Transcript: Farmland Partners Q1 2026 Earnings Conference Call

Farmland Partners (NYSE:FPI) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/. View the webcast at https://events.q4inc.com/attendee/507399842 Summary Farmland Partners reported a net income of $0.6 million for Q1 2026, slightly lower than the previous year. The company maintains a strong liquidity position with $114 million in untapped credit, focusing on deleveraging the balance sheet. Strategic disposition of volatile California property and redemption of CDSA preferred units were highlighted. Guidance for 2026 reflects a reduced AFFO range due to increased credit loss provisions. Management addressed impacts of geopolitical events on fertilizer and grain prices, with minimal direct effects on U.S. farmers. Full Transcript Janice (Operator) Thank you for standing by. My name is Janice and I will be your conference operator today. At this time I would like to welcome everyone to the Farmland Partners Inc. Q1 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask questions during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press STAR one again. Thank you and now I would like to turn the conference over to Luca Fabri, President and Chief Executive. Please go ahead. Luca Fabri (President and Chief Executive Officer) Thank you, Janice Good morning everybody and welcome to Farmland Partners First Quarter 2026 Earnings Conference Call and webcast. We truly appreciate your taking the time to join us for these calls because we see them as a very important opportunity to share with you our thinking and our strategy in a format less formal and more interactive than public filings and press releases. I will now turn the call over to our General Counsel, Christine Garrison for some customary preliminary remarks. Christine Garrison (General Counsel) Thank you, Luca, and thank you to everyone on the call. The press release announcing our first quarter earnings was distributed after market close yesterday. The supplemental package has been posted to the Investor Relations SECtion of our website under the subheader Events and Presentations. For those who listen to the recording of this presentation, we remind you that the remarks made herein are as of today April 30th and will not be updated subsequent to this call. During this call we will make forward looking statements, including statements related to the future performance of our portfolio, our identified and potential acquisitions and dispositions, impact of acquisitions, dispositions and financing activities, business development opportunities, as well as comments on our outlook for our business rents and the broader agricultural markets. We will also discuss certain non-GAAP financial measures including Net Operating Income and FFO, adjusted FFO, EBITDAre and Adjusted EBITDAre. Definitions of these non-GAAP measures, as well as reconciliations to the most comparable GAAP measures are included in the Company's press release announcing first quarter 2026 earnings, which is available on our website FarmlandPartners.com and is furnished as an exhibit to our current report on Form 8K dated April 29, 2026. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations and we advise listeners to review the risk factors discussed in our press release distributed yesterday and the documents we have filed with or furnished to the SEC. I would now like to turn the call to our executive Chairman, Paul Pittman. Paul Pittman (Executive Chairman) Paul thank you, Christine. It was all in all a pretty good quarter. I'm just going to address a couple of issues in my prepared comments and then I'll turn it over to Luca. So the first, the first issue is we've been getting some questions about what's the impact of the war in Iran on fertilizer, grain prices, farmer outlook, etc. So let me kind of hit a couple of key issues and if anybody has follow ups, we can deal with it in Q and A. The first is on fertilizer. Most of the US fertilizer does not come from the Middle east or from the Gulf generally. It frankly comes from the US and Canada. So all in all, you know, the US farmer, while prices may be higher for fertilizer, is sort of unaffected from a supply perspective on fertilizer. So, you know, I think if this went on for another year it would have some impact. But largely speaking, I haven't heard any reports, you know, about lack of fertilizer. What I have heard is some, some people changing crop decisions because cost of fertilizer is an issue which may lead to slightly less corn being produced as opposed to soybeans in. So that's really kind of on the fertilizer front. We have seen some grain price increases recently, particularly in wheat. You know, the US is not a huge worldwide producer of wheat compared to some other places in the world. But you have seen, you know, wheat is also very fertilizer intensive. You may see less wheat grown or less yield on wheat in other parts of the world because of the limitation on fertilizer production coming out of the Gulf. So we've seen some wheat price increases, some corn increases as price increases as well. I think that's at least as much due to drought in the