TRC - NYSE

Greetings, and welcome to the Tejon Ranch Co. fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nicholas Ortiz, Senior Vice President of Corporate Communications. Please go ahead.

Good afternoon, and welcome to Tejon Ranch Co.’s fourth quarter 2025 earnings call. My name is Nicholas Ortiz. Joining me today are Matthew Walker, President and Chief Executive Officer, and Robert Velasquez, Senior Vice President and Chief Financial Officer. Today’s press release, Form 10-Ks, and this webcast are available on our investor website. A replay will be posted after we conclude. That site is investors.tejonranch.com. Today’s remarks may 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. These 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 may 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 are included in today’s filings and are posted on our website, again, investors.tejonranch.com. After prepared remarks, we will address questions. Shareholders were invited to submit questions by email in advance. With that, I will turn the call over to Matthew.

Good afternoon. I am Matthew Walker, President and CEO of Tejon Ranch Co. Thank you for joining us. For this, our second earnings call, we will be using the same format as last November. I will share my perspective and turn it over to our CFO, Robert Velasquez, who will cover our financials, and then we will answer questions. As we did last quarter, we will be answering each shareholder question that is asked. So moving on to this quarter, I would like to talk about where we have been and where we are headed. For the quarter, our operating income was up compared to the fourth quarter 2024, while our net income was down. Our net income reflects one-time proxy defense costs, but our overall operating performance was strong, which we will explain as we go through our segments. For the year, our $49,600,000 in revenue and $24,200,000 in adjusted EBITDA both improved over 2024. Our company’s economic driver remains our commercial real estate business. Commercial revenue was up $1,000,000 for the quarter and $3,500,000 for the year, led by two land sales. One of which was a hotel site and the second, a back-end payment on our Nestlé transaction from 2025. In farming, we had one of the stronger years in recent memory. This was supported by an on-bearing year for pistachios. Farming revenue was up 20% over the same quarter last year, and up nearly 26% annually. I am pleased to report that our farming revenues were the highest in a decade. Income from our joint ventures was down for the quarter and down for the year. While our industrial real estate JVs performed well, our travel center JV with TA Petro was impacted by reduced car and truck traffic on Interstate 5. This led to lower fuel sales and fuel margins as well as lower sales in our travel centers and restaurants. On the positive side, we have seen encouraging signs from the Outlets at Tejon, with December generating the highest retail sales of any month since we opened in 2014. There are many factors in play, but among them is the positive impact of the new Hard Rock Tejon Casino, which opened in November. So far, the casino’s impact has been extremely encouraging, and we look forward to further positive benefits from the casino in 2026. Last fall, I talked about commitments made by the board with respect to corporate governance. Today, I am pleased to report that our board is delivering on those commitments. First, as I hope you saw this morning, we filed an 8-K announcing a proposal to provide shareholders with the right to call a special meeting. We are proposing that our shareholders or groups of shareholders owning at least 25% of the outstanding shares can call for a special meeting. Our proposal is consistent with the majority of public companies, and we think it better aligns us with our shareholders. Shareholders will be able to vote on this proposal as part of their proxy ballot prior to the annual meeting in May. Second, I have spoken in the past about our board size and composition. We filed an 8-K earlier this month announcing the decision by our board to reduce in size from 10 to 9. Also, the board decided that two board members, in the event that they are elected this May, would step down by May 2027, which would bring our board size down to 7. In addition, as part of our board size reduction, the board voted to eliminate our executive committee. These changes reinforce that our board is committed to positive governance change. Next, we will be holding our annual meeting on-site at the Ranch on May 13. We invite each of our shareholders to attend. We will also provide an opportunity for our shareholders to attend virtually. It will be a good opportunity to see our assets up close and also a chance to spend time with our management team and board. Following the annual meeting, we will be hosting tours of the Ranch including the Tejon Ranch Commerce Center, the Terra Vista apartment community, and the Hard Rock Tejon Casino, and we hope you can join us. Registration information will be provided with your proxy statement. Last year, we completed a number of cost-saving measures. Looking ahead, I want to communicate that we are not done yet. We are continuing to streamline our operations and have targeted an additional $1,000,000 of overhead savings by 2027. When you add all of this up, our operating business is showing signs of positive momentum. However, I want to emphasize that cost improvement alone is not our only goal. As a company, we must put more of our assets to work generating higher cash flow, producing more earnings, and increasing value for our shareholders. I described my first year at the company as setting the table. This consisted of taking a close look at all aspects of the business, formulating a strategy, and then communicating that strategy to the market. This year, we are working on activating those plans. Right now is an exciting time for the company as we look to grow our revenue base and realize the benefits of our cost savings to drive more earnings growth. With all this as a backdrop, I would like to turn the call over to our Chief Financial Officer, Robert Velasquez, so that he can go through the quarterly financials.

