Village Farms International Reports Significantly Improved Second Quarter

• Canadian Cannabis Retail Branded Sales Increase 18% Year-Over-Year (24% in Canadian Dollars), Significantly Outpacing Market Growth
• Canadian Cannabis Delivers Positive Net Income and 19^th Consecutive Quarter of Positive Adjusted EBITDA
• Canadian Cannabis Maintains Top-Three Market Share Position Nationally and Takes Over Number One Market Share Position in Quebec
• Canadian Cannabis Exports Increase 189% (217% in Canadian Dollars) Year-Over-Year
• US Cannabis Delivers Sequential Revenue Growth and Positive Net Income, Adjusted EBITDA and Cash Flow
• Fresh Produce Delivers Fourth Consecutive Quarter of Significant Sequential Improvement with Positive Adjusted EBITDA

VANCOUVER, British Columbia, Aug. 09, 2023 (GLOBE NEWSWIRE) -- Village Farms International, Inc. (“Village Farms” or the “Company”) ( VFF) today announced its financial results for the second quarter ended June 30, 2023. All figures are in U.S. dollars unless otherwise indicated.

Management Commentary

“The second quarter saw the continuation of strong growth in Retail Branded sales in our Canadian Cannabis business, steady performance in our U.S. Cannabis business, and marked improvement in our Fresh Produce business, all of which contributed to significantly improved financial results on both a year-over-year and sequential basis,” said Michael DeGiglio, Chief Executive Officer, Village Farms.

“Our Canadian Cannabis business delivered 24% year-over-year growth in Canadian dollar Retail Branded sales – all of which was generated organically – once again significantly outpacing expansion of the overall market. We maintained our top-three market share position nationally for the second quarter of 2023. Importantly, the business delivered these strong competitive results while generating positive net income and its 19^th consecutive quarter of positive adjusted EBITDA, which was up 97% in Canadian dollars year-over-year.”

Mr. DeGiglio continued, “The continuing standout performance of our Canadian Cannabis business is the result of a deliberate strategy and execution to win in Canada’s challenging market environment. In the last year-and-a-half we have launched seven new brands – the latest, Super Toast, last month – and more than 300 new SKUs. At the same time, we are realizing continuous production efficiencies to support future growth in Canada and internationally. Market share growth and leadership in Canada require continuous, consumer-focused innovation, and with the rock-solid foundation we have built, our undivided attention is on leveraging our leading position in dried flower and top brands to deliver new strains, products and formats that meet the evolving preferences of the cannabis market. Finally, we are using our extensive experience in Canada to aggressively pursue international opportunities, via both export and in-country operations, delivering more than a 200% year-over-year growth in Canadian dollar sales to international markets during the second quarter.”

“In our U.S. Cannabis business, the success of our innovative new products and prudent cost management have stabilized this business. Sales for the second quarter increased sequentially, while each of net income, adjusted EBITDA and cash flow were all positive. There is no company better positioned to benefit from favourable changes in CBD regulation than Balanced Health Botanicals (“BHB”) in what we continue to believe will be a high-growth, multi-billion-dollar market. Recent positive regulatory discussions are encouraging based on BHB’s competitive advantages: a stable, profitable business with a leading online presence, DSHEA compliance, internalized manufacturing capabilities, multiple published studies and a track record of safety.”

“Our Cannabis business performance this year is strong evidence of why we continue to believe, as we have since day one, that Village Farms can be the leader for the long-term in the global cannabis industry.”

Mr. DeGiglio added, “In our Fresh Produce business, we continue to benefit from the actions we have taken under our multi-part plan to return this business to profitability as the macro-environment also improves. The result was another quarter of substantial improvement in financial performance, highlighted by an $11.6 million increase in adjusted EBITDA to positive $1.3 million, which contributed to a $16.8 million improvement and positive adjusted EBITDA for the year to date. Looking ahead, we are strengthening our operations with investments in infrastructure and AI technology, while innovating with new higher margin varieties that have been well received by retailers and consumers alike. With our strong results thus far in 2023, we continue to track toward our goal of achieving positive adjusted EBITDA for the full year.”

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 2022 unless otherwise stated)

Consolidated

• Consolidated sales decreased (7%) year-over-year to $77.2 million from $82.9 million;
• Operating loss before tax improved to ($42 thousand) compared with an operating loss before tax of ($43.8 million);
• Consolidated net loss improved to ($1.4 million), or ($0.01) per share, compared with ($36.6 million), or ($0.41) per share; and,
• Consolidated adjusted EBITDA (a non-GAAP measure) improved to $4.5 million from negative ($10.3 million).

Canadian Cannabis (Pure Sunfarms and Rose LifeScience)

• Net sales decreased (6%) to $28.1 million (C$37.7 million) from $29.8 million (C$38.0 million) (a decrease of (1%) in Canadian dollars);
• Retail branded sales increased 24% (in Canadian dollars);
• International (export) sales increased 217% (in Canadian dollars);
• Gross margin was 38%;
• Net income was $1.2 million (C$1.7 million) compared with net income of $1.8 million (C$2.3 million); and,
• Adjusted EBITDA increased 78% to $4.8 million (C$6.7 million) from $2.7 million (C$3.4 million) (an increase of 97% on a constant currency basis).

U.S. Cannabis (Balanced Health Botanicals)

• Net sales were $5.3 million, with gross margin of 67%, net income of $0.2 million and adjusted EBITDA of $0.4 million.
  

Village Farms Fresh (Produce)

• Sales decreased (7%) to $43.8 million from $47.2 million;
• Net loss improved significantly to ($0.7 million) from ($9.4 million); and,
• Adjusted EBITDA improved significantly to $1.3 million from negative ($10.3 million).
  

Strategic Growth and Operational Highlights

Canadian Cannabis

• Maintained top-three producer market share ranking nationally for the second quarter of 2023¹;
• Became the number one producer for Quebec by market share for the second quarter of 2023¹;
• Was the number two ranked cannabis producer in the dried flower category nationally (held number one position prior to acquisition of market share by a competitor);
• Had the number one dried flower brands in the core and premium price categories (Pure Sunfarms and Soar, respectively) and the fastest growing dried flower brand in the value category (The Original Fraser Valley Weed Co.) in Canada’s largest provincial market, Ontario; and,
• Subsequent to quarter end, further expanded its brand portfolio with the addition of Super Toast, a brand focused on convenience and ready-to-go products.
  

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

Canadian Cannabis Performance Summary

¹ SG&A for the three and six months ended June 30, 2023 includes share-based compensation of C$375 (US$291) and C$850 (US$663), respectively, compared with C$338 (US$219) and C$804 (US$586), respectively, for the three and six months ended June 30, 2022.
² Adjusted EBITDA is not a recognized earnings measure and does not have a standard meaning prescribed in by GAAP.

Canadian Cannabis’ Percent of Sales by Channel