Limoneira's Q3 Earnings Call: Avocado and Lemon Pricing Projections Clash With Prior Guidance

Date of Call: Sep 9, 2026

Financials Results

• Revenue: $23.9M, compared to $35.1M in the second quarter of fiscal year 2025
• EPS: Net loss of $1.20 per diluted share, compared to a loss of 20 cents per diluted share in the prior year period
• Operating Margin: Operating loss of $21.7M, compared to an operating loss of $3.3M in the prior year period

Guidance:

• Expect to achieve positive adjusted EBITDA in Q3 and Q4 of fiscal 2026.
• Full-year avocado volume guidance increased to 5.5 to 6.5 million pounds.
• Full-year fresh lemon volumes reiterated at 4 to 4.5 million cartons.
• Expect total proceeds of $155M from real estate projects over the next five fiscal years.
• Organic recycling joint venture expected to contribute meaningful earnings in FY2027.
• Expect monetization of water rights in FY2026 and continued improvement from Sunkist partnership.

Business Commentary:

Strategic Transformation and Cost Efficiency:

• Lehman Air reported exceeding expectations for revenue and adjusted EBITDA in the second quarter, despite a challenging operational environment.
• The company is on track to achieve its targeted $10 million in annual selling, general, and administrative savings, which is driving improved operational efficiency.

Avocado Production Capacity Expansion:

• The company has 1,700 acres of avocados planted, with an additional 800 acres expected to bear fruit over the next two to four years, representing a near 100% increase in production capacity.
• This expansion is anticipated to significantly boost avocado volumes, contributing to improved financial performance.

Water Rights and Asset Monetization:

• Lehman Air is advancing its water monetization strategy and expects a monetization event from its Class III Colorado River water rights in fiscal year 2026.
• The strategic sale of non-operational assets, such as the Paso Robles vineyard, is part of a broader initiative to unlock value from its diversified asset base.

Lemon Pricing and Market Performance:

• Current lemon pricing is above $20 per carton, with expectations for further increases, driven by strong market demand and high levels of fresh utilization.
• The partnership with Sunkist has enhanced customer access, reducing pricing pressure and supporting stronger margins.

Non-Cash Charges and Strategic Asset Reevaluation:

• The second quarter included $23.8 million in non-cash charges, primarily from the impairment of the Windfall Farms property and losses on asset disposals.
• These charges reflect strategic decisions to reallocate capital from non-strategic assets to higher return opportunities, aligning with the company's transformation goals.

Sentiment Analysis:

Overall Tone: Positive

• "Our second quarter results demonstrate continued execution of our strategic transformation... Our fundamentals of our business are strengthening... We exceeded expectations for revenue and adjusted EBITDA... we have very well positioned to achieve positive adjusted EBITDA in the third and fourth quarters of this year."

Q&A:

• Question from El Nabor (Lake Street Capital Markets): Notice with harvest timing you delayed the avocado harvest to capture better pricing with only 285,000 pounds sold in Q2 at 96 cents a pound. So how much volume has been pushed into Q3 and what pricing are you currently seeing in the market?
  Response: Approximately 500,000 pounds were moved from Q2 to Q3. Current peak size pricing is $1.30-$1.40 per 48, with an expected blended average around $1.30.

• Question from El Nabor (Lake Street Capital Markets): Can you also give us an update on current lemon pricing per carton?
  Response: Average lemon pricing is above $20 per carton, with forecasts indicating an increase of about $1 per carton each month through October.

• Question from El Nabor (Lake Street Capital Markets): With windfall farms, kind of a little bit of a closing risk potentially. So the Paso Robles sale is structured with $10 million cash and $6 million permissionary note. So what are the conditions to closing in Q4? And then what happens to the transaction if the buyer can't close on schedule?
  Response: First hard money received on July 1st; closing can occur anytime after that. Buyer has until end of October to complete due diligence and fund the $10M. If not, the deal may fall out of escrow.

• Question from Jack Harden (Stevens Inc. on behalf of Puran Sharma): Lemon pricing was up year-over-year despite being net of the Sunkist marketing fee. How much of that improvement is mix or market slash Sunkist customer access or fresh utilization?
  Response: Attributed to market strengthening, but majority due to Sunkist's strong market presence with retail and food service contracts. Fresh utilization is above 80%, the highest in years.