Thank you, Matt, and good afternoon, everyone. I will focus my remarks on our fourth quarter results, provide some additional detail on segment performance, and then briefly discuss liquidity. For the fourth quarter of 2025, net income attributable to common stockholders was $1.6 million, or $0.06 per diluted share, compared to $4.5 million, or $0.17 per diluted share, in 2024. Revenues and other income, including equity in earnings from unconsolidated joint ventures, increased 8% to $23.3 million compared to $21.6 million in the same quarter last year. Adjusted EBITDA for the quarter was $11.4 million, an increase of 9% compared to $10.5 million in the prior period. Turning briefly to segment performance, commercial and industrial real estate generated $4.2 million in revenue for the quarter, compared to $4.1 million in the prior-year period. Operationally, the portfolio remains strong, with the industrial portfolio fully leased and the commercial portfolio approximately 98% leased, which includes the Outlets at Tejon at 93% occupancy at year-end. Equity in earnings from unconsolidated joint ventures totaled $2.1 million in the fourth quarter, compared to $3.3 million in the prior-year period, reflecting lower earnings from the travel center joint venture. Farming revenues for the quarter were $12.2 million, an increase of 26% compared to $9.7 million in 2024, reflecting the impact of the pistachio harvest on the on-bearing year cycle as well as improved performance across other permanent crops. Adjusted farming EBITDA before fixed water obligations increased to $4.4 million in the fourth quarter from $3.4 million in the same quarter last year, with margins improving modestly as higher crop production drove operating leverage. Mineral Resources revenue totaled $2.4 million for the quarter, compared to $2.5 million in the prior-year period, reflecting lower oil and natural gas production volumes, and pricing. I am pleased to introduce a new reporting segment and a milestone for the company. For the first time, we are reporting a segment dedicated to our multifamily revenues and expenses. As lease-up activity at Terra Vista at Tejon gained momentum, we evaluated whether the business warranted its own segment and concluded that it did. Here is where things stand. During the quarter, the company recognized $536,000 of multifamily revenue, reflecting leasing activity at Terra Vista at Tejon, which commenced leasing early in 2025. Phase one of the project, consisting of 228 units, was completed during the year, and the property continues to progress through a lease-up phase. Turning briefly to our balance sheet, as of 12/31/2025, cash and marketable securities totaled approximately $24.9 million. Available capacity on our revolving line of credit facility was approximately $66.1 million. Total liquidity was therefore approximately $91.0 million. We believe our liquidity position provides sufficient flexibility to continue advancing development initiatives while maintaining balance sheet discipline. With that overview, I will turn it back to Matt.

Thanks, Robert. To close, our direction is clearer. We are strengthening our core business, tightening our cost structure, and concentrating on leveraging our assets to generate recurring cash flow. At the same time, our board has made significant progress in governance and shareholder alignment. We remain committed to providing you, our shareholders, with clear communication and accountability. We will now open for questions. We will respond to the questions that have been submitted. So please just give us a moment to get those pulled up. Alright.

Thank you, Matt. We received 11 questions before the deadline. We will read each one as submitted, as we did last quarter, and identify the submitter. Before we begin, I just want to thank all of our investors who submitted questions for their engagement. Our first question: When will TRC management and its self-serving board finally respect and benefit all the shareholders as its prime goal rather than the selfish history of self-enrichment? When will management stop being a disgrace and finally unlock the assets of the company for the benefit of its owners, not its management who, for decades, only sought the benefits for themselves? The question is from Samuel Koenig.

