Village Farms Announces Q2 2024 Earnings

VANCOUVER, British Columbia and ORLANDO, Fla., Aug. 08, 2024 (GLOBE NEWSWIRE) — Village Farms International, Inc. (“Village Farms” or the “Company”) (NASDAQ: VFF) today reported its financial results for the second quarter ended June 30, 2024. All figures are in U.S. dollars unless otherwise indicated.

The Delta, Canada-based company recorded a loss of 21 cents per share, with adjusted losses, excluding asset impairment costs, at 10 cents per share. The reported results fell short of Wall Street’s expectations, with an average estimate of three analysts surveyed by Zacks Investment Research projecting a loss of 3 cents per share. Despite the loss, the greenhouse operator exceeded revenue expectations, posting $92.2 million compared to the anticipated $84.3 million from three analysts surveyed by Zacks.

Management Commentary

“We are driving strong momentum in our Canadian Cannabis business by building on our undisputed leadership in dried flower to further close in on the number one market share position nationally¹,” commented Michael DeGiglio, President and Chief Executive Officer, Village Farms International. “During the second quarter, we grew retail branded sales by 35%. Notably, we have solidified our number two national market share rank in pre-rolls and further strengthened share in key provinces¹. In 12 months, we have improved to number two in British Columbia (from four) and number four in Alberta (from eight) and have maintained our number one position in Ontario and number two position in Quebec¹.”

“In our non-branded channel, we continued to take advantage of a favourable wholesale market to further reduce non-brand-spec inventory, which again impacted gross margin but drives cash flow. It was also another solid quarter for export sales as we remain on track to deliver year-over-year growth this year. We expect production to start in just a few months in the Netherlands and we look forward to our first sales in the first quarter of next year.”

“In our fresh produce business, during the quarter we expanded third-party supply to strategically support the long-term growth and health of our produce business. Our cost management and efficiency initiatives drove a year-to-date improvement in gross profit compared to last year, offsetting second quarter margin pressure due to softer than expected market pricing.”

“Looking ahead, our steady execution is driving sustained growth in our Canadian Cannabis business, with gains across our brands, form factors and geographies, as we look to benefit from multiple, near-term growth opportunities internationally. In Fresh Produce, we expect continued yield-focused initiatives, cost improvements and the current recovery in market pricing should generate significantly improved performance in both the third and fourth quarters of this year and position the business well for the future.”

1. Based on estimated retail sales from HiFyre, other third parties and provincial boards.

Second Quarter Financial Highlights
(All comparable periods are for the second quarter of 2023 unless otherwise stated)

Consolidated

• Consolidated sales increased 19% year-over-year to $92.1 million from $77.2 million;
• Consolidated net loss was ($23.5 million), or ($0.21) per share, compared with ($1.4 million), or ($0.01) per share;
• Excluding the ($11.9 million) goodwill and intangible asset impairment related to U.S. Cannabis, adjusted net loss was ($11.6 million);
• Consolidated adjusted EBITDA (a non-GAAP measure) was ($3.6 million) from $4.5 million; and,
• Consolidated cash flow from operations improved to $5.7 million from cash used in operations of $1.6 million.

Canadian Cannabis (Pure Sunfarms and Rose LifeScience)

• Net sales increased 45% to $40.7 million (C$55.8 million) from $28.1 million (C$37.7 million);
• Retail branded sales increased 38%, international (export) sales increased 11%, non-branded (wholesale) sales increased 190% (in Canadian dollars);
• Gross margin was 26% compared with 38%; (in Canadian dollars). This quarter’s gross margin was reduced by sales of non-brand-spec inventory in the non-branded channel:
• Net income increased to $1.4 million (C$1.9 million) from $1.2 million (C$1.7 million);
• Adjusted EBITDA was $4.8 million (C$6.6 million) compared with $4.8 million (C$6.7 million); and,
• Cash flow from operations increased 38% to $5.4 million (C$7.2 million) from $3.1 million (C$5.2 million).

