Village Farms Earnings + Call Notes
Canadian standout with a global reach.
$92.2M Revs; est. $84.3M
($3.56M) AEBITDA; est. $2.9M
$9.2M GP; est. $16.2M
10% GM; est. 19.2%
($ 23.6M) NI; est. ($2.3M)
($0.21 ) EPS; est. ($0.02)
“We are driving strong momentum in our CAD Cannabis business by building on our undisputed leadership in dried flower to further close in on the number one market share position nationally. In Q2, we grew retail branded sales by 35% and solidified our number two national market share rank in pre-rolls. In 12 months, we improved to number two in British Columbia (vs. 4) and number four in Alberta (vs. 8) and maintained our #1 position in Ontario and #2 position in Quebec.”
“Looking ahead, steady execution is driving sustained growth in our CAD 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 pricing should generate significantly improved performance in the third and fourth quarters of this year and position the business well for the future.”
Call Notes
Record consolidated sales in the quarter.
Canadian cannabis had record high sales record.
Produce had 2nd highest quarter of last 5 years.
Canadian cannabis growth is broad based.
Net sales grew 45% YoY, w/o acquisitions.
Branded retail sales grew 35%.
Once again profitable, w/ C$7.2m CFFO.
Fastest growing market share of top 5 LPs in Q1.
In Q2, only producer to grow share in Canada.
Less than 2% from #1 ranking in Canada.
Importantly, growth is diversified across leading brands, multiple segments, form factors, and geographies.
Fastest growing producer in pre-rolls YTD.
In last 12mo, invested in innovation + pricing + assortment.
Expanded pre-roll share from under 3% to now nearly 8% of the market.
Hi-Def pre-rolls an innovation in the category.
SuperToast flower brand continues outstanding performance.
Milled category very competitive.
Have 20% share of milled category nationally, 25% in ON.
^ all despite launching just 1 year ago.
In May, SuperToast took over as top milled SKU in ON.
In Premium segment, SOAR brand continues to excel.
Pinnaeple God is 4th best selling premium SKU nationally.
Have #1 flower products nationally in Q1 + Q2.
Launched 3 new cultivators in ‘Trials’ small batch offerings in BC.
New Kush God strain under PSF has added meaningfully to market share, outstripping demand.
Resonating across many consumer preferences in Canada.
#1 and #2 in ON + QC.
Now #2 in BC (up 2 positions YoY) and #4 in AB (up 4 positions YoY).
Growing intl export business.
Solid contributions from GRMY + UK in Q2.
Both markets ramping / larger proportionate of export sales.
In GRMY, seeing higher demand following regulatory change in April.
Sales to AUS expanding.
Total AUS sales grew 4x vs. last year.
Flower strategy successful in Canada, now continuing internationally.
Months away from production in the Netherlands.
First sales Q1 ’25.
GM in first 6mo improved by over 150bps, despite pricing challenges.
For produce, added more partner sales in the quarter.
Higher yields in TX operations.
Expanding asset light growth strategy in produce to supplement cannabis plans.
Invested in fresh produce, has top value as a top 5 producer marketer in N/A.
Excellence as operators stems from VFF deep cultivation expertise.
Sales grew 19% YoY to $92.1m.
Strong top line growth in CDN Canna + produce.
Of net loss, $12m is non-cash impairment charge on US canna business + $8.3m driven by produce business poor market pricing.
Q2 produce up 7% YoY to $47m, 2nd best quarter in last 5years.
Driven by higher volumes at TX + third party volumes, partially offset by pricing.
Pricing in tomatoes dramatically lower in 2H of the quarter.
Prices in May/June were 31% lower than Jan/April period.
May/June pricing usually only 20% lower.
Ongoing focus on cost efficiencies / yield expansion.
On own produce facilities, w/o incremental third-party supply, would have been close to break-even GM on first 6mo of the year.
Look at produce on a full year basis.
CDN canna record retail sales + strong quarter for non-branded sales.
C$7.2m OPCF; helps self-fund Netherland facility + increase ownership of ROSE by 10% during the quarter.
$41.8m canna retail sales.
$11.3m B2B sales.