Okay. I understand the question, Samuel, and I understand the sentiment and the frustration behind it. I have been at the company for just over a year now. And in that time, I have scrutinized our operations looking for opportunities to grow our revenue base and reduce our costs. We have been able to reduce our workforce by 20%. We have cut millions from our overhead. We have also taken a much more proactive approach with our shareholders. We held an Investor Day last October. We are now hosting earnings calls like the one we are having right now, and those include a format where individual shareholders like yourself can engage in a direct dialogue with management. We provided additional financial disclosures like the ones that Robert just mentioned, plus investment scorecards and hurdle metrics to better explain our business to shareholders. These are all examples of the company’s new approach. You alluded to accountability with executive compensation. Right now, we are in the process of finalizing our proxy statement. When it is released, I think you will see how our existing compensation structure is responsive to the company’s financial performance and how it addresses the accountability issue in a meaningful way. And in addition, we have been working on a revised compensation plan, which will be covered in the upcoming proxy, that further aligns us with shareholders and increasingly ties our performance to share price improvement. Moreover, I personally made adjustments to my compensation to further align myself with shareholders. Furthermore, a few weeks ago, as we discussed just a few seconds ago, our board shared its plan for governance reform. We reduced the board size. We eliminated the executive committee. Today, we announced the proposal for a shareholder meeting right. Our board is, on top of that, we have increased representation from our shareholder base compared to where we were a few years ago. I think you should know that our board is not monolithic, and our board members have diverse opinions and they are not afraid to share them. So these are just a few of the things that we are working on between management and the board to enact change for the better. Taken in aggregate, we have made a positive difference in the last year. I cannot speak to all the things that you mentioned before I joined the company, but what I can tell you in the answer to your question is I do think that we are on our way to demonstrating accountability and creating value for our shareholders. Next question.

Next question. As California continues to tighten regulations on traditional rodenticides, including the 2021 restriction on second-generation anticoagulants, how is Tejon Ranch approaching wildlife-friendly or nonlethal rodent control methods across its almond, pistachio, and cattle operations? And is this an area where you see potential for innovation or outside partnership as proof of your broader sustainability and environmental stewardship commitments? The question is from Eli Simo.

So one of the things that I have grown to appreciate on the Ranch in my first year here is how interconnected the various businesses are and how important it is to take a long-term view of the Ranch and its stewardship. The Ranch really is a special place that requires active management. Our team has been doing this for nearly two hundred years. The vast majority of the Ranch is also part of the Tejon Ranch Conservancy, and that means we have numerous rules and restrictions that are designed to protect the Ranch and the wildlife that calls the Ranch home. And I can see some of that wildlife outside of my window as we speak. Your question gets to how we balance our farming business with our game management business. We take our responsibility to grow crops seriously and to do so in a sustainable manner, just as we are committed to safely operate a high-quality hunting program and one that respects the stewardship of our wildlife resources. We approach pesticide and wildlife management with an integrated framework. We emphasize prevention and habitat management over reliance on any single tool or chemical approach. And all of that means if the regulatory environment evolves, we are well positioned to adapt because that philosophy is already embedded in how we operate everything that we do here.

We have two questions from the same submitter. I am going to read them both before you respond, Matt. The first question is this: As of year-end, we have roughly $300,000,000 of invested capital in Mountain Village and Centennial combined. These assets generate no income, and between the associated water costs, land management, and continual development planning, they continue to impede our ability to generate acceptable returns on invested capital. How are you going to grow returns on invested capital to an acceptable level over the next few years while we continue to hold on to these assets? Even with no additional investment, these projects would need to go from generating losses to contributing over $20,000,000 of annual income simply to earn a minimal ROIC. The next question is: We would greatly appreciate hearing how the company will be able to significantly increase ROIC and earnings over the next five years while we continue to have $300,000,000 of capital tied up in these projects. Both questions are from Justin Lebo.

Thank you for your questions, Justin. As Nick said, let me take those together. They are important topics and I want to recognize that there are varying opinions on this. Let me share our perspective and build on what I have said and what I have written in the past. Our master-planned communities have been an important component of our overall business plan for several decades. You are right. They have required a significant capital investment. My goal is to move our communities into active implementation so that they can begin to generate cash flow and a return on our invested capital as you noted. Reality is that this is going to take a few more years. There are many examples of public companies who are operating in this master-planned community space from Florida to Texas to right here in California. Each of them has had to go through some degree of effort to complete their approvals, to complete their design, and to finish their infrastructure before they can start producing revenue. And all of that takes time and capital. We are no different, and we have consistently communicated that to the market. Fortunately, we have other businesses that also generate cash, and we hope to increase that while our community development ramps up. When you look at the other companies developing MPCs, you can see that there is significant cash flow that is generated, which achieves an attractive ROIC, and we would expect that our master-planned communities can generate significantly more than the $20,000,000 of annual income that you mentioned. Also, our business plan is to utilize third-party joint venture equity, so that should help a little bit too. On Mountain Village, we started the capital raising process. And on Centennial, first and foremost, our approach is to complete a reentitlement effort, which will result in significant value creation and preserve the value of our investment to date. As we mentioned in our press release, that project is advancing through the reentitlement process and will soon be entering a more public stage, and we expect to be in front of Los Angeles County later this year. Alright.

