Tejon Ranch (TRC) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Investor Relations - Nick Ortiz
• President and Chief Executive Officer - Matt Walker
• Senior Vice President and Chief Financial Officer - Robert Velasquez

TAKEAWAYS

• Revenue -- $22.6 million, representing an increase from $12.0 million driven primarily by agricultural insurance proceeds and pricing adjustments.
• Net Income -- $3.3 million, or $0.12 per share, compared to $1.7 million, or $0.06 per share.
• Adjusted EBITDA -- $10.4 million, representing an increase from $5.3 million.
• Farming Revenue -- $12.6 million, reflecting $3.9 million in crop insurance proceeds and $2.6 million in pistachio price adjustments related to the prior-year crop.
• Mineral Resources Revenue -- $4.0 million, growing 24.9% due to higher rock and aggregate royalties and water sales.
• Multifamily Revenue -- $924,000, representing an increase from $181,000 as leasing progressed at the Terra Vista apartments.
• Corporate Expenses -- $2.2 million, declining 40% for the quarter following management efforts to improve operating efficiencies.
• Industrial Occupancy -- 100%, maintained across 2.8 million square feet of gross leasable area within the joint venture industrial portfolio.
• Commercial Occupancy -- 95%, reflecting stable performance across approximately 584,000 square feet of gross leasable area.
• Building 1B Construction -- 510,500 square feet, with a certificate of occupancy expected in the first quarter of 2027 for this industrial facility in which the company holds a 60% economic interest.
• Olive Cultivation -- 300 acres, following the planting of an additional 150 acres in 2026 as part of a crop diversification strategy.
• National Cement Lease -- 20 years, representing a lease extension exercised by the tenant that secures the partnership through 2047.
• Total Liquidity -- $74.4 million, consisting of $8.8 million in cash and marketable securities and $65.6 million in available credit.
• Total Debt -- $94.4 million, representing approximately 16% of total capitalization.
• Cash Flow From Operations -- $7 million, representing an improvement for the first nine months of the year compared to a $4 million usage in the prior-year period.
• Hard Rock Casino Expansion -- 406-room hotel, with construction starting on the project's next phase which management expects to increase commercial activity at the Tejon Ranch Commerce Center.
• Grapevine Development -- Specific Plan amendment, approved by the Kern County Board of Supervisors to update land use mix and phasing.
• Trailing 12-Month Adjusted EBITDA -- $35 million, representing a 44% increase over the $24.3 million reported one year ago.
• Wine Grape Harvest -- Early harvest timing, which accelerated sales into the third quarter due to warm spring weather.
• Industrial Net Asset Value -- $14 per share to $20 per share, representing management's estimated value for the Tejon Ranch Commerce Center based on 2024 financials.

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RISKS

• Walker stated, "The interest costs are very real to us," emphasizing the importance of maintaining conservative leverage given current income levels.
• Velasquez stated, "warm weather also impacted almond nut sizing, which will be reflected in the total yield, which we will report at year-end," indicating a potential negative impact on farming production.
• Velasquez warned that results will continue to fluctuate from quarter to quarter due to the nature of the company's business segments and the timing of land sales.

SUMMARY

Tejon Ranch Co. (NYSE:TRC) is executing a strategic transition from a conglomerate real estate operating entity to a land company focused on converting assets into recurring income. Management reported that the company is prioritizing disciplined capital deployment and cost reductions to narrow the gap between its share price and the intrinsic value of its 270,000-acre land holdings. The company continues to advance its residential projects, including Grapevine and Centennial, while leveraging joint ventures for industrial developments to maintain a conservative balance sheet.

• CEO Walker stated, "We want Tejon Ranch Company to evolve from a conglomerate real estate operating company to take on many of the best characteristics of successful land companies."
• Management indicated that the company is pursuing capitalization for the fully entitled Tejon Mountain Village with the assistance of third-party investment banking resources.
• The company is processing an updated application for the Centennial residential community and expects to appear before the Los Angeles County Regional Planning Commission in the coming months.
• CEO Walker noted that the company offloaded water early in the year to capture demand before market conditions changed due to El Niño winter patterns.
• Management reported that the first phase of the Grapevine residential community is moving closer to a mapping process following local government approvals.
• The company plans to further reduce controllable costs and discretionary capital spending in the upcoming budget cycle to improve durable earnings.

INDUSTRY GLOSSARY

• EBITDA: Earnings before interest, taxes, depreciation, and amortization.
• GLA: Gross leasable area, the total floor area designed for tenant occupancy and exclusive use.
• Specific Plan: A comprehensive planning and zoning document for a defined geographic area within a county or city.
• State Water Project: A water storage and delivery system of reservoirs, aqueducts, power plants, and pumping plants operated by the State of California.
• TRCC: Tejon Ranch Commerce Center, a 1,450-acre commercial and industrial development.

