Okay, we'll go ahead and get started. Good morning, everybody. Welcome to Sidoti's January Microcap Conference. My name is Daniel Harriman, and I'm an analyst here at Sidoti. It's my pleasure this morning to welcome back to the conference Alico Inc, as ticker ALCO. Once again, we have the company's CEO, John Kiernan, here to go through the presentation. We're going to give John about 20 minutes to go through the slides, after which time I'm going to open it up to Q&A. If you do have any questions during the presentation, please feel free to type those into the Q&A box, and time permitting, we'll get to as many as we can. But again, please join me in welcoming Alico and John. And with that, John, I'll turn it over to you. Thanks for being here.
Daniel, thank you so much. Delighted to be back with Sidoti. I hope everybody's having a great 2025 so far. As Daniel had mentioned, our ticker is ALCO. We trade on the Nasdaq. We've got a market cap of close to $250 million, and the stock has had a decent run over the last couple of weeks because of an announcement that we had relative to us. Anybody hear me?
Hey, John, I think we're back. I'm not sure what exactly happened there.
Yeah, I don't know what's going on here. I've got no display on my side, so.
Sorry, everyone. If you could just give us one second, I'm going to get our IT team to help us here with the presentation.
Thank you.
John, I think we're back. Do you have a display on your screen?
I sincerely apologize. Daniel, are we good?
Yes, we should be good. John, if you'll go back to the slideshow there at the top.
Yes.
On the there.
Hey, Eric, I'll say, Daniel.
I'm just.
John's just getting the presentation back up, Eric.
Okay, that's fine. There's nothing that he could just rejoin, and we wouldn't be able to.
Okay.
Do anything anyway.
Now we're all set. Sorry about that, everyone.
Yeah, no problem.
Okay, John, all yours.
All right. I am mortified. I have no idea what happened. It gets below 50 degrees in Florida, and everything just freaks out. So.
The main break.
Happened. But you guys can hear me fine, right?
Yes, sir.
All right. That's the most important thing. So let's just jump in. Yeah, and we're having a little trouble. There we go. Forward-looking statements. All right. Let's talk a little bit about our history. Daniel, you can see this?
I see the beginning of the slide deck, the investor presentation.
Gotcha.
That's it. That's it, huh?
Yes, sir.
All right. Reset. Hang on one sec. How about now?
Now we're good. Let's just leave it like this so we don't run into any issues, if that's okay.
We're not going to mess with anything.
Thank you, everyone.
Sincere apologies. So our history basically is over 125 years. We've been in agribusiness and a land management company, all located in the state of Florida. Today, we own about 53,371 acres. And on top of that, and not mutually exclusive, some of our duplicative, we also own 48,700 acres of oil, gas, and mineral rights, again, all through the state of Florida. Our two divisions are Alico Citrus, where we're the number one customer for Tropicana to make orange juice. We grow the oranges. They squeeze it into juice. And our Land Management and Other Operations division incorporates basically lease income, as well as some other support operations where we've done some third-party caretaking, and we've got some mining operations too.
I think the reason we're all getting together today is for the last few years, Alico has really approached investors to provide them with the benefits and stability of a conventional agricultural investment with the optionality that's going to come from active land management. And this would be our footprint, all located within the state of Florida. In the northern part, you see Tampa, you see Lakeland, a little bit on the top of the screen, which you can't see, is going to be Orlando. And then you go down the center of the state. So almost all of our land is in the center of the state. Down to where you see that little yellow geometric shape, that is our Corkscrew Grove. It's not our southernmost property, but it's what we think is probably the southernmost property that has the potential for commercial residential development.
But we're in 31 different locations in eight different counties. These counties have basically different rules and regulations for entitlement work and approvals and so on and so forth. So we approach them as if they're their own little country. And we field teams specifically to address the needs for each of those regulatory environments. We have built a team over the last several years. The key addition would be the pretty one in the center. That's Mitch Hutchcraft. He joined last May. He's had a 35-year career basically doing real estate and entitlement work in Southwest Florida. He is a specialist. He is an expert. We think he's the best there's ever been at what he does.
And what he does is take land like we have, like agriculturally zoned properties, and he works with the authorities and the processes and gets the approvals over a period of time with great efficiency to convert that approval into something else. So he's a rezoning expert, particularly for residential or commercial. And we're delighted to have him here on the team with us today. Two weeks ago, on January 6, Alico made a very strategic announcement that we were winding down our citrus operations at the end of this harvest season. The harvest should run on the second half of our crop until about April or May of this year. And after that, we are no longer going to be active in the citrus industry. We're not going to continue to invest money into our trees. We let a whole bunch of people go, unfortunately.
