Village Farms International Reports Third Quarter 2022 Financial Results
- Village Farms’ Canadian Cannabis Business Becomes #3 Producer in Canada Across All Product Categories for Third Quarter and #1 in October1
- Canadian Cannabis Retail Branded Sales Increased 46% Year-Over-Year and 26% Sequentially
- Quebec Business, Rose LifeScience, Becomes #2 LP in Quebec in October2
- Canadian Cannabis Launches Soar, Its Third Major New Brand This Year
- Completion of Continuance into the Province of Ontario
VANCOUVER, BC, Nov. 9, 2022 /PRNewswire/ – Village Farms International, Inc. (“Village Farms” or the “Company”) (NASDAQ: VFF) (TSX: VFF) today announced its financial results for the third quarter ended September 30, 2022. All figures are in U.S. dollars unless otherwise indicated.
Management Commentary
The strong performance in our Canadian Cannabis business in the third quarter reflects the successful execution of our growth strategy and investments as we achieved another sales record, outstanding growth in retail sales, and our 16th consecutive quarter of positive adjusted EBITDA.
Michael DeGiglio, Chief Executive Officer, Village Farms
Our growth in retail branded sales continues to be driven by multiple factors. Pure Sunfarms, which remains the best-selling dried flower-brand nationwide, grew market share with consumer-preferred innovations. We launched the first SKUs in our new brand targeting the value segment of the market, The Original Fraser Valley Weed Co., which has already contributed to expanding our number one dried flower market share positions in BC and Alberta.
He added, “In Quebec, Rose LifeScience became the number two selling licensed producer in October, less than one year after our majority acquisition, as it launched new products across its brands, including the highly successful Promenade brand in collaboration with Pure Sunfarms. All of this contributed to Village Farms becoming the number one selling cannabis company in Canada across all product categories in October.”
“As our spending on major brand launches subsides and with completion of our investment in 100% hang-dry product, we remain focused on prudent cost management to further enhance profitability over the near- and long-terms and invest in future growth. We continue to refine our operating model to further expand our leading market share and profitability status. We expect to contribute to industry growth through consumer-led innovation like our new Soar brand being unveiled this week.”
“In our U.S. Cannabis business, Balanced Health Botanicals continues to perform well despite the challenging consumer environment. We remain focused on cultivating our customer base and managing our costs as we pursue new sales opportunities and introduce new products such as the recently launched second product in the Synergy+ line, Deep Sleep Synergy+.”
“Internationally, we continue to steadily move forward on multiple opportunities in select additional markets. Sales to Australia have accelerated through this year spurred by market growth and consumer brand affinity, with third quarter sales more than tripling from the first quarter of this year. We continue to progress towards commencing shipments to Israel and Germany. And in the Netherlands, where we hold just one of ten cultivation licenses granted under the Closed Cannabis Supply Chain Experiment in that country, we are advancing our plan to directly participate in what is expected to be the first major European market to permit large-scale cannabis cultivation and distribution for recreational purposes.”
“Our Fresh Produce business continues to be impacted by a number of significant pressures including input cost inflation, adequate supply of product, which has challenged our ability to pass on higher costs to customers, and the ongoing challenges of the Brown Rugose tomato virus that is impacting growers globally. We are encouraged by the progress of the operational review we initiated late summer of this year with the goal of optimizing the profitability of this business. We believe strongly in the potential of these operations, especially for their optionality and considerably greater value as part of our cannabis strategy in a national or Texas state legal cannabis market in which we can participate.”
1. Based on estimated retail sales from HiFyre and Weed Crawler, as of October 31, 2022.
2. Based on estimated retail sales from Weed Crawler, as of October 31, 2022.
THIRD QUARTER 2022 FINANCIAL HIGHLIGHTS
(All comparable periods are for the third quarter of 2021)
Consolidated
- Consolidated sales were $71.1 million, a decrease of (2)% from $72.4 million; on a constant currency basis, consolidated sales were essentially unchanged from the previous year;
- Consolidated net loss was ($8.7 million), or ($0.10) per share compared with net income of $0.8 million), or $0.01 per share; and,
- Consolidated adjusted EBITDA was negative ($2.2 million) compared with positive adjusted EBITDA of $6.9 million.