US as it is to the war that's going on in Iran. The drought in the southeastern portion of the US which is a reasonably large wheat producer, is very, very significant. I read this morning it's actually the worst drought that there's may have ever been at this point in the southeast. So that'll lead to, you know, probably lead to somewhat increases in grain prices. And then the final question we've been getting is about how all that might impact our next cycle of rent negotiations. And the real answer is it's really too early to tell. This doesn't move through the, you know, things like the war in Iran does not move through the farm economy overnight, you know, certainly doesn't move through nearly as quickly as the up and down of the public markets. So, you know, this is going to be a kind of slow moving process. Higher grain prices obviously help us in our upcoming rent negotiations, which won't even start for another few months. And, you know, lower grain prices obviously hurt in those negotiations. But just to give context, hurt means we're largely flat and have a hard time getting increases. Good times when we can get, you know, modest increases in rents. The final issue I want to address before I turn over Luca is we did take some additional loan loss reserves. Not because we're, you know, directly concerned that we won't collect, but we are obviously making relatively high interest rate, high risk loans. And we just think it's prudent to continue to make some reserves under the eventuality that, you know, we didn't collect everything. Hopefully those things get reversed. But we put them in our financials, you know, in an effort to be cautious and conservative given the risk profile of our loan program. So that's with that, I'm going to turn it over to you, luca, and I'll be back at the Q and A. Luca Fabri (President and Chief Executive Officer) Thank you, Paul. This quarter was very much in line with expectations from an operational standpoint. The largest items of note we actually already addressed in the prior call, which is the completed redemption of our Series A preferred units. They were a significant overhang on the company in case we had to convert them into common at prices that we consider at a significant discount to our intrinsic value. But we had prepared for this event for a long time by shoring up our liquidity reserves and we were able to satisfy our Series A holders in cash. Despite that, we still have a very strong liquidity position. We have access to about $114 million in untapped liquidity on our lines of credit. So from a balance sheet perspective, our company is very, very strong at this point in time. On the portfolio side, we continue to marginally improve the overall quality of our portfolio. We disposed of another California property, which we consider a region subject to volatility and to risks, and therefore we welcome the reduction to that kind of exposure overall. In the global picture, if you set aside AI, this is a time of great uncertainty and volatility and so on and so forth. And in the agricultural sector in particular, there is quite a bit of trepidation about what's going to happen on the cost side, as Paul was outlining. But overall, farmland as an asset class continues to demonstrate its strength and its resilience, and we remain a very, very strong believer in the quality of the asset class. With that, I will turn the call over to our CFO Susan Landy for her overview of the company's financial performance. Susan Landy (Chief Financial Officer) Susan thank you, Luca. I'm going to cover a few items today, including the Summary of the three months ended March 31, 2026, a review of our capital structure, and updated guidance for 2026. I'll be referring to the supplemental package which is available in the Investor Relations section of our website under the subheader Events and Presentations. First, I will share a few financial metrics that appear on page 2. For the three months ended March 31, 2026, net income was 0.6 million or $0.01 per share available to common stockholders, which was lower than the same period for 2025. AFFO was 2.1 million versus 2.3 million for the same period of 2025, or $0.05 per weighted average share, which was the same as Q1 of 2025. Page 5 shows a more comprehensive look at the main drivers of the changes year over year. On the revenue side, we were positively impacted by higher interest income, higher due to a higher average balance on loans under the FBI loan program and financing Receivable, an increase in amortization of points, and higher proceeds from oil and gas royalties. These increases were partially offset by lower rental income due to asset dispositions, the absence of auction brokerage and third party management income due to the sale of Montgomery Water Authority in the fourth quarter quarter of 2025. Operating expenses are slightly higher over the prior year due to the increase in the allowance for credit losses related to loans under the FBI loan program. This increase was partially offset by decreases in property, operating and depreciation expenses which are due to asset dispositions and savings on corporate and travel