That was a key step to transform us into a diversified land company. That's going to allow us to focus on non-citrus-related agricultural revenues. These would be away from permanent crops. Permanent crop would be something like a citrus tree that takes seven or eight years to grow and mature before it actually produces meaningful amounts of fruit. The agricultural opportunities that we'll be pursuing are much more seasonal and short-term. Fruits, vegetables, sugar, sod, corn, those are all good examples of alternative non-citrus-type agricultural operations that hopefully Alico will be using some of our land to participate in. In addition to that, a small portion of our land would be strategically entitled to develop into commercial and residential spaces. We'll talk a little bit more of that in a minute. That did affect the workforce immediately.
We will have a small amount, about 10% of our land, about 3,460 acres, would continue in citrus for one more season, but we would outsource all the caretaking for that because it does look like it's productive and profitable, at least for one more season. But this really allows the team to focus our time and our resources towards land optimization to get to the highest and best use for every acre that we have. Without belaboring the point, if you've been following the industry, you know that citrus production in Florida has been declining because of the disease known as greening. Our production has been down about 73% over the last 10 years, and it's really the last three, though they're most disappointing, post-Hurricane Ian.
We made a call after the first part of our season, which concluded at the end of December, that we did not think that this crop was going to be substantially higher. In fact, it's probably going to be lower than the previous season, and we're not going to be profitable on our citrus operation. So we did make this strategic decision to transition past citrus. We think this basically is going to decrease our capital requirements. It's going to basically decrease our operating costs. It's going to increase our returns on investments, and it should lower our financial volatility. Those were all trends that were going the wrong way with citrus. And on behalf of our shareholders, we think this strategic transformation is going to improve all those factors and results.
And this is just a simple chart that we put together to show you the numbers over the last 10 seasons, where in the state of Florida, 450,000 acres produced about 91 million boxes of fruit. And then that's down to about 250,000 acres in 2024. We don't know what it is in 2025, but this year, best-case scenario, they're looking at about 12 million boxes of fruit. So on the state side, extremely significant decline. On the Alico side, we had about 10 million boxes of fruit, and this year potentially going down about 2.6, which is similar to what we've done for the last three years post-Hurricane. And again, you see the Adjusted EBITDA, which is the EBITDA just from our citrus operations, has been in decline since 2022 when we had that impact from Hurricane Ian.
So this really, this decision is all about creating shareholder value while still maintaining our roots and our legacy of being good stewards for the land that we own and operate. We think that the highest and best use for our acres (again, we own about 53,000, all within the state of Florida) is probably somewhere between $650 million and $750 million. And we'll break that into different categories to help you do your own analysis. But the other side of this is immediately, we think the cash flow profile for Alico changes once we've made this strategic transition announcement. So we think the rest of this year will be cash flow positive. We think at the end of this fiscal year, we should have ample cash reserves to sustain at least two years of operations without additional land sales next year and the year after.
This will significantly reduce our working capital too. This will keep 75% of the land that we own still in agriculture. We're still tied to the land here in Florida as we have for 125 years. It's just 25%, hopefully, is going to be going for something highest and best use that's related to commercial residential. 10% of the acres that we have potentially could be done commercial and residential within the next five years, but it really is all going to come down to our highest and best use analysis. When we looked at our real estate portfolio, we put these into three buckets. What potentially could be development in the near term, and we did near term within five years. We estimated a value for those 5,500 acres somewhere between $335 million and $380 million.
The long-term development potential, we think, is outside of five years. It's not 5 to 10. It's probably 5 to whenever. That potentially could be worth $140-$170 million additional dollars. And that would cover about 7,100 acres. Again, in more rural parts of our portfolio today, but it does have potential for real estate development. The remaining 75% of the land that we own, which is about 40,700 acres, we think remains in agriculture or tied to agriculture or have some sort of agricultural operations. And that's probably worth somewhere between $175-$200 million, which we believe is a conservative estimate. And when you add all that up, that gets you about $650-$750 million. Focusing back on really kind of investor profile, we think this definitely is in line with the strong financial position that we have.
We had announced at the end of the summer that we renewed a credit line, a revolving credit line with MetLife. That's going to go out 10 years, and that offers us $95 million of untapped credit. We had about $8.4 million drawn on that at the end of the fiscal period, but as we have cash flow coming in, we expected that balance would go down, but we do have credit lines that we think provide us liquidity, and that certainly goes a long, long way to giving investors some clarity and some confidence that Alico can sustain any ups and downs. Since we're no longer tied to citrus, we believe that our weather-related risk is going to go down significantly, so those ups and downs should get a lot narrower. On the shareholder value side, we've been paying quarterly dividends since about 1974.