Taking advantage of B2B channel as long as it makes sense / doesn’t detract from other channels.
$2.1m export, up 11% YoY.
1H’24 strongest period of international sales to date for the business.
On track to deliver strong YoY growth this year.
Q2 aEBITDA for CDN Canna of $6.6m, in line w/ last year.
Significant excise tax in Canada.
Excise tax of C$27m, or C$54m last 6mo.
Largest single expenditure for cannabis business.
Will continue to see CCAA continue in Canadian canna industry until tax changes happen.
Unpaid excise taxes in many operators.
Supply drying up due to burdensome excise tax + asset light model shift.
$4.3m US CBD business.
Impacted by proliferation of unregulated hemp based products.
In response, a growing number of states are restricting hemp products.
^ has impacted VFF responsibly produced products.
Completed internalization of gummies for US CBD business.
Underway w/ multiple other initiatives in the business.
$5.7m CFFO vs. ($5.2m) YoY period.
Primary driver was reduction of cannabis inventory.
Finished goods inventory is down 30% vs. end of last year.
$44m debt, split equally between May ’27 debt and Feb ’26 debt.
Amended $10m revolving line during the quarter.
$4m current balance, May ’27 maturity.
$15m line of credit currently not drawn on.
In early stages of replicating canna strategy in emerging markets.
Proud to participate in Germany, Netherlands, UK, Australia + other markets as they open.
Ready to replicate successes in the U.S. when allowed.
^ frustrated by lack of regulatory direction in the U.S.
^ compounded by an environment of non-enforcement.
^ creates a race to the bottom and leaves the industry in limbo.
Outsized gains driven by high quality product + operational performance + genetics + execution in Canada.
Outsold expectations on some better selling strains in particular.
30-40% CDN canna GM target continues.
Actively analyzing current SKUs in market.
34% of volumes are in value price segment.
As a clear leader, our job is to work very carefully on profitability in that segment.
Looking at CAPEX in all aspects of the company, including marketing spend.
Improved significantly in volumes / efficiency in TX operations.
QoQ costs misleading.
TX crops start in Sept and end in June.
6mo GM would have been breakeven for produce business.
Will see improved 2H vs. Q2.
At retail, price per gram declines are stabilizing / flatlining.
B2B business participation is a leading indicator.
Move to asset light from Canadian players.
^ helping to take out excess biomass that was dumped into the market.
For those who can export, another market that is drawing down on Canadian supply.
Expecting good EBITDA in 2H but not enough to get back to breakeven for the year.
Think can produce outstanding quality in Netherlands.
^ market that isn’t typically found there.
What’s produced there / comes in from adjacent countries has never been that great.
About $1b market in Netherlands.
Not a lot of operators participating, only 10 license holders.
Capacity of 10 licenses is not high enough to fulfill the 85 initial coffee shops.
No tax in Netherlands.
Prices are far superior to anything seen in CDN + US.
^ Gov wants to keep it that way.
Will generate revenues in Q1 ’25.
Active in expanding cannabis cultivation capacity in Canada.
Only converted 50% of Delta 2, actively looking at converting the other 50%.
In Canada, innovation, product quality, and product mix.
^ should drive sustained / growing market share.
VFF continuing to drive towards #1 share.
Not sustaining share, increasing share.
Only one of the top 5 operators that has driven share.
Have to have products that resonate w/ the consumer.
^ great quality every day, and product innovation.
Could see CDN drive to $7-8b at retail level over next several years.
White space in Canada that VFF isn’t playing in.
Paying attention to that closely.
Will talk more on next call.
Want to be #1-#2 in each market before going onto something new.
First executed in flower, then pre-rolls.
Didn’t want to expand internationally until a top tier player in Canada from a long term sustainable basis, true still today.
Focused on vapes continuing going forward.
Don’t want to be all things, want to be #1-#2 position.
Expect natural price compression in EU markets over time.
In Germany, seeing increased inquiries / revenues as that market opens.
Went through recertification of EU GMP for Canadian greenhouse, passed that.
In 2nd term w/ German municipality that sponsored EU GMP.
All facilities are in production, minus Permian Basin greenhouse, which is up for sale.
/end
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