12/02/2024 - Limoneira Company: 2023 Annual Report

Board of Directors

Left to Right

Elizabeth Mora	Peter Nolan	Edgar A. Terry
Harold S. Edwards		Scott S. Slater
Chairperson of the Board
Gordon E. Kimball	Barbara Carbone

TM

CHAIRPERSON'S LETTER TO THE SHAREHOLDERS

As we turn the corner into the first quarter of 2024, the Board is looking forward to management's continued implementation of the strategic plan. Fiscal year 2023 brought about significant successes in the profitable disposition of well over $100 million in non-strategic assets, reduced debt and the emergence of new related operations, such as the provision of farm services to owner-growers. It is now reasonably well known that on December 1, 2023 the Company announced its initiation of a process that will assist us in ascertaining the true value of the enterprise and its individual parts. More importantly it will lead us to a better understanding of the best corporate structure, alliances, ventures, sales and combinations that can be designed and adopted in pursuit of objective to add greater value to the Company and maximize the benefit and return to our shareholders.

In short, we acknowledge the importance of determining the highest and best use of our assets, in a post-pandemic international marketplace. We are blessed to own valuable land and water resources that have been sustainably managed to ensure continued productivity for decades to come. Our historical experience and internal processes have already led us to an increased appreciation of the comparatively special value of the California avocado. In recognition of this fact, we have begun to repurpose existing orchards in Ventura County moving out of lemons and into avocados. While we are bullish on the long-term value of California avocados, we also embrace our important role in improving our profitably in growing lemons. Toward this end, the Board is supportive of management's objective of reducing our lemon cultivation while increasing our farm management, packing and selling services. Our farming practices are generally understood to be both sustainable and comparatively more productive. We will strive to increase productivity and reduce costs relative to our peers and this will be an important focus in 2024.

It is also true that some of our land is destined for continuing development through our trusted relationship with our surrounding community. Our partnership with The Lewis Group of Companies has given Ventura County something to be pleased about with the successful Harvest Project and its role in providing new housing. However, the drastic housing shortage in Ventura County is growing and Californians still want and need new homes. Limoneira pledges to contribute in this important discussion and we will faithfully work with the City of Santa Paula and Ventura County in an effort to solve the housing crisis.

In all things, we realize that Limoneira is dependent upon contributions from its valued employees, partner growers, customers, and the many relationships it has in every community in which we do business. We are grateful for these many contributions and from the support of our shareholders as we have undergone material changes. We look forward to delivering on our promises in 2024.

Sincerely Yours,

Scott S. Slater

Chairperson of the Board

CEO'S LETTER TO THE SHAREHOLDERS

Fiscal year 2023 was a year of significant accomplishment for Limoneira. The Board of Directors and Management's ac�ons to transi�on our One World of Citrus to an "asset-lighter" model, including the expansion of services, the streamlining of opera�ons, and the sales of non-strategic assets, have now put us into posi�on to improve our consistency of earnings, reduce our debt, right size our balance sheet, increase our EBITDA and dividends, and improve our returns on invested capital. We have been pleased with our progress but s�ll have more to do.

The company's sale of its Oxnard Lemon packing house to the Port of Hueneme for $20 million and the sale of its Northern Proper�es to PGIM Agricultural Investments, a division of the Pruden�al Insurance Company, for $100 million, allowed Limoneira to reduce its net debt to $37 million by the end of the fiscal year - down from $105 million in fiscal year 2022. These ac�ons proved fortuitous given the increases in interest rates this past year. The Northern Proper�es sale allowed Limoneira to establish a new value-adding opera�ng division within the company providing farm management services to PGIM and offering these services to other interested farm owners throughout California and Arizona. Limoneira retained approximately one million cartons of fresh lemons produced on the Northern Proper�es in its supply chain through a marke�ng agreement with PGIM as part of the ongoing business arrangement. The company recorded a $40 million profit with the sale and took advantage of the gain to exit unprofitable business opera�ons caused by the fundamental global oversupply of lemons and the corresponding nega�ve impact on lemon pricing and profit margins. The company fully funded its long-term pension obliga�on which it then successfully transferred to a financial ins�tu�on in 2023, elimina�ng future risk and costs. The combina�on of these ac�ons leaves Limoneira in a much stronger financial posi�on as it enters fiscal year 2024.