We've actually been paying since 1960, but we missed two quarters in 1974 because of the oil embargo, but we're all about creating consistent returns, so we've been paying dividends out for at least 50 years. On the operational benefit side, we talked about the working capital since we're no longer required to basically fund citrus operations, which basically take a year in advance before the fruit can be harvested, and we think this is also, because of the weather, going to lower our financial volatility too. On the strategic side, this focus on profitable non-citrus, so that's more seasonal, not permanent crop agriculture opportunities, gives us greater flexibility. It's going to basically put us in a position to opportunistically consider offers on our land.
So many cross our doorstep and basically wish to buy any properties because we now have highest and best use analysis on all the acres that we own, and we kind of know what the land is worth for us. And that supported some of those values that we had said at the top. On the capital side, we talked about our dividends. We paid back over the last 10 years more than $41 million worth of dividends. We've also repaid about $113 million worth of debt. We've done almost a $10 million 10b5-1 program. We do not have one active today, but it's possible they'll have one in the future. But we've paid back, we've brought back more than almost $10 million worth of stock. We also did a tender offer in 2018 and brought back from our investors almost $26 million worth of stock.
So we have been active as far as returning capital to the tune of about $189 million over the last 10 years, $87 million of which since 2021. So from a takeaway perspective, why invest in Alico? Obviously, the strategic vision of winding down citrus is going to strengthen our financial foundation. It does put us on a clear path to dramatically improve our shareholder value. And we continue to offer you as the investor the stability of a conventional agricultural investment and combine that with the optionality of active land management. We think this strong foundation revolves around an expert management team that has a proven track record for executing. We also have improved the cash flow profile, and we've got ample liquidity for years to come. We've returned close to $190 million since 2015, and we've been basically paying out dividends since 1974.
We're not going to talk about comparable companies, but if you benchmarked us to get some other agriculture-related firms, we think our valuation is compelling. As a responsible land management company, we think we've got a proven track record of land sales all located within the state of Florida. We think that this track record creates value for our shareholders while also benefiting our local communities. We're good stewards of our land for generations, and we plan to do that for generations to come. With that, I'll turn it back to Daniel and see if we've got any questions we can answer today.
Sure. Thank you so much, John, and thank you for the questions that have come in so far. We do have a little bit of extra time. Again, if you have some questions, please feel free to type them into the box.
And John, we've already had quite a few, so I'm going to try to combine as I can. And again, some of these may be repeats from your last appearance. But touching on what you just mentioned about the compelling valuation, since the January 6th announcement, obviously, the stock has reacted positively, but there still appears to be quite a big disconnect between your estimated value and what the market is showing. Can you explain that disconnect a little bit? And then at the same time, with the announced transformation, what makes you think that the public markets are the best market in which to continue to execute your strategy?
Sure. We'll take those in reverse order. We get asked frequently why we're a public company, why don't we just go private. That certainly is not an option that we've never heard of or considered internally before.
But at this point, as a management team and as a board, we're focusing on delivering this strategic vision to all of our shareholders equally and expect that the stock will basically narrow the gap between kind of the realized value for assets and the trading value to where we are today. And I think the simplest way to do that is by delivering on basically what we promise. And as we build credibility by delivering on either realizing value for strategic land sales at prices that we've discussed or continuing to return substantial amounts of capital, we think that that will be recognized in the public market. And hopefully, we'll see the share price continue to improve.
But I think the burden is on us as a company and myself as part of the management team to really deliver on those results and go back and build credibility with this new strategy with these investors to continue to do what we promised. And it's only been two weeks, but we're working behind the scenes as hard and as fast as we possibly can to produce results for you, the investors.
Perfect. And then touching a little bit about returns for investors and also the allocation. As you look to sell land, should investors expect you to retain the cash, pay higher regular dividends, or perhaps some special dividends, or would you prefer share buybacks? I know you've got multiple options on the table there.
We have had multiple options in the past.
I think it's really going to be case by case depending on what the timing is going to be. We think after we get a decent level of cash on the books, returning cash in some form makes obvious sense and is consistent with how we've approached return to capital over the last 10 years. But whether we've made a decision of doing a 10b-5 buyback program or a special dividend or increasing the rate of common dividends, that really all three of those are still on the table and has not been decided conclusively because it's really going to depend on kind of the day, month, and year when that decision has to be made, as well as where the stock is trading that day. So we have to kind of see where we are before we go down that path, but everything is still on the table today.