Full Conference Call Transcript

Operator: Please note, this event is being recorded. I would now like to turn the conference over to Nick Ortiz, Investor Relations. Please go ahead.

Nick Ortiz: Good afternoon, and welcome to Tejon Ranch Company's Third Quarter 2026 Earnings Call. My name is Nick Ortiz. Joining me today are Matt Walker, President and Chief Executive Officer, and Robert Velasquez, Senior Vice President and Chief Financial Officer. Today's press release, 10-Q, and this webcast are available on our Investor Relations website. A replay will be posted after we conclude. That site is ir.tejonranch.com. Today's remarks, including responses to questions, include forward-looking statements. These statements are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially.

Key factors are detailed in our SEC filings, including our most recent forms 10-Q and 10-K. We assume no obligation to update any forward-looking statements. We will also reference non-GAAP measures. These measures should be considered in addition to, not as a substitute for, GAAP results. Reconciliations to the most directly comparable GAAP measures and reasons why we use non-GAAP measures are included in today's filings and are posted on our website. Again, it's ir.tejonranch.com. After prepared remarks, we'll address questions. Shareholders were invited to submit questions by email in advance. I'll now turn the call over to our CEO, Matthew Walker.

Matthew Walker: Thanks, Nick, and good afternoon. Let me go through the results and point out a few highlights, then turn it over to Robert, and then I'll wrap up by talking about our plan going forward. For the third quarter, revenue, net income, and adjusted EBITDA were all ahead of last year, with comparable results year to date. Looking at each of our individual operating segments tells a similar story, with steady to positive growth across our portfolio. I'd like to provide some context. Tejon Ranch Company is involved in a number of different diverse businesses, some of which are more passive, like our ground leases and royalties, while others are more active, like ranch operations and our apartments.

We benefit from the diversification of those cash flow streams, as well as their compounding growth. So net-net, it's encouraging to see consistent improvement across the board this quarter. I do want to make sure we are transparent about what is recurring and what is exceptional, because a portion of our improvement reflects timing and non-recurring items. Notably, this includes our land sale contribution in the industrial joint venture with Dedeaux Properties in the second quarter. in farming, as Robert will discuss, we benefited from the unusually high crop insurance proceeds, as well as bonus pricing on last year's pistachio crop. Setting those items aside, what remains is a set of operating businesses that performed well this quarter.

In terms of highlights, at our Commerce Center, Building 1B, that is the one that we are developing with Dedeaux Properties, it remains under construction and is on track for completion early next year. Its deal structure, namely a joint venture targeting a high return on invested capital, which leverages third-party equity, is a model we intend to repeat. Next door to TRCC, the Tejon Indian Tribe and Hard Rock International have broken ground on the next phase of the Hard Rock Casino Tejon, with a new 406-room hotel and entertainment venue. The tribe's ongoing investments into their regional destination will continue to have a wide-ranging positive impact on our business at the Commerce Center and expand our customer base.

With our water sales, we were aggressive early this year at offloading a good portion of water that would otherwise be banked. We successfully captured demand before the water market changed dramatically as the strong El Niño winter is becoming realized. We remain poised to meet future demand when conditions permit. Moving over to our residential communities, in late September, the Kern County Board of Supervisors approved an amendment to the Grapevine Specific Plan that updates the land use mix and phasing. With this, we are one step closer to a mapping process in bringing the first phase of Grapevine to market.

At Centennial, we are processing an updated application with Los Angeles County and expect to be before the Regional Planning Commission in the coming months, and shortly after, in front of the Los Angeles County Board of Supervisors. We are also continuing to seek capital partners for the fully entitled Tejon Mountain Village. With that, I will turn it over to Robert to take you through the quarter in more detail.

Robert Velasquez: Thank you, Matt. Net income attributable to common stockholders was $3.3 million, or $0.12 per share, compared to $1.7 million, or $0.06 per share a year ago. That is an improvement of $1.6 million. Adjusted EBITDA nearly doubled to $10.4 million, compared to $5.3 million last year. The press release and the 10-Q provide the segment details, so I will focus on three areas: earnings quality, cost management, and our balance sheet. First, earnings quality. As Matt mentioned, our results benefited from some unusual items, particularly in farming. Our revenue includes $3.9 million of crop insurance proceeds and $2.6 million of bonus price adjustments related to last year's pistachio crop.