Limoneira's Board of Directors and Management recently updated the company's strategic plan to include:

• Growing our One World of Citrus business model in an "asset lighter" way by o Expanding packing, marke�ng, and selling services to Grower Partners o Expanding our newly formed Farm Management Services to farm owners
  throughout California and Arizona
  o Expanding our marke�ng and selling services to citrus suppliers throughout the world
• Expanding Ventura County avocado produc�on while decreasing Ventura County lemon produc�on
• Unlocking the market value of iden�fied non-strategic assets.

1. Execu�ng an iden�fied roadmap of sales of non-strategic assets

• Real Estate Development

1. Execu�ng the development of the Harvest at Limoneira master-planned

community in Santa Paula (East Area 1)

• 1. Execu�ng the development of the Harvest Medical Pavilion in Santa Paula (East Area 2)
• Exploring forward integra�on into avocado packing, marke�ng, and selling

We have made great progress on the updated strategic plan to date. We have successfully developed a grower services team that has recruited and retained over one million addi�onal fresh lemon cartons from new grower partners. We have sold four of the six non-strategic assets iden�fied for mone�za�on for a total of $130 million in proceeds, with $50 million remaining. We established a 3-year fallowing program in Yuma, Arizona that will drive $1.3 million of annual revenue from idling 600 of the 1,300 acres of farmland in Yuma. We have pivoted our San Joaquin Valley opera�ons to farming services provider, packer, marketer, and seller. We have eliminated unprofitable opera�ons in Cadiz. We terminated our long-term re�rement plan for annual plan savings of approximately $1 million. Finally, as men�oned, we reduced our net debt posi�on to $37 million at the end of fiscal year 2023, strengthening our balance sheet.

As suggested earlier, we s�ll have more to do. We will con�nue our drive towards being "asset lighter" by moving towards 75% of our lemon source volume from grower partners and agency in the next 5 years - up from 60% today. We will work to refine and expand our farm management services division. We intend to sell the remaining two non-strategic assets iden�fied for mone�za�on for expected total proceeds of $50 million. We will diligently pursue addi�onal water fallowing/mone�za�on opportuni�es in Yuma, Arizona and seek to mone�ze water rights in the Santa Paula Water Basin. We will increase our Ventura County avocado produc�on to 2,000 acres and reduce our Ventura County lemon produc�on to 1,000 acres over the next five years. Lastly, we will explore ways to add value to avocados beyond produc�on in ripening, packing, marke�ng, and selling as a complement to our One World of Citrus product offerings.

Lemon markets around the world are currently oversupplied, which has had a negative impact on lemon pricing and profit margins for lemon producers in California, Arizona and worldwide. This lemon oversupply and lower lemon pricing environment comes during a period of inflationary pressure on lemon production, packing and distribution costs which have effectively eroded profit margins for Limoneira and other lemon producers around the world. Higher lemon production yields, higher percentages of lemon quality, and higher levels of fresh utilization are now critical for improving lemon profitability today, given the realities of lower prices and higher costs in our operating environment. We believe we can achieve the highest production yields, quality and fresh utilization for ourselves, our farm management services partners and our grower partners and will work relentlessly to execute and achieve profitable results in this challenging operating environment.

Avocado production in California enjoys a sustainable and complimentary competitive advantage to production from other parts of the world (Mexico, Peru, Colombia, and Chile) because of its seasonality (May - July) and its proximity to high value domestic markets that enjoy California avocado's high quality and freshness. As water scarcity becomes more prevalent in San Diego County, Orange County and Los Angeles County, more California avocado production will migrate to Ventura County where the avocado growing climate is ideal and there is a sustainable supply of water to produce avocados. Ventura County's avocado acreage expansion will accelerate given the challenges described earlier with lemon overproduction. Lemon trees will come out and avocados will go in. Since Ventura County's total avocado production capability is limited and California's total production capability is limited compared to the overall demand for avocados in the United States, we believe that Limoneira has the unique opportunity to take advantage of this sustainable market niche - hence the Ventura County pivot towards more avocado production and less lemon production. Today's higher density planting configurations and stronger root stocks for the popular Hass avocado variety better match soil conditions compared to older root stock options and planting configurations which combine to improve per acre yields for new plantings. New production technology also will assist us with our irrigation, fertilization and overall production and gives us excitement for our aggressive growth in avocado production. When the dust settles in five years, Limoneira will be farming 2,000 acres of avocados with annual avocado production targets of twenty to thirty million pounds and 1,000 acres of lemons with annual production targets of 1.6 million cartons in Ventura County.

