Limoneira's Q4 2025: Contradictions Emerge on Avocado Production Timelines, Lemon Pricing, and Sunkist Partnership Savings

Date of Call: December 23, 2025

Financials Results

• Revenue: $42.8M in Q4 (compared to $43.9M in Q4 prior year); FY2025 total net revenue $159.7M (compared to $191.5M in FY2024)
• EPS: $0.49 net loss per diluted share in Q4 (compared to $0.11 net loss per diluted share in Q4 FY2024); FY2025 net loss per diluted share $0.93 (compared to $0.40 net income per diluted share in FY2024)

Guidance:

• Expect ~$10 million of cost savings in fiscal 2026 vs FY2025 from Sunkist transition and operational efficiencies
• Fresh lemon volumes for fiscal 2026 guided to 4.0M–4.5M cartons
• Avocado volumes for fiscal 2026 guided to 5.0M–6.0M pounds
• Real estate distributions expected to total $155M over the next five fiscal years
• Avocado expansion to meaningfully contribute in fiscal 2027 as nonbearing acres mature
• Agromin organic recycling JV expected to add $4M–$5M EBITDA beginning fiscal 2027

Business Commentary:

* Transformational Business Model Changes: - Limoneira Company transformed its business model by focusing on multiple profit centers and improving its cost structure, leading to a 50% reduction in SG&A expenses expected in fiscal 2026. - The strategic initiatives included expanding avocado offerings to 700 acres and partnering with Agromin for an organic recycling joint venture, which is expected to contribute $4 million to $5 million EBITDA in fiscal 2027. - The return to Sunkist is expected to provide $10 million in cost savings, enhancing customer access and strengthening grower partner relationships.

• Avocado Production Expansion:
• Limoneira's avocado production capacity is set to increase by 100%, with 700 acres of nonbearing trees expected to mature over the next 3 to 4 years.
• The strategic expansion is driven by the premium pricing of California avocados due to superior quality and logistical advantages, with historical pricing averaging $1.33 per pound.

• The company anticipates operating income per acre of $12,000 to $14,000, with farming and harvesting costs amounting to $5,000 and $3,500, respectively.

• Financial Performance and Outlook:

• For fiscal 2025, total net revenue was $159.7 million, down from $191.5 million in fiscal 2024, primarily due to decreased agribusiness revenues.
• The company's operating loss for fiscal 2025 was $20.4 million, compared to an operating loss of $6.2 million in fiscal 2024.

• Limoneira expects fiscal 2026 to deliver improved financial performance, driven by the convergence of multiple value drivers, including avocado production increases and operational restructuring initiatives.

• Water Monetization Strategy:

• Limoneira plans to capture an additional $50 million to $70 million in value through its Class 3 Colorado River water rights and Santa Paula Basin conserved pumping rights by fiscal 2027.
• The strategy leverages local water scarcity in areas like the Santa Paula Basin and the potential for higher valuations in water-scarce regions, with discussions ongoing for higher per acre-foot values.
• The company's water monetization efforts also include the potential for programs involving lower use crops like agave to provide economic benefits while conserving water for urban use.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly framed the company as transformed and positioned for improvement: "we expect to generate $10 million in cost savings compared to fiscal year 2025"; "fiscal year 2026 will mark the beginning of this transformation's financial impact"; provided FY2026 volume guidance and cited multiple value drivers (Sunkist partnership, avocado expansion, Agromin JV, real estate monetization).

Q&A:

• Question from Pooran Sharma (Stephens Inc.): Can you give granularity on the $10M cost savings and how customer relationships/contracted volumes will change under the Sunkist partnership?
  Response: The $10M splits roughly $5M from transferring sales/marketing to Sunkist and ~$5M from storage and operational efficiencies; Sunkist lowers marketing cost per carton from ~$1.50 to ~$0.60 and provides access to premium retail and foodservice contracts, improving pricing and contracted demand.

• Question from Pooran Sharma (Stephens Inc.): Can you discuss water asset monetization, valuation per acre-foot and potential pushback from local governments?
  Response: Water monetization targets local scarcity opportunities: monetizing conserved pumping rights in Santa Paula Basin and Class 3 Colorado River rights in Yuma via programs that pay farmers not to use water; values vary by market and scarcity, and transactions will consider community/social impacts.

• Question from Gerard Sweeney (ROTH Capital Partners): Is the Colorado River renegotiation a positive for your water rights strategy and will allocations/cuts drive higher values?
  Response: Yes; management views renegotiation as constructive, expects agreements by 12/31/26, and believes demand/cuts will push higher per–acre-foot values for senior rights like their Class 3 holdings.

• Question from Gerard Sweeney (ROTH Capital Partners): Could cuts hit Class 3 rights or will they come from more junior classes?
  Response: Management indicated cuts are expected to come from more junior classes (below Class 3, e.g., Class 5 and lower), positioning Class 3 holders favorably.

• Question from Gerard Sweeney (ROTH Capital Partners): What is the development plan and path to value for Limco Del Mar (infill land)?
  Response: Limco Del Mar requires a heavy entitlement process (public outreach, CEQA, public vote) through 2026; development approach undecided—could partner or self-develop—value step-up is expected if entitlements are won.

• Question from Gerard Sweeney (ROTH Capital Partners): What's the cadence for the 700 nonbearing avocado acres and expected per‑acre operating economics?
  Response: 700 nonbearing acres plus ~250–300 acres planted yearly; new plantings denser; long‑term average ~17,000 lbs/acre with alternate bearing (10k–25k range); management models ~$12k–$14k operating profit per acre (farm cost ~$5k/acre; pick/haul ~$3.5k).