I should also point out that an earlier harvest moved wine grape sales into the third quarter that would ordinarily occur later this year, so this accentuated the quarter's variances. This spring's warm weather also impacted almond nut sizing, which will be reflected in the total yield, which we will report at year-end. That said, we continue to see positive contributions across our operations. Mineral Resources revenues increased 25%, with operating income up nearly 58%. National Cement exercised a 20-year extension on its lease, continuing our longstanding partnership with them. Our commercial and industrial portfolio remains well leased, with industrial occupancy at 100% and commercial occupancy at 95%.

At Terra Vista, leasing continues to progress, and multifamily revenue increased to $924,000 compared to $181,000 last year. Second, costs. We've continued to focus on managing expenses and improving operating efficiencies. Corporate expenses, including share-based compensation adjustments, declined 40% for the quarter and 22% year-to-date after adjusting for non-recurring costs in the prior year. For the quarter, adjusted farming EBITDA before fixed water obligations was $2.6 million compared to $425,000 last year. Third, the balance sheet. We ended September with approximately $74.4 million of liquidity, including $8.8 million in cash and marketable securities, and $65.6 million available under our revolving credit facility. Total debt was $94.4 million, representing approximately 16% of total capitalization.

We continue to be disciplined in how we deploy capital, prioritizing investments that support long-term value creation while maintaining financial flexibility. Turning to our overall financial performance, trailing 12 months adjusted EBITDA reached $35 million compared to $24.3 million a year ago, an increase of approximately 44%. Some of that improvement reflects the timing of land sales and other items that won't necessarily repeat, but it also reflects progress across several of our operating businesses and our efforts to control costs. Our results will continue to fluctuate from quarter to quarter given the nature of our businesses.

Our focus remains on improving recurring earnings, managing expenses, and putting capital to work where we believe it will generate the greatest returns for shareholders. With that, I'll hand it back to Matt for some additional remarks.

Matthew Walker: I'll close my comments by saying a few words about where we go from here. A number of you have reached out to me and told me in so many words, you like what you've seen, but you want to see more, and by more, you mean real transformational change. What's your plan? Plan will unfold over time. At a high level, here is what we're trying to achieve. We want Tejon Ranch Company to evolve from a conglomerate real estate operating company to take on many of the best characteristics of successful land companies. This means leveraging our land's unique characteristics, including our key location as the gateway between Northern and Southern California, with much contribution.

We want to feed the TRCC flywheel across industrial, retail, multifamily, and our travel centers, benefiting from superior regional population and jobs growth. Operationally, we must continue to be disciplined, and with some things, it is addition by subtraction, and by that I mean if we simply eliminate doing the things which lose money, our performance will improve. We have to do things differently. To pursue these objectives, we must clean up our balance sheet, convert land to recurring income, and reduce our drag. We're moving forward on the first stages of implementing this plan. I know that many of you want more details, more clarity, and really more accomplishments more quickly. So do I.

What I can tell you is that we will be reporting on our progress on a number of initiatives as those efforts advance. I don't take anything for granted, and I want to thank all of you for your patience during this transitional time. With that, we'll turn over to shareholder questions that were submitted in advance. Please give us a moment to pull those up.

Nick Ortiz: Matt, we received four questions from investors. The first question is from David Ross with Praxis Partners. Question is, "We applaud your efforts to reduce costs, but at the end of the day, cash flow is still negative and net debt continues to increase $16 million year to date. When will management and the Board acknowledge the need to materially cut debt and cut costs further to drive earnings and free cash flow per share?

Matthew Walker: David, to answer your question, I can say that management as well as our Board very much understand the importance of maintaining conservative leverage. Any reductions to the principal balance of our credit line are going to follow cash-generating activities. And looking at the detail, while our net debt did increase, the actual borrowings only increased by $500,000. We used our cash flow from operations and cash flow that was available in marketable securities, all to substantially fund our operations. And when you examine our cash flow statement, we generated more than $7 million in cash from operations this year versus consuming about $4 million of cash from operating activities. So that's a positive difference of $11 million.

And then if you exclude the expenditures for the construction of our Terra Vista apartments, we used something like $14 million less cash than the prior year. So, no doubt there is still work to be done, but we think this is a step in the right direction. It remains critically important to maintain conservative debt loads, particularly for a company like ours, which has an emphasis in land, and particularly given our income levels. The interest costs are very real to us. Next question, Nick. We seem to have lost Nick. Let me see if I can pull up the question. The next question is from Paul Ross. Nick, you still there?

Nick Ortiz: I got it. I got it, Matt. I apologize.