Next question: Have there ever been any outbound efforts or inbound inquiries to monetize the Mountain Village and Centennial, or the land held under the conservation agreement? What is the status, and what is your thinking about this? This is a question from David Ross.

Thanks, David. As we mentioned before and in my answer to the previous question, there have been outbound capital raising efforts in the past related to Mountain Village. As I mentioned in my letter last fall, and in my previous remarks today, we are in the process right now of capital raising for that project. As it relates to inbound inquiries, we are always happy to chat with anyone who has an interest in our business, including our land. And as I just previously mentioned, Centennial is in a little bit different position given its ongoing reentitlement status.

Alright. Our next question is: Given the large amount of investments the company has made in Mountain Village and Centennial over the last thirty years, would not the highest and best use of capital be to monetize these assets and focus on Grapevine and TRCC? How do you justify the alternative? This is a question from Paul Ross.

Hi, Paul. I do not look at Mountain Village and Centennial as being mutually exclusive with Grapevine and TRCC. The Commerce Center is already a huge focus for us, and I think you can see from our notable investment at Terra Vista we are committed, economically and strategically, to TRCC. We are also committed to expanding and developing out TRCC, and we plan to do so. The same goes with Grapevine. I have tried to state the case for Mountain Village and Centennial. What I would add is that with respect to any of the company’s assets, the ones I have spoken about or the ones I have not, we need to maintain flexibility so that we can adapt to market conditions and any opportunities that might arise, so that we are deploying our capital on a go-forward basis in the most advantageous way possible. I have tried to be clear that capital allocation is one of the most important things that we do here at Tejon Ranch Co.

Alright. Are you satisfied with the pacing and absorption of the apartments? Will you expand into phase two or bring in a partner? This is a question from Stuart Ross.

Stuart, I appreciate the question. Yes. We are pleased with our current lease-up at Terra Vista, and I am happy to say that we are now 70% leased. We are approaching our one-year anniversary, which is exciting. We brought on Greystar to manage the apartments, so we are benefiting from the horsepower of the nation’s largest multifamily owner and manager. They are leveraging their platform in Los Angeles and Northern Los Angeles County to expand into Kern County. We have also done a good job with programming and events and things like that, and our tenants really enjoy living there, and we hope to have them for years to come. On phase two, yes, the plan is to expand into our second phase. It really, for us, comes down to a capital allocation and prioritization decision. There are a number of ways that we can proceed. Fortunately, the amenity complex from phase one is already in place, so there are efficiencies that would come in developing that second phase.

Next question. As of the end of this year, the company has close to $600,000,000 of invested capital on its own balance sheet, while our joint ventures, fully owned commercial real estate assets, and Mineral Resources segments generate roughly $20,000,000 of annual recurring profits, or total annual net operating profit after taxes has never exceeded $3,500,000 in any of the past three years. To achieve a sustainable return on invested capital of just 5%, a reasonably low expectation for a shareholder, you would need to either grow total net operating profit to over $30,000,000 per year or remove a substantial amount of capital from the business. How will you be able to achieve this over the next few years? This is a question from David Spear.

Thanks, David. Let me see if I can provide some additional thoughts on top of what I already said earlier on this topic. You are absolutely right. Big picture, we need to take more of our company’s balance sheet, and we need to convert those assets into cash flow production. And this needs to happen as quickly as possible. And believe me, I feel the urgency. Beyond our master-planned communities, and I think this is what you were getting at, is we need to increase our cash flow from all of our non-MPC assets as well. So there are a number of ways that we can address this. First, we need to drive bottom-line improvements across our existing operating assets through active asset management. We are doing all sorts of things. We are renegotiating contracts. We are looking for lower-cost alternatives. We are finding better ways to be more efficient across our different segments. Second, we need to continue to advance our business plan, as I mentioned before, particularly at TRCC, where we have a consistent track record of producing high-yielding commercial real estate assets, particularly in the industrial sector. This is a priority for us, and we are working hard to move forward, and it is critical that we do this, and it is a critical way for us to increase our cash flow. Third, we need to think out of our commercial real estate box, and we need to leverage our key differentiating asset, and that is our 270,000 acres of land, and we need to monetize that land. So our team is hustling. You would be surprised at who is interested in utilizing our land. So overall, it is a balanced approach, and it is going to take a combination of singles and doubles and more than that to move the cash flow needle to where it needs to be, whether you are talking about EBITDA or NOPAT or net income. Okay? Our next question.

