plan to apply the OTC therapy to substantially all of our producing trees in fiscal 2 year 2024 and believe that this treatment combined with the recent tree plantings that are maturing and consistent caretaking practices should support a significant increase in fruit harvested next season. In addition, Aliqua is continuing to evaluate all of our properties to determine their highest and best use to create long term value for our shareholders.

Speaker 1

We strive to provide our investors with the benefits and stability of conventional agricultural investment With the enhanced optionality that comes through active land management.

Speaker 3

And with that, we'll now open the

Speaker 1

line up to questions from industry Chelsea?

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer And your first question comes from Gary Sweeney from ROTH Capital. Please go ahead.

Speaker 3

Good morning, John and Brad. Thanks for taking my call.

Speaker 1

Hi, Jerry.

Speaker 3

Good morning. I wanted to talk about The harvest, obviously, you said in the past, it could take up to 2 years for the harvest to rebound. So but may be a little bit below my expectations, which totally understandable this ag. But curious, Is this I just wanted to talk about maybe the actual trees and orchards. We've talked in the past that There was no structural damage to the trees.

Speaker 3

Is this just a longer rebound well, a rebound that's going to take 2 years? Or is there any concern that there may have been some structural damage

Speaker 1

As we reported back in 2022, we lost relatively few trees Compared to our entire portfolio, it's clear that 150 mile an hour winds for the sustained amount of hours that affected a majority of our groves definitely stressed the trees out, and we think that is directly attributable We don't think that there's permanent damage to the trees. We just think the trees are taking a little bit longer to come back. We did flag that it could take up to are in 2 years back in 2022. We think our peers are suffering as well that they're not seeing a robust rebound as quickly as we did previously, but we do not think that there is permanent structural damage to the trees themselves.

Speaker 3

Got it. And then you talked about OTC and I think administering it to the rest of your orchards. I believe about 35% of your crop has been treated with it. Now, given the your results participants can you see a difference between and I know the harvest is down this year obviously, but I was just curious if you're seeing Difference in production where the OTC was administered to the early and mid as opposed to trees that were have not been treated yet.

Speaker 1

Another great question. Obviously, last year was the 1st year, we kind of piloted the treatment once it was approved by the FDA last January. We definitely saw noticeable improvement from our control groups for the early mids In this past harvest season, we're just having a little trouble quantifying it. But we applied about 3 times have many applications to our Valencia trees last season, as we did to the early mid. So we have a much larger are in the same store.

Speaker 1

So we'd like to reserve until the end of this harvest season participants A full evaluation to quantify kind of what the improvement was, but it is visible and noticeable.

Speaker 3

Cautiously optimistic. So, I mean, got it. Got it. That's fair. And then final question, Obviously, contracts, I think some of the at least larger percentage of Some of your fruit is coming up for contract renewal this year, just any comments on that front or around What you're looking at or timing or when we should hear when that would be completed?

Speaker 1

So it is early days. We are basically putting out to bid The replacement for the current contract that expires at the end of the season for, I think it's 3 quarters of our acre, so it is material. But we anticipate that no later than when we release the Q3 Q in August. I'll keep my fingers crossed. We may have some better news to report that maybe we get it done by May.

Speaker 1

But right now, we really have no details that we can share other than we're actively in the bid process.

Speaker 3

Got it. And that contract would be for Next year's harvest, not this year.

Speaker 1

Correct. That would start in November, December.

Speaker 3

Got it. Okay. Thanks. Thank you for taking my questions. I appreciate it.

Speaker 1

Appreciate it, Jerry. Thank you very much.

Operator

Thank you. And there are no further questions at this time. Mr. Kiernan, you can proceed.

Speaker 1

I just want to thank everyone for joining call today and for your continued support of Aliko. We look forward to speaking with you all about our Q2 results in May. Have a good day.

Operator

Ladies and gentlemen, this

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Alico Q1 2024
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