Matthew Walker: Okay.

Nick Ortiz: I was on mute.

Matthew Walker: Okay.

Nick Ortiz: The Board and management continue to make sure that shareholders do not benefit from stock appreciation. Tejon has an asset, the Commerce Center, that was said to be worth $20 per share during the proxy fight. Therefore, the 250,000 acres of land is worth -$4 per share. Since the management and Board are unwilling to bring out the value, I would recommend that you hire an investment banker to monetize the asset.

Matthew Walker: Thanks, Paul. I think what you are referring to is a presentation that I made last year, where we estimated that the net asset value of the Tejon Ranch Commerce Center was somewhere between $14 and $20 a share, and we based that on 2024 financials. That is just one part of our business, and that excludes our water assets, and it highlights what I said before, is that we believe our business is materially undervalued, and this would include much of the undeveloped land within our 270,000 acres. Where I would disagree with you is your comment that management and the Board are unwilling to bring out the value in the land.

I mentioned earlier how we are bringing our first phase of Grapevine closer to mapping so that we have an asset with value that can be readily monetized through a number of different potential implementation structures. We will be in front of L.A. County in the near future on Centennial, and we are confident that our efforts there will bring us another important step closer to realizing value of that asset. As I also mentioned, we are in the capitalization process with Mountain Village with the assistance of third-party investment banking resources. There is progress, but I agree with you, we need to find and monetize value where we can.

Nick Ortiz: All right. Our next question is from David Spier with Nitor Capital Management. The question is, Matt, a question on earnings power and costs. "Over the last 12 months, Tejon's share of joint venture EBITDA was roughly $16 million. Excluding farming, the wholly owned businesses brought in roughly another $27 million of mostly recurring revenue, much of it fairly passive. Yet by our math, those businesses are carrying about $30 million a year of cash costs, including corporate, the MPCs, and capitalized interest, once you back out farming and water. The wholly owned side spends more than it takes in, and the $16 million of JV EBITDA is largely absorbed.

While you have reduced costs, it seems substantial further reductions need to be on the table for the company to deliver durable earnings." How do you respond to that?

Matthew Walker: Thanks, David. I appreciate the question. You have identified one of the big challenges that we have in our company today. We have a portfolio of businesses which generate cash, and we also have a portfolio of businesses which, along with our corporate overhead, consume cash. My approach has been to immediately reduce the cost which we can control. We started that process, and as we look at our budget for the coming year, we are going to continue to reduce all of our controllable costs. The next step is to look at our capital spending and especially our discretionary capital spending as part of that. I mentioned this in my earlier remarks.

We need to balance that CapEx spend with what our anticipated cash flow is going to be. As we look to next year, we are asking the hard questions about what is absolutely essential. For example, what can we do to make an asset productive and cash flow producing? What can we do so that we create underlying land value? Or what can we do so that we preserve important optionality in the future? Then the final step, which is the hardest, is to make decisions on where we grow our revenue and how to generate cash, because at the end of the day, it's all about the cash, and how much capital allocation is necessary for that effort.

Then where are the trade-offs? What's the capital required? What's the risk, the investment horizon, our return on invested capital? So you're right, David, in as much as we too need to continue to reduce our costs and reduce our CapEx, and then work to increase our revenues so that we can generate durable earnings. I'm going to be reporting more on this as I am able to.

Nick Ortiz: Our final question comes from Phil Goldstein with Bulldog Investors. Mr. Goldstein asks, "I think almost all shareholders and management of TRC believe that the share price has been languishing far below the intrinsic value of the company for many years. What is the plan for narrowing the gap before I die? By the way, my life expectancy is less than eight years.

Matthew Walker: Well, Phil, I didn't think I needed any more sense of urgency than I already had, but I do believe that you just gave me another reason. Look, you bring up a good point. Our shares trade below the intrinsic value of the asset. We share your frustration. In my earlier prepared remarks, I tried to lay out at a high level the things that we need to do in order to change the share price for the positive. It's disciplined deployment of capital, it's the conversion of assets into cash flow, and it's the continued reduction of cost.

We're working on all three of those, and as I said before, as soon as I'm able to share more detail, I will. For everyone's benefit, I hope that the company will see this change in way less than the eight years that you mentioned, and I hope that you've got a lot more than eight years ahead of you. On that note, thank you to all of our shareholders for submitting your questions. We look forward to reporting back to you for our fourth-quarter results early next year. Have a good day, everyone.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. With that, ladies and gentlemen, we will be concluding today's question and answer session as well as today's conference call and presentation. We do thank you for joining. Have a great rest of the day. You may now disconnect your line.

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