Given that the Tejon Ranch property is in proximity to Los Angeles, will the company consider holding an Investor Day at the company headquarters rather than in New York, as was done previously? This question is from Richard Rudgley.

Good question, Richard. I think you are onto something. I have some good news to report on this front, which we talked about a little bit before. There really is not any substitute to seeing Tejon Ranch firsthand. There is a lot to see, and even for the people who have toured over the past couple of years with us, I think there is reason to come out. As I mentioned earlier, we are pleased to share that our upcoming annual meeting will be on May 13. It is going to be right here at the Ranch. It will be a hybrid format, so shareholders can participate in person or remotely. We are going to have a lot of the same components that we did for last October’s Investor Day in New York. So we will be giving a presentation about the company. We will take your questions just as we did in New York. But since we are on-site, we will also be hosting property tours of the Ranch. Our goal is to make it immersive and informative, and it will be a great way for shareholders to interface with our management team while also getting a close-up look at some of our recent additions. And these would include our Terra Vista apartments and our new neighbors at the Hard Rock Tejon Casino, which ought to be packed no matter when it is that we have to go. And good for them, as I have mentioned before. We are going to be sending out details on the event shortly. We will be taking reservations for our tours, so stay tuned. And then as it applies to a dedicated Investor Day, we will start planning for that after our annual meeting. So your feedback, Richard, is noted and appreciated.

Next question. How much is estimated to be needed to fund the development of Centennial, as well as separately, Mountain Village? And will a shareholder rights offering be considered as a way to fund some of this to limit dilution of future profits? This is a question from Bob Edwards.

Thanks, Bob. We have not disclosed publicly the future all-in development cost of Mountain Village or Centennial. While I can appreciate the desire for you to see that, it is something that we would intend to share closer to groundbreaking. As with any large-scale master-planned community, construction is phased, and we recycle the cash flow on the front end to minimize how much equity is required. And as I noted earlier in the call, we would plan to use third-party joint venture equity as opposed to a rights offering to avoid dilution of our shareholders. Okay. Which is our eleventh and final question.

What level of confidence do you have that Los Angeles County will approve the Centennial development, and what timeline do you project for potential approval? This is a question from Steven Chats.

Hi, Steven. Good question. I have touched on Centennial some already, but let me answer your question with some more detail. First off, we are not going to prejudge any regulatory outcome, and we want to be respectful of the process before it proceeds. But I will say this: Our confidence in advancing Centennial to approval is high. It is important to note that our relationship with Los Angeles County remains genuinely strong; throughout this entire process we have built a long-standing partnership with the County, which has been extremely productive. The challenge at this stage is not really the County; it is the pace of any legal process that may unfold. And that is a distinction that is worth noting. So as it relates to Centennial, we have been working hard to prepare a comprehensive plan, which we believe addresses the court’s previously identified issues. What is encouraging is that the list of open issues continues to narrow. We have been through a lot on this project. It includes the Antelope Valley regional area planning process, which identified the site for economic development and growth. We worked on the General Plan. There has been new case law on fire protections, you name it. We have consistently taken the approach that we should show up, engage, and then move through the process just like we have successfully done at TRCC, at Mountain Village, and at Grapevine, which are all today fully entitled and fully litigated. This year at Centennial, we will be moving into a more public phase of environmental review, and as I mentioned before, we hope to be in front of Los Angeles County and the Board of Supervisors later this year. Centennial does shine a spotlight on something broader, and that is California’s need to modernize its environmental review framework. We are active in those conversations at the state level, and we think there is real momentum at last to enact positive reform. But we are not waiting for a policy miracle. We have demonstrated that we know how to get through a process. We have done it multiple times. And we are confident that we will get Centennial approved. So if that is all, I would like to thank everyone for providing questions. As I mentioned earlier, we also look forward to our upcoming annual meeting in May right here at the Ranch, and we hope you will join us here. So thank you very much, and have a good day.