U.S. Cannabis (Balanced Health Botanicals)

• Net sales were $4.3 million compared with $5.3 million;
• Gross margin was 61% compared with 67%;
• Net loss was ($12.3 million) compared with a net income of $0.2 million;
• Excluding the ($11.9 million) impairment of goodwill and intangible assets, adjusted net loss was ($0.4 million); and,
• Adjusted EBITDA was ($0.2 million) compared with $0.4 million.

Village Farms Fresh (Produce)

• Sales increased 7% to $47.1 million from $43.8 million;
• Net loss was ($8.3 million) compared with a net loss of ($0.7 million);
• Adjusted EBITDA was ($6.4 million) compared with $1.3 million, with last year’s quarter benefitting from a favourable legal settlement of $5.6 million; and,
• Year-to-date, gross loss improved to ($854) from ($2,146), benefitting from cost management and efficiency initiatives.

Strategic Growth and Operational Highlights

Canadian Cannabis

• Further expanded its number two national market share position¹, further narrowing the gap to the number one position and achieving our highest national market share position to date;
• Was the only LP among the top five to expand its national market share position sequentially¹;
• Further expanded its number one national market share position in dried flower¹;
• Expanded its number two national market share position in the pre-roll category¹;
• Continued to achieve steady market share gains in British Columbia (moving up two positions to be tied for the number two position) and Alberta, moving up four positions to the number four position, in the last year¹;
• The Supertoast brand was the third fastest growing brand nationally for the first half of 2024 with 20% market share in the milled category nationally, despite being sold in only four provinces²;
• Village Farms’ products held the number one position in the flower category during both the first and second quarters of 2024²;
• Launched Hi-Def Pre-Rolls, a first-of-its-kind pre-roll, featuring pure ground flower optimized for high potency, with THC content between 36 to 44%, with no concentrates, infusions or kief.

1.For the second quarter of 2024. Based on estimated retail sales from HiFyre, other third parties and provincial boards.
2.Based on estimated retail sales from HiFyre, other third parties and provincial boards.

International Cannabis

• Continued the build-out of the Company’s first indoor cannabis production facility in Drachten, The Netherlands for the Dutch recreational cannabis program, with production on track to begin in the fourth quarter of 2024. The Dutch Program recently completed its start-up phase, expanded the number of municipalities in which regulated cannabis can be sold in “coffee shops” from two to ten.

U.S. Cannabis

• Completed internalization of gummy production, which will support consistency of supply and gross profit;
• Balanced Health’s CBDistillery reported study results demonstrating its shhh+ Distilled THC + CBN Deep Sleep Gummies help users to achieve better-quality rest, fall back to sleep during the night and wake up feeling refreshed; and,
• The Company’s application for a Texas medicinal marijuana license remains pending review by the Department of Public Services. If awarded, the Company plans to work with its listing authority to structure an acceptable ownership structure.

VF Fresh (Produce)

• Continued improvement in our Texas greenhouse operations resulting in a year-over-year decrease in cost per pound due to ongoing labor efficiencies and increased yields;
• Entered into a strategic agreement to expand third-party supply;
• Implementing new cultivation technologies, including artificial intelligence, to drive further operational improvements;
• Amended and extended the credit agreement for the Company’s C$10 million revolving line with a Canadian chartered bank. Amendments include expansion of the Company’s borrowing options to provide additional financial flexibility and the maturity date was extended from May 24, 2024 to May 24, 2027; and,
• The Company has an ongoing sale process for its Monahans (Permian Basin, Texas) greenhouse facility. It is also evaluating other uses for the site and facility, some of which are outside its historical produce business.

Village Farms Clean Energy

• In April 2024, the Delta, British Columbia Renewable Natural Gas Project began operations, which commenced the Company’s royalty revenue stream and began contributing incremental profit to the Company.

Corporate

• Increased ownership of Rose by 10% to hold an 80% interest, with the purchase being immediately accretive to adjusted EBITDA and net income;
• Appointed finance and operations veteran, Carolyn Hauger, to the Board of Directors; and,
• Approved the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2024.