expenses as a result of the sale of Montgomery Water Authority. On page 12 there are a few capital structure items to point out. We had undrawn capacity on lines of credit of approximately 114 million at the end of Q1 of 2026. Borrowings during the quarter were primarily used to redeem the remaining Series A preferred unit. We had rate resets on three MetLife loans during the quarter. The aggregate amount of these loans 19.3 million. The weighted average rate on these loans went from about 5.56 to 5.19. The MetLife term loan number seven is scheduled to reprice in June. Moving on to page 15, you'll see our updated outlook for 2026. The assumptions are listed at the bottom of the page. On the revenue side, changes from the February guidance include management fees and interest income, which is higher due to the amendment, and extensions of loans under the FBI loan program. On the expense side, changes from the February guidance include an increase in provision for credit loss allowance due to higher allowance on potential credit losses of loans. The forecasted range of AFFO is 13.2 million to 15.2 million or $0.30 to $0.35 per share, which is a decrease from the prior quarter on both the high and low end of the range. It summarizes where we stand today. We will keep you updated as we progress through the year. This wraps up our comments this morning. Thank you all for participating. Operator, you can now begin the Q and A session. Operator At this time I would like to remind everyone, in order to ask questions, press STAR, then the number one on your telephone keypad. We will pause for just a moment to compile a Q and A roster. Your first question is coming from the line of John Masoka with B. Riley Securities. Please go ahead. John Masoka (Equity Analyst) Good morning. Good morning, John. Let me just kind of. Okay. So maybe just to clarify on the loan reserve increase, is that being tied to the performance of the borrower, is there something specific you're seeing there? It just seems like, you know, it seems like it's an older loan. Right. It's not new loans necessarily creating more reserves. So just kind of curious why the change if it kind of seemed like there wasn't a major change in the Paul Pittman (Executive Chairman) outlook for kind of farm valuations? Yeah, we make a, we make loans to a variety of different folks. One of the lenders, one of the borrowers continues to have, you know, sort of some critical challenges in their overall business and you know, have, you know, negative news cycle, if you will. While we may feel secure about our specific loans, that negative news cycle always makes us nervous, which is really what's kind of driving the, you know, the reserves. When things get messy for a borrower with other lenders, even though it may not directly affect our collateral position, it just makes the whole situation, you know, any situation more complicated and you know, in a non sort of defined way increases risk. And so that that's what's driving those reserves. John Masoka (Equity Analyst) Are those issues cause at all about a certain crop type having, having headwinds or is it more just very specific to the borrower? Paul Pittman (Executive Chairman) No, it's very, it's very specific to that borrower. It's not a crop type issue. John Masoka (Equity Analyst) Okay. And in terms of the size of the outstanding loan program, I mean is any of that kind of Maintained size and kind of growing interest income tied to extensions on that particular, with that particular borrower or is it just kind of more broadly either extensions or new loans? Paul Pittman (Executive Chairman) Some of the extensions and some of the increased interest rates are related to that buyer or that borrower. John Masoka (Equity Analyst) Shifting gears maybe a little bit. Has the conflict in the Middle east and maybe some of the uncertainty around prices impacted the disposition market for transactions to the extent you're still really looking for more kind of sale opportunities within your portfolio if you're non core portfolio? Paul Pittman (Executive Chairman) No, no. What's going on in the Middle east doesn't have any kind of sort of, direct line of sight impact on the, on the transaction market for farmland. What does have an impact is the general economy, slash general ag economy. And you know, we're not in any real different situation than we were before hostilities in Iran started. We were in a somewhat challenging farm economy based on crop price versus versus costs of operation. That makes farmers less aggressive bidders on properties. And as we always talk about, the farmers are the most aggressive bidders and really sort of, set the price for properties. This is, again, this is not, you know, you don't have a pendulum here that swings very far. You know, good times are okay, 5% if you're really lucky, 7 or 8% increases in land values on a per annual annual basis. And bad times are, you know, only up 1 or 2% or maybe flat or maybe even down 1 or 2%. You know, I think it's, it's just incredibly important to always recognize that we're in a industry with a very slow, steady upward march in asset values due to