• Question from Mark Smith (Lake Street Capital Markets): How much of the SG&A/other cost savings are from the Sunkist transition vs other operational changes?
  Response: Majority from Sunkist transition (salesforce moved and brokerage closed) plus storage/lease renegotiations and operational cuts; examples include Oxnard lease saving ~$700k; company expects the ~$10M savings to be realized conservatively on a 12‑month basis in FY26.

• Question from Mark Smith (Lake Street Capital Markets): Any outlook on near‑term lemon pricing?
  Response: Management declined a formal price forecast but noted current prices just below $20, typical winter dip to ~$16–$17, and said Sunkist participation provides floor/protection and summer supply shifts (Turkey/Spain issues) could support better prices.

• Question from Mark Smith (Lake Street Capital Markets): Thoughts and comfort on the balance sheet and covenant renegotiation?
  Response: Priority is debt reduction toward a ~$40M target; recently renegotiated covenants to a capitalization ratio and deferred debt service coverage testing until end of FY27, maintaining $41.6M credit availability and constructive lender support.

Contradiction Point 1

Avocado Production Timeline

It directly impacts expectations regarding the production timeline of avocados, potentially influencing company revenue and investor expectations.

Can you update us on avocado production timelines and operating income per acre? - Gerard Sweeney (ROTH Capital Partners, LLC, Research Division)

2025Q4: The avocado expansion involves planting 250-300 acres annually, with maturity taking 3-4 years. - Mark Palamountain(CFO)

Can you provide early insights on avocado volumes for fiscal year 2026, given the bi-annual crop cycle and completed California harvest? - Benjamin Klieve (Lake Street Capital Markets, LLC, Research Division)

2025Q3: Avocado volumes for fiscal year 2026 will be similar to or slightly less than fiscal year 2025. The company expects a significant production increase starting in fiscal year 2027. - Harold Edwards(CEO)

Contradiction Point 2

Avocado Production Expansion

It pertains to the company's strategic focus on avocado expansion, which could influence future revenue and growth.

Can you update production timelines and operating income per acre for avocados? - Gerard Sweeney(ROTH Capital Partners, LLC)

2025Q4: The avocado expansion involves planting 250-300 acres annually, with maturity taking 3-4 years. - Mark Palamountain(CFO)

How feasible is expanding avocado production beyond the 1,000 acres? Are other California growers also shifting to avocados? - Ben Klieve(Lake Street Capital)

2025Q1: Avocado production could potentially be expanded by up to 500 more acres outside of the announced 1,000 acres, considering suitable climate and water availability. - Mark Palamountain(CFO)

Contradiction Point 3

Lemon Pricing Expectations

It involves differences in expected lemon pricing patterns, which are crucial for revenue projections and investor expectations.

What is your short-term outlook for lemon prices? - Mark Smith(Lake Street Capital Markets, LLC Research Division)

2025Q4: Lemon pricing is expected to improve due to better supply-demand balance, with similar pricing patterns to last year. - Mark Palamountain(CFO)

How do you define normalized pricing in the lemon business today? What supply constraints do you expect to support lemon prices in FY2026? - Benjamin Klieve(Lake Street Capital Markets, LLC Research Division)

2025Q3: Limoneira is expecting normalized lemon pricing with two in front in fiscal year 2026 due to anticipated supply shortages in international areas like Spain and Turkey. - Mark Palamountain(CFO)

Contradiction Point 4

Cost Savings from Sunkist Partnership

It involves a key strategic partnership and the expected financial benefits, which are crucial for the company's financial health and operational efficiency.

Can you provide more details on the $10 million in cost savings from the Sunkist partnership? How does this partnership affect your leverage between contracted and open market volumes? - Pooran Sharma(Stephens Inc., Research Division)

2025Q4: The $10 million cost savings is split between transitioning sales and marketing personnel to Sunkist ($5 million) and operational efficiencies in storage and operations ($5 million). - Mark Palamountain(CFO)

How should we think about the per-box economics of the Sunkist deal, and is it a fixed cost model? - Benjamin Klieve(Lake Street Capital Markets)

2025Q2: The Sunkist deal includes three main benefits: utilizing Sunkist's wash and storage assets at no lease cost, transitioning the sales and marketing staff to Sunkist for a fixed fee, and gaining access to Sunkist's full citrus category for retail customers. This results in an annual cost savings of $5 million and improved EBITDA by $5 million per year. - Harold Edwards(CEO)

Contradiction Point 5

Water Asset Monetization Strategy

It directly impacts the company's financial strategy and potential revenue streams from water asset sales.

Could you discuss the strategic and noncore assets you're selling, particularly the water assets and their valuation expectations? - Pooran Sharma(Stephens Inc.)

2025Q4: Water assets are valuable in water-scarce areas, with conserved pumping rights and water rights in the Santa Paula Basin and Yuma, Arizona, being monetizable. The current focus involves negotiating higher values for water rights, supported by urban growth. - Harold Edwards(CEO)

What is the confidence in additional water asset transactions this fiscal year? - Ben Klieve(Lake Street Capital)

2025Q1: There is confidence in additional water asset transactions this fiscal year, driven by prior buyers and other opportunities. A water utility creation is being explored to manage resources efficiently and provide water service to the company's operations. - Mark Palamountain(CFO)