Lemon Farm's third-quarter revenue fell sharply by 25%, and I witnessed the tough times of agricultural giants.

Key Content

• Limoneira (NASDAQ: LMNR) quarterly revenue plummeted by 25%, with dismal performance in the third quarter of fiscal year 2025.
• Adjusted earnings per share fell from last year's $0.42 to a loss of $0.02, showing a sharp decline in profitability.
• The management still insists on the full-year guidance for lemon and avocado production, and I am skeptical about this.
• This former agricultural giant is struggling, and the farmers' income season has also turned into a loss season.

Looking at Limoneira's disappointing financial report, I can't help but feel heartbroken. As a long-time observer of the agricultural market, witnessing this lemon and avocado cultivation giant struggle is truly lamentable. The financial report released on September 9 was nothing short of a disaster—declining revenue, evaporating profits, and shrinking cash flow. I believe this not only reflects the ongoing pressure on its core agricultural business but also exposes the company's excessive reliance on its real estate business. While the management continues to talk incessantly about its cooperation with Sunkist and various development plans, the numbers don't lie; this quarter's performance is clearly "putting on a brave face."

| Indicator | Q3 2025 | Q3 2024 | Year-on-Year Change | |------|------------|------------|---------| | Adjusted Earnings Per Share | ($0.02) | $0.42 | (104.8%) | | Revenue | $47.5 million | $63.3 million | (25.0%) | | Adjusted EBITDA | $3.0 million | $13.8 million | (78.3%) | | Avocado Revenue | $8.5 million | $13.9 million | (38.8%) | | Fresh Lemon Packaging Revenue | $23.8 million | $25.8 million | (7.8%) | | End Cash | $2.1 million | $3.0 million | (29.7%) |

Limoneira's Business and Focus

Limoneira operates two main businesses: the cultivation and sale of fresh fruit and the development of its large land holdings for real estate projects. The main crops include lemons and avocados, as well as oranges and grapes. The company's agricultural land spans thousands of acres, primarily located in California and Arizona, with expansions into Chile and Argentina.

In recent years, they have attempted to shift their focus - increasing the profit margins of fruit sales, expanding avocado production, and creating value through real estate projects. Strategic priorities include effective water resource management, diversifying agricultural outputs, and selling or developing land to generate cash. But to put it bluntly, agriculture is no longer profitable, and they want to survive by selling land and engaging in real estate.

Quarterly Review: Notable Trends and Developments

This quarter marks a sharp decline in Limoneira's core business. The drop in revenue is primarily due to a decrease in the sales of lemons and avocados, with agricultural revenue falling by 25.7%. Profit margins are also deteriorating, with adjusted earnings per share falling into negative territory and adjusted EBITDA (a measure of operating cash flow) declining by more than 75% year-on-year. This decline far exceeds seasonal variations, indicating widespread weakness across all major product lines.

Lemon sales (the main business of Limoneira) are simultaneously facing pressure on both volume and prices. Revenue from fresh packaged lemons fell by 7.8%, while sales of brokered and processed lemons saw an even more significant decline. The price per box of lemons decreased by about 8% compared to the same period last year, and the company is facing significant market resistance. The leadership explained that lemons were stored in warehouses in order to seek more favorable prices later in the quarter, but this approach has not prevented profit losses. I can only say that this "holding inventory" strategy is incredibly foolish; they can't even understand market trends yet dare to be clever.

Avocado revenue fell nearly 39% year-on-year, mainly due to a decrease in harvest volume, with production dropping from 8.86 million pounds last year to 5.65 million pounds. This is related to the "alternate bearing" cycle of avocado trees, where the trees naturally produce fewer fruits every other season. Although the price per pound remains relatively stable, avocado revenue is still far below the previous period. Management still insists that the production guidance for lemons and avocados for the full fiscal year 2025 can be achieved, but I am highly skeptical of this.

Other business sectors are also showing pressure. Farm management revenue has collapsed due to the loss of a major contract. Orange revenue increased by $500,000, and sales have doubled, but relative to total revenue, the scale of this sector is still very small.

At the same time, Limoneira's real estate projects continue to support the balance sheet. The company received a cash distribution of $10 million from its joint venture "Harvest at Limoneira" in April 2025, and obtained $1.7 million from water rights sales in January 2025. These earnings provided much-needed liquidity as cash used for operations increased and net debt surged.

The company is advancing its merger plan for its citrus sales and marketing business with Sunkist Growers. This strategic initiative is expected to commence in fiscal year 2026, saving $5 million annually in management costs and providing benefits to adjusted EBITDA, primarily by transferring sales and marketing functions to Sunkist. But to be honest, I am skeptical about whether this lifeline will work.

Outlook: Guidance and Key Metrics to Track

Limoneira reiterated its full-year sales targets, expecting to deliver between 4.5 million and 5 million boxes of fresh lemons and approximately 7 million pounds of avocados. Management also emphasized the anticipated benefits of the Sunkist partnership starting in fiscal year 2026 and the ongoing cash flow from real estate projects, particularly from the expected contributions of the "Harvest at Limoneira" joint venture, which aims to provide a total allocation of $180 million by fiscal year 2030.

As profit margins decline and cash usage increases, investors should closely monitor several factors. This includes the actual cost savings and cash inflows from planned strategic partnerships and the sale of real estate assets, as well as price trends in the core citrus and avocado markets. Rising debt levels have tightened financial flexibility, making successful farm operations and timely real estate monetization crucial, especially considering the significant cash outflows this year.

Watching a once-glorious agricultural company fall into difficulties fills me with emotion. The agricultural industry is already challenging enough, facing weather changes, water resource shortages, and market fluctuations, requiring astute management and forward-looking strategies. The management of Limoneira seems to have lost its way in this storm, overly relying on real estate bailouts rather than addressing the fundamental issues of its core agricultural business. This quarter's dismal performance should be a wake-up call; it is time to reassess the strategy.