The Harvest at Limoneira master-planned community development successfully sold the final 121 lots associated with Phase 1 of the project to Lennar and Richmond American in the fourth quarter of fiscal year 2023. These lot sales recorded a $12 million profit to the Limoneira Lewis Community Builders LLC partnership and $5 million of earnings to the Limoneira Company. Lot values appreciated over 40% from the same lot sales made at the beginning of Phase 1. These sales were welcome following 18 months of rising mortgage rates which slowed new home construc�on and home sales during that �me. We are now ac�vely marke�ng Phase 2 of the Harvest at Limoneira master plan, The Foothill Neighborhood, comprised of 554 hillside lots. Interest from homebuilders in the lots has been high and we look forward to lot sale announcements in fiscal year 2024.

Residents of homes in Harvest at Limoneira are enjoying the homes built by Lennar, KB Home, K. Hovnanian, and Richmond American. They are also enjoying the recently constructed first phase of a 38-acre sports park as well as the many ameni�es the master plan provides. It is gra�fying to see the Harvest at Limoneira development gaining momentum and bringing valuable new housing to Santa Paula and Ventura County.

We are nearing the conclusion of nego�a�ons with the City of Santa Paula to increase the en�tled lots approved for the Harvest at Limoneira project from 1,500 dwelling units to 2,050 units - an increase of 550 lots. This increase in lots was made possible by the Santa Paula Unified School District transferring twelve acres of en�tled land back to Limoneira Lewis Community Builders LLC

due to a lack of student demand. This increase in dwelling units for the project was also made possible by Limoneira dedica�ng its 17-acre retained parcel within the Harvest at Limoneira master plan towards the development of three hundred new apartments for the project, which we plan to construct and operate in partnership with The Lewis Group.

The Harvest Medical Pavilion (East Area 2) moved closer towards development and mone�za�on this past year as well. We an�cipate closing on the sale of a 5-acre parcel to Pacific Coast Investments, Inc. for the construc�on of medical office buildings in August 2024. We also look forward to closing the sale of a 2-acre parcel to a popular na�onal quick-serve-restaurant chain in June 2025, closing the sale of a 2.5-acre con�guous parcel to a na�onal hotel operator in June 2025 and finally, closing the sale of an addi�onal 5-acre parcel to Pacific Coast Investments, Inc. for the construc�on of a new Santa Paula Hospital operated by the Ventura County Healthcare Administra�on in June 2025. These transac�ons leave 18-acres of Limoneira owned property in East Area 2 that we are ac�vely marke�ng.

We sold 4.8 million cartons of fresh lemons in fiscal year 2023 at an average sales price of $18.24. We also sold 3.8 million pounds of avocados at an average price of $1.06. Total revenue for the company was $180 million which was 3% lower than fiscal year 2022 revenue caused by lower fresh lemon u�liza�on, lower lemon prices and lower avocado produc�on year-on-year. EBITDA for the year of $22 million was primarily driven by the gain on the sale of assets and masked challenging lemon fresh u�liza�on, low lemon selling prices, and low avocado produc�on. As we enter fiscal year 2024 we an�cipate higher lemon sales volumes, higher lemon sales prices, and higher avocado produc�on for the year.

We experienced several changes to our Board of Directors this past year, and I would like to recognize and thank re�ring directors Wyat Merriman, Robert Sawyer, and Betsy Chess for their wisdom and valuable contribu�ons to Limoneira over many years of dedicated service. I would also like to thank our refreshed and energized seven-member Board of Directors for their insights and wisdom guiding management through these important �mes of transi�on and change. We are working collabora�vely together to plot our course towards opera�onal improvement and success while focusing on daily execu�on to get there. On behalf of the management team and all the employees of Limoneira we would also like to thank our shareholders for your ongoing support and belief in Limoneira's investment thesis. We are excited about the transi�on the company is making and confident it will yield valuable results for years to come.

Sincerely,

Harold S. Edwards

President & CEO