Village Farms International Reports Strong Third Quarter Results, Highlighted by Positive Cash Generation

Village Farms International, Inc. announced its financial results for the third quarter ended September 30, 2023. All figures are in U.S. dollars unless otherwise indicated.

“We delivered continued strong improvement in our financial results in the third quarter, building on the first half of the year,” said Michael DeGiglio, President and Chief Executive Officer, Village Farms. “Solid, profitable performance from each of our Canadian and U.S. Cannabis businesses, together with another quarter of significant year-over-year improvement in our Fresh Produce operations, is proving out our strategic decision to build upon our unmatched expertise in controlled environmental agriculture to deliver positive cash flow and profitability as we pursue growth in each of our businesses. The combined performances of our businesses in the third quarter were reflected in positive consolidated adjusted EBITDA, as well as consolidated cash generation, with positive contributions from each of our operating segments.”

“Our leadership in the Canadian Cannabis industry is undisputed as we delivered another quarter of positive cash flow and adjusted EBITDA, while continuing to rank among the largest Licensed Producers nationally¹,” continued Mr. DeGiglio. “Notably, year-to-date Canadian dollar adjusted EBITDA has increased 37%, driven by our focus on operational excellence. Our competitive advantage in cultivation is enabling innovative investment in other critical functions, such as commercialization, to generate sustainable, profitable market share expansion. We are seeing encouraging results as we evolve and improve “newness” at the shelf and continuously focus on quality, which is resonating with consumers and resulted in a return to the number two market share position nationally in October¹ from number four in July¹.”

“Our stabilized U.S. Cannabis business generated positive net income, adjusted EBITDA and cash flow,” added Mr. DeGiglio. “Building on the strength of our product launches in the Synergy+ line of products, we recently launched a new visual brand for CBDistillery, including a revamped web site, focused on the wellness attributes of our products.”

“Our Fresh Produce business is progressing towards our goal of a return to profitability. We delivered another quarter of positive adjusted EBITDA and a $22.5 million year-over-year improvement year-to-date to positive $1.1 million. We also generated positive cash flow and remain firmly on track toward our goal of achieving positive adjusted EBITDA for this year. With the continued progress we have made in managing the Brown Rugose virus, including the implementation of virus-tolerant, and, increasingly, virus resistant strains, as well as investments in new technology, the Fresh Produce business is positioned for continued improvement next year.”

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

Third Quarter Financial Highlights
(All comparable periods are for the third quarter of 2022 unless otherwise stated)
Consolidated

• Consolidated sales decreased (2%) year-over-year to $69.5 million from $71.1 million;
• Operating loss before tax and loss from equity method investments improved to ($2.9 million) from an operating loss before tax of ($12.3 million);
• Consolidated net loss improved to ($1.3 million), or ($0.01) per share, compared with ($8.7 million), or ($0.10) per share;
• Consolidated adjusted EBITDA (a non-GAAP measure)¹ improved to $3.2 million from negative ($2.2 million); and,
• Consolidated cash flow improved to $8.8 million compared with cash used of ($9.8 million).

^{1. For a reconciliation of Adjusted EBITDA to net (loss) income, see “Presentation of Financial Results—Reconciliation of Net Income to Adjusted EBITDA” below.}

Canadian Cannabis (Pure Sunfarms and Rose LifeScience)

• Net sales decreased (5%) to $28.8 million (C$38.7 million) from $30.4 million (C$39.8 million) (a decrease of (3%) in Canadian dollars);
• Retail branded sales decreased (3%) (in Canadian dollars);
• International (export) sales decreased (15%) (in Canadian dollars);
• Gross margin was 35% compared with 27%; (in Canadian dollars);
• Net income increased to $2.9 million (C$3.8 million) from net income of $0.2 million (C$0.2 million);
• Adjusted EBITDA was $4.6 million (C$6.2 million) compared with $5.4 million (C$6.7 million); and,
• Cash flow improved to $3.8 million (C$5.1 million) compared with $0.4 million (C$1.3 million).

U.S. Cannabis (Balanced Health Botanicals)

• Net sales were $5.0 million compared with $5.1 million;
• Gross margin was 64% compared with 69%;
• Net income improved to $79,000 from a net loss of ($0.3 million);
• Adjusted EBITDA increased to $0.2 million from $10,000; and,
• Cash flow was $0.4 million compared with $0.1 million.

Strategic Growth and Operational Highlights

Canadian Cannabis

• Maintained market share leadership, with recently launched brands and geographies increasingly contributing:
  • A top-three Licensed Producer nationally for 2023 year to date¹, returning to the number two position in October¹ and, in Quebec, the number two Licensed Producer and fastest growing Licensed Producer for the third quarter of 2023¹, with market share expanding from the second quarter of 2023¹;
  • A top-two ranked Licensed Producer in the dried flower category nationally in the third quarter of 2023 (held number one position prior to acquisition of market share by a competitor) ¹;
  • Pure Sunfarms was the top-selling brand of dried flower in the core price category nationally for the year to date¹;
  • The Original Fraser Valley Weed Co. was the fastest growing dried flower brand in the value category in Canada’s largest provincial market, Ontario, for the third quarter of 2023¹;
  • Shortly after its launch, the Soar brand rapidly became a top three premium dried flower cannabis brand in Canada¹. Much of the brand’s success to date can be credited to Pineapple God, one of Soar’s exclusive cultivars. In the third quarter of 2023, this cultivar was one of the best-selling premium dried flower products, nationally;
• Launched new form factors to address the evolving preferences of Canadian consumers, including:
  • The Super Toast brand, which is a line of ready to smoke products intended for consumers who are looking for easy ways to select and experience fresh and potent cannabis; and,
  • An entirely new product line, the High THC, 1g Vape offering, featuring new hardware and formulations to maximize flavour, potency and consumer experience. The new 1g cartridges are optimized to deliver flavour and balanced vaporization, allowing consumers to enjoy their vape from start to finish; and,

• In September, Village Farms was named the Best Canadian Cannabis Company for the second consecutive year at the 2023 Benzinga Cannabis Awards.

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

U.S. Cannabis

• Balanced Health Botanical’s CBDistillery recently unveiled a new visual brand featuring the same great ingredients and benefits. Products can now be found in five different categories, each with their own wellness benefit; and,
• The Company filed an application for a Texas Medicinal license in late April 2023. The Company is hopeful that its application will be awarded the highest or one of the highest marks, putting it in a good position, should the State of Texas award additional medicinal cannabis licenses. If awarded, the Company plans to work with its listing authority to structure an acceptable ownership structure.