• Question from Jack Harden (Stevens Inc. on behalf of Puran Sharma): For the Colorado river timing, what for the water rights and FY 26, what milestones should investors watch between now and year end? And what is most likely the structure?
  Response: Outright sale is less likely; more probable is a structure involving crop substitution to free up water for long-term leasing or sale of access rights. Monitoring contracts expiring Dec 31, 2026 for potential extensions or new programs.

Contradiction Point 1

Avocado Pricing Forecast

Contradiction in the expected blended average price for avocados.

El Nabor (Lake Street Capital Markets) - El Nabor (Lake Street Capital Markets)

2026Q3: Current market pricing for avocados (peak size 48) is around $1.30 to $1.40 per pound, with an expected blended average price of about $1.30. - Harold Edwards(CFO)

How much avocado volume was pushed into Q3 and what is the current market pricing? - Elle Niebuhr (Lake Street Capital Markets, LLC)

2026Q2: Current market pricing for the peak size (48) is around $1.40 per pound, with blended average pricing expected to be on the order of $1.30 per pound. - Harold Edwards(CFO)

Contradiction Point 2

Colorado River Water Rights Transaction Structure

Contradiction in the likelihood of an outright sale versus a crop substitution agreement.

Jack Harden (Stevens Inc. for Puran Sharma) - Jack Harden (Stevens Inc. for Puran Sharma)

2026Q3: An outright sale is less likely than a crop substitution that frees up water rights for long-term leasing or direct sale of water access. - Greg Hamm(CFO)

What milestones should investors watch regarding the Colorado River timing and water rights in FY26 between now and year-end, and what is the most likely structure of the deal (farmland agreement, outright sale, or other)? - Jack Hardin (Stephens Inc., on for Pooran Sharma)

2026Q2: Outright sale is less likely than a crop substitution agreement that frees up water for long-term leasing or sale. - Greg Hamm(CFO)

Contradiction Point 3

Lemon Pricing Outlook

Contradiction on the direction and drivers of lemon price movements.

El Nabor (Lake Street Capital Markets) - El Nabor (Lake Street Capital Markets)

2026Q3: Lemon pricing is currently above $20 per carton. The company forecasts average pricing to increase by about $1 per carton each month through October... marking the strongest lemon pricing in over a decade. - Harold Edwards(CEO)

What is the current price per carton of lemons? - Mark Smith (Lake Street Capital)

20260313-2026 Q1: Q1 pricing ended at $17.42 per carton vs. $18.44 in the prior year... Pricing softened in February to around $16 per carton but is likely at a trough, expected to rebound towards May. - Harold Edwards(CEO)

Contradiction Point 4

Water Rights Valuation

Contradiction on the valuation timeline and expected proceeds from water rights.

Jack Harden (Stevens Inc. for Puran Sharma) - Jack Harden (Stevens Inc. for Puran Sharma)

2026Q3: A key milestone to watch is the expiration of certain Colorado River contracts held by the Bureau of Land Management on December 31, 2026. The company is monitoring for an extension of current agreements or the opportunity to establish a long-term program that allows for monetization of the water rights. - Greg Hamm(CFO)

What key milestones should investors watch for the Colorado River timing and water rights in FY26 between now and year-end, and what is the most likely structure—farmland agreement, outright sale, or another option? - Pooran Sharma (Stephens)

20251224-2025 Q4: Harold expects $50–70 million in value from these rights through FY2027, with negotiations ongoing for optimal monetization. - Harold Edwards(CEO)

Contradiction Point 5

Avocado Pricing Outlook

Contradiction on near-term avocado price expectations.

El Nabor (Lake Street Capital Markets) - El Nabor (Lake Street Capital Markets)

2026Q3: Current market pricing for avocados (peak size 48) is around $1.30 to $1.40 per pound, with an expected blended average price of about $1.30. - Harold Edwards(CEO)

How much avocado volume was deferred to Q3 due to harvest timing and what pricing is currently being realized in the market? - Mark Smith (Lake Street Capital)

20260313-2026 Q1: Current prices are around $1.00-$1.10 per pound for sizes 48 and 60... California pricing is expected to firm to $1.10-$1.20. - Harold Edwards(CEO)