Makes sense. Thank you. Are you able to provide any information on the discount rate that was used to calculate the present value estimate of the land? So we did not disclose that, but we've talked anecdotally and provided a range somewhere between 10% and 15%. Okay. Okay. Perfect. And then going back to the non-citrus agricultural operations, are you going to be managing that, or will that be a third party?
So we expect primarily we'll be engaged with third parties where we would lease the land in exchange for rental income, particularly in the near term. There are several agricultural opportunities that we're exploring to do on a proprietary basis. So we would do the work ourselves. But we need to really kind of lower the risk profile to make sure that it's not going to require substantial amounts of capital.
The immediate payoff is substantial enough that it's worth your while, and really doesn't put your capital at risk. So those are going on behind the scenes. In the near term, though, we expect that we'll be doing more third-party leasing arrangements.
Okay. Perfect. And then to the extent that you can, based upon what you've disclosed, how should investors think about the timing of potential sales? One year, three, five, ten. And is there an end game in sight as to what the company would like to do?
So the end game really would be to basically realize the highest and best use for every acre that we have is to optimize our real estate portfolio on behalf of the shareholders. So that's what we set out to achieve two weeks ago when we made the strategic announcement.
As far as a timetable goes, we are opportunistic. We don't feel like there is a tremendous amount of pressure to sell anything to meet any sort of expenses or bills or build up any resources or cash balances. We think that's all well in hand already. Instead, we're weighing offers that have been coming in over the last several weeks, a couple of weeks, sorry, the last couple of weeks, very, very carefully. Where it's appropriate, we'll negotiate. We have had several real estate transactions that have been percolating in the back, behind the scenes, as well as we have for every fiscal year, and at this point, we don't have anything that's ready to announce, but we will be very transparent with the market and making full disclosures when appropriate to tell you, the investor, that we're making progress on any land sales.
So the short answer is no, there's no kind of visibility that we're providing as far as a timeline. But we're within the highest and best use analysis that we've devised, able to identify really where we think valuation is appropriate for the land that we have. And if we have opportunistic offers that come across our doorway, we evaluate those against our internal benchmarks, and potentially we can get deals. So it's not a wait and see. It's make us an offer and let's see what we get in light of operating it for agricultural purposes, in light of what eventually is going to need to be entitled for corporate or residential development. So it really comes down to the highest and best use paradigm and then kind of the price points that we know, and we measure it against that.
So we're going to get fair value for our investors.
Perfect. And then again, with the theme of the announcement, how do you think about the revenue and profit profile on a per-acre basis of the alternative agriculture uses relative to the legacy citrus operations?
We have not disclosed any of that. I will say it is going to have a lot less volatility and is not going to be as significant on a per-acre basis as it was under citrus. Citrus was doing $50 million five or six years ago and Adjusted EBITDA. I don't think that that is the potential in the near term for these 53,000 acres. But we're also not going to lose money on this anymore. So cash flow will improve as we go forward, which is a huge step forward for us and you as the shareholders.
Yeah. I'm sure you've gotten that question, though, over the last.
Yeah. And we would like to provide it. We just don't have enough accurate information to give you a good view on a projection.
Okay. How should investors think about the potential rental income from leasing any land that you have?
How so?
Well, just the potential for having any rental income or how big of a part do you expect that to play in the financials moving forward?
So that's where we've been talking about kind of alternative agricultural crops from non-citrus opportunities, whether it's sod or sugar or corn or vegetables like green beans or fruits like watermelon. These are all seasonal, not permanent crops. And we necessarily would not engage in the business directly. We would lease out the land. So we would basically be the landlord.
So it would all be rental income, particularly in the near term. But that could change if we go and start making some proprietary operations, but that probably is not going to happen this season.
Okay. Last one, and on what should be an easy one. Do you have any estimate of working capital release this fiscal year or if you have disclosed that?
We've not disclosed that other than we think it's substantially, substantially reduced from what it's been historically because we don't need to support 5.5 million trees on 53,000 acres. So we think the scale of our business becomes de-risked as we move to more leasing activities. And we're not going to require the working capital to basically caretake all of those trees in that entire citrus operation.
Perfect. Well, John, this has been very informative, and we thank you for your time today and the presentation. For those of you in the audience, thank you. I think we got to just about all the questions. Actually, we did. We got to all of them. So thank you for your support and your interaction. And on behalf of Sidoti and everybody in the audience, John, thank you again for sharing Alico's story, and we look forward to seeing you again in the near future.
Thank you, everyone. Available for one-on-ones. You can come during this conference or we can talk afterwards. And again, sincerely apologize for the IT difficulties. That was all on us.
They hung with us, so we're good. We're good.
So thank you.
Y ep. Thank you, everyone.