Cannabis Segment
- Total Cannabis segment net sales increased 14% year-over-year to $35.5 million, representing 50% of total Village Farms sales; and
- Total Cannabis segment adjusted EBITDA was $5.4 million compared with $9.4 million.
Canadian Cannabis (Pure Sunfarms and Rose LifeScience)
- Canadian Cannabis net sales increased 15% to a record $30.4 million (C$38.0 million), with a gross margin of 32% (within the Company’s stated target range) and adjusted EBITDA of $5.4 million (C$6.7 million); and,
- Canadian Cannabis retail branded sales increased 46% year-over-year and 26% sequentially.
U.S. Cannabis (Balanced Health Botanicals and VF Hemp)
- U.S. Cannabis net sales were $5.1 million, with a gross margin of 69% and adjusted EBITDA of nil compared with net sales of $3.9 million, with a gross margin of 68% and adjusted EBITDA of $0.7 million. (Comparative results for the third quarter of 2021 include the contribution of Balance Health for the period August 16 through September 30 following the acquisition of Balanced Health Botanicals by Village Farms.)
Village Farms Fresh (Produce)
- Sales were $35.5 million compared with $41.0, primarily due to lower volumes (including a lower percentage of higher priced specialty tomatoes), and adjusted EBITDA was negative ($4.9 million) compared with $1.3 million.
STRATEGIC GROWTH AND OPERATIONAL HIGHLIGHTS
Canadian Cannabis
- Total Canadian Cannabis market share grew steadily throughout the quarter and continued in October, marking four straight months of expansion, with Village Farms becoming the third best-selling cannabis producer in Canada across all product categories for the third quarter and was the top-selling cannabis producer in Canada across all product categories in October1;
- Pure Sunfarms maintained its number one brand position for dried flower in Canada and continued to expand its market share in key provinces like Ontario, Alberta and British Columbia;
- Rose LifeScience expanded market share of its brands in Quebec becoming the number two licensed producer in Quebec in October[2], driven by the Promenade, Pure Laine Cannabis and Tam Tams brands;
- The roll-out of our second BC-grown brand, The Original Fraser Valley Weed Co., focused on the value segment of the market, contributed to market share expansion in BC and Alberta, and was recently launched in Ontario;
- The Pure Sunfarms brand expanded into the provinces and territories of Yukon, Northwest Territories, New Brunswick, Newfoundland and Labrador while Rose LifeScience launched select brands in the provinces and territories of Yukon, Northwest Territories and New Brunswick; and,
- Pure Sunfarms placed number 17 of 430 companies, and was ranked the fastest growing cannabis company, by The Globe and Mail Report on Business’ 2022 ranking of Canada’s Top Growing Companies.
U.S. Cannabis
- Balanced Health Botanicals launched the second product in its Synergy+ line. Deep Sleep Synergy+ is positioned to help customers fall asleep, and stay asleep, using plant-based ingredients to promote a refreshing slumber.
International Cannabis
- Sales to Australia during the third quarter more than tripled from the first quarter of 2022 by both volume and dollars.
3. Based on estimated retail sales from HiFyre and Weed Crawler, as of October 31, 2022.
4. Based on estimated retail sales from Weed Crawler, as of October 31, 2022.
CANADIAN CANNABIS FINANCIAL PERFORMANCE SUMMARY
Canadian Cannabis’ Percent of Sales by Product Group1
PRESENTATION OF FINANCIAL RESULTS
The Company’s financial statements for the three and nine months ended September 30, 2022, as well as the comparative periods for 2021, have been prepared and presented under United States Generally Accepted Accounting Principles (“GAAP”). Village Farms acquired 100% of Balanced Health Botanicals on August 16, 2021 and their operating results are consolidated in our Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2022 as well as for August 16, 2021 through September 30, 2021 for the three and nine months ended September 30, 2021. The Company acquired 70% of Rose LifeScience on November 15, 2021 and their results are presented in the operations of our consolidated wholly-owned subsidiaries and the minority interest is presented in Net Income (Loss) Attributable to Non-controlling Interests, Net of Tax for the three and nine months ended September 30, 2022.