scarcity and fundamentally due to food demand. Those are not things that, you know, all of us involved in public markets have a hard time grasping this. You know, you just don't get the kind of volatility swings we're used to seeing in asset values or crop price or anything else. It's very glacial in terms of, you know, with a, with a pretty strong upward trend. But, but it doesn't, just doesn't move quickly no matter what. John Masoka (Equity Analyst) Okay, and then you talked a little bit about kind of the impact or non impact of fertilizer prices. This is someone who's much closer to kind of the farm economy than most other people on the call. How impactful has the increase in diesel prices been? And is that something that can maybe be even more meaningful for farmers versus fertilizer or something where it's just a relatively small portion of the overall cost of running the farm? Paul Pittman (Executive Chairman) So it's a relatively Small portion is the answer. So a couple of things to grasp here. Number one, most farmers, most farmers of scale do some level of hedging or pre buying of their diesel fuel. You know, it's quite common for a farmer to have, you know, 10,000 gallons or multiple 10,000 gallon tanks of diesel on their farm. And they probably bought that, you know, sometime last winter, well before the Iranian hostilities began. So, you know, not a huge, huge impact. But obviously as they look forward on their budgets, you know, they'll run out of that fuel sometime this summer, have to replace it, you know, when they start trucking this fall, you know, diesel will affect trucking costs, you know, so it's, it's certainly not positive for their P and L. But again, it just doesn't come through very quickly because of the amount of kind of pre bought capacity on diesel. You know, round numbers. Diesel might be in the neighborhood of 10% of a farmer's crop budget, maybe, maybe a little less, you know, so it's just not, it's not a huge impact overall and probably less impactful than fertilizer cost on the, you know, the corn and wheat crops. Hope that helps. John Masoka (Equity Analyst) I appreciate all the color. I'll see the floor. Thank you very much. Operator There's no other questions in queue at this time. There's one that just came in. It's coming from the line of Susie Hyde with Raymond James. Please go ahead. Susie Hyde (Equity Analyst) Hey guys, sorry to sneak this one in. Just a quick follow up on the FBI loan program. It looks you have probably somewhere around 30 million coming in later this year. Are there any kind of priorities for capital allocation? We should be thinking about share repurchases, deleveraging the balance sheet a little bit further, extending new loans. Any kind of color you can provide would be very helpful. Thank you. Yeah, I would say that most of that capital, when it gets returned to us, is likely to go for continued deleveraging the balance sheet if we, you know, I think our stock is still a relative bargain, although not as big a bargain as it has been in times past. So, you know, you could see us buy stock back depending on stock price. But more likely deleveraging would be my current thinking. Luca or Susan, if you have a point of view on this, feel free to express it, even if it's frankly different than mine. Luca Fabri (President and Chief Executive Officer) Now, as we've discussed, that's our priority right now on capital allocation, is frankly delivering. But we remain, as Paul mentioned, we remain very, very opportunistic on the stock price in watching it and implementing potential stock repurchases. Susie Hyde (Equity Analyst) Got it. Thank you. That's all I had. Operator Your next question is coming from the line of John Masoka with B. Riley Securities. Please go ahead. John Masoka (Equity Analyst) Yeah, just a quick follow up one, any kind of outlook currently for what you would expect the rate to be on the repricing of the term loan number seven. Luca Fabri (President and Chief Executive Officer) I'm going to turn that over to Luca or Susan if you want to make a comment there. Susan Landy (Chief Financial Officer) At this point, we're expecting it to be fairly in line with what we did with the two that occurred in Q1. Luca Fabri (President and Chief Executive Officer) Yeah. I would expect to add on that that the expect the spread to be consistent. But of course your guess on rates is as good as mine. John Masoka (Equity Analyst) And does that lock in in June or is it locked in in advance of the actual change? Susan Landy (Chief Financial Officer) It locks in June, just before. Yeah. So it will be late May, early June. John Masoka (Equity Analyst) Okay, perfect. Thank you very much. That's it for me. Operator There's no questions in queue at this time. That concludes our Q and A session. I will now turn the conference back over to Luca Fabbri for closing remarks. Please go ahead. Luca Fabri (President and Chief Executive Officer) Thanks, Janice. We appreciate your interest in our company and look forward to updating you on our activities and results in the coming quarters. Have a great day, everybody. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.