RESULTS OF OPERATIONS
(In thousands of U.S. dollars, except per share amounts, and unless otherwise noted)
Consolidated Financial Performance
We caution that our results of operations for the three and nine months ended September 30, 2022 and 2021 may not be indicative of our future performance, particularly in light of the ongoing COVID-19 pandemic. We are currently unable to assess the ultimate impact of the COVID-19 pandemic on our business and our results of operations for future periods.
SEGMENTED RESULTS OF OPERATIONS
(In thousands of U.S. dollars, except per share amounts, and unless otherwise noted)
A detailed discussion of our consolidated and segment results can be found in our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2022 (the “Quarterly Report”), which will be filed with the Securities and Exchange Commission and will be available at www.sec.gov, and will also be filed in Canada on SEDAR (www.sedar.com). In addition, the Quarterly Report can be found on the Village Farms website under Financial Reports (https://villagefarms.com/financial-reports/) within the Investors section.
Reconciliation of Net Income to Adjusted EBITDA
The following table reflects a reconciliation of net income to Adjusted EBITDA, as presented by the Company:
This press release is intended to be read in conjunction with the Company’s Consolidated Financial Statements (“Financial Statements”) and Management’s Discussion & Analysis (“MD&A”) for the three and nine months ended September 30, 2022 in the Quarterly Report, which will be filed on (www.sec.gov/edgar.shtml) and SEDAR (www.sedar.com) and will be available at www.villagefarms.com.
Completion of Continuance into the Province of Ontario
On November 9, 2022, the Company completed its continuance (the “Continuance”) from the Canada Business Corporations Act into the Province of Ontario under the Business Corporations Act (Ontario) (the “OBCA”). The Continuance was approved by the Company’s shareholders at the Company’s annual and special meeting of shareholders held on May 24, 2022. As a result of the Continuance, the Company is now governed by the OBCA.
Conference Call
Village Farms’ management team will host a conference call today, Wednesday, November 9, 2022, at 8:30 a.m. ET to discuss its financial results. Participants can access the conference call by telephone by dialing (416) 764-8659 or (888) 664-6392, or via the Internet at: https://app.webinar.net/Q8rLNPLNepq. The live question and answer session will be limited to analysts; however, others are invited to submit their questions ahead of the conference call via email at investorrelations@villagefarms.com. Management will address questions received via email as part of the conference call question and answer session as time permits.
Conference Call Archive Access Information
For those unable to participate in the conference call at the scheduled time, it will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial (416) 764-8677 or (888) 390-0541 and enter the passcode 675731 followed by the pound (#) key. The telephone replay will be available until Wednesday, November 16, 2022 at midnight (ET). The conference call will also be available on Village Farms’ web site at http://villagefarms.com/investor-relations/investor-calls.
About Village Farms International, Inc.
Village Farms leverages decades of experience as a large-scale, Controlled Environment Agriculture-based, vertically integrated supplier for high-value, high-growth plant-based Consumer Packaged Goods opportunities, with a strong foundation as a leading fresh produce supplier to grocery and large-format retailers throughout the US and Canada, and new high-growth opportunities in the cannabis and CBD categories in North America and selected markets internationally.
In Canada, the Company’s wholly-owned Canadian subsidiary, Pure Sunfarms, is one of the single largest cannabis operations in the world, the lowest-cost greenhouse producer and one of Canada’s best-selling brands. The Company also owns 70% of Québec-based, Rose LifeScience, a leading third-party cannabis products commercialization expert in the Province of Québec.
In the US, wholly-owned Balanced Health Botanicals is one of the leading CBD brands and e-commerce platforms in the country. Subject to compliance with all applicable US federal and state laws and stock exchange rules, Village Farms plans to enter the US high-THC cannabis market via multiple strategies, leveraging one of the largest greenhouse operations in the country (more than 5.5 million square feet in West Texas), as well as the operational and product expertise gained through Pure Sunfarms’ cannabis success in Canada.
Internationally, Village Farms is targeting selected, nascent, legal cannabis and CBD opportunities with significant medium- and long-term potential, with an initial focus on the Asia-Pacific region and Europe.
