Village Farms International Q3 2025 Earnings Report

Village Farms International EPS Results

• Actual EPS: $0.08
• Consensus EPS: $0.03
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: N/A

Village Farms International Revenue Results

• Actual Revenue: $66.74 million
• Expected Revenue: $58.63 million
• Beat/Miss: Beat by +$8.11 million
• YoY Revenue Growth: N/A

Village Farms International Announcement Details

• Quarter: Q3 2025
• Date: 11/10/2025
• Time: Before Market Opens
• Conference Call Date: Monday, November 10, 2025
• Conference Call Time: 8:30AM ET

Village Farms International (NASDAQ:VFF) is a North American agricultural company specializing in greenhouse cultivation of fresh produce and cannabis. Through its wholly owned operations, the company grows a variety of high-quality vegetables, including tomatoes, cucumbers and sweet peppers, using controlled-environment agriculture techniques designed to maximize yield and sustainability. Village Farms leverages advanced climate and hydroponic systems to deliver consistent year-round supply to major grocery retailers across the United States and Canada.

In its produce segment, Village Farms operates large-scale greenhouse facilities in Texas and Canada. These facilities employ integrated pest management, energy-efficient technologies and rigorous food-safety protocols to meet the specifications of supermarket chains and foodservice distributors. By combining modern automation with traditional horticultural expertise, the company aims to reduce resource consumption while maintaining the flavor and nutritional value of its crops.

Complementing its fresh-produce business, Village Farms is a 50/50 partner in Pure Sunfarms, one of Canada’s leading licensed producers of recreational cannabis. Pure Sunfarms cultivates, processes and packages a range of dried flower, pre-rolls and cannabis oil products at its greenhouse campus in British Columbia, supplying federally regulated adult-use markets. This joint venture brings together Village Farms’ greenhouse know-how with Pure Sunfarms’ cannabis-specific licensing and distribution network.

Village Farms International Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Consolidated net sales rose 21% YoY to $66.7M, net income from continuing operations was $10.8M ($0.09/share), and adjusted EBITDA hit a record $20.7M (31% margin) with operating cash flow of $24.4M.
• Positive Sentiment: Canadian cannabis delivered CAD 64.1M in sales (+29% YoY) with an exceptional 56% gross margin and CAD 26.6M adjusted EBITDA (41% of sales), which management says is an industry profitability record.
• Positive Sentiment: International momentum accelerated: medical exports grew ~758% YoY to CAD 16.3M, the Delta BC facility’s EU GMP certification was renewed enabling direct GMP exports, and Netherlands production is scaling with a phase‑two facility (5x capacity) due late Q1.
• Positive Sentiment: Significant organic growth runway—only ~35% of ~5 million sq ft greenhouse capacity is used for cannabis today and a announced 40 metric ton capacity expansion (≈33% more production) is expected to start coming online in Q2 and fully ramp by early 2027.
• Negative Sentiment: Risks and drag on profitability include a pressured U.S. cannabis segment (impacted by unregulated hemp products, producing slightly negative adjusted EBITDA), heavy Canadian excise taxes (CAD 21.6M paid in Q3, ~40% of retail branded sales), and regulatory uncertainty for U.S./Texas expansion that could limit near‑term upside.

Presentation

[Operator]

Good morning, ladies and gentlemen. Welcome to Village Farms International, third quarter 2025 financial results conference call. This morning, Village Farms issued a News Release reporting its Financial Results for the third quarter ended September 30th, 2025. That News Release, along with the company's Financial Statements, are available on the company's website at villagefarms.com under the Investors Heading. Please note that today's call is being broadcast live over the internet and will be archived for replay both by telephone and via the internet beginning approximately one hour following completion of the call. Details of how to access the replays are available in today's news release. Before we begin, let me remind you that forward-looking statements may be made today, during, or after the formal part of this conference call. Certain materials, assumptions, were applied in providing these statements, many of which are beyond our control.

[Operator]

These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in Forward-Looking Statements. A summary of these underlying assumptions, risks, and uncertainties is contained in the company's various securities filings with the SEC and Canadian Regulators, including its Form 10-K MD&A for the year ended December 31, 2024, and Form 10-Q for the quarter ended September 30, 2025, which will be available on EDGAR and SEDAR+. These forward-looking statements are made as of today's date and except as required by applicable securities laws. We undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DeGiglio.

[Michael DeGiglio, President and CEO at Village Farms International]

Thank you, Cherie. Good morning, everyone, and thank you for joining us today. With me on the call are Stephen Ruffini, our Chief Financial Officer, Ann Gillin Lefever, our Chief Operating Officer, Patti Smith, our Corporate Controller, and Sam Gibbons, Senior Vice President of Corporate Affairs. I'll begin with a review of highlights from the third quarter. Steve will review the financials in more detail before I provide some last closing comments. As we discussed in this morning's earnings release, our third quarter was another one of many records for Village Farms. On our last quarter's call, we talked about our confidence in the sustainability of the positive trends we were seeing across the business as we continue executing and scaling a Profitable Global Enterprise.

[Michael DeGiglio, President and CEO at Village Farms International]

Today's results, only three months later, validate the expectations we discussed, and we remain confident that our Competitive Strengths, combined with the Incremental Growth Catalysts we see on the Horizon, position us for a very strong future. Consolidated Net Sales increased 21% year-over-year in Q3, and Net Income from continuing operations was CAD 10.8 million, or CAD 0.09 a share, an increase of almost 10% sequentially compared to the record we set last quarter. For the second consecutive quarter, we also achieved new records for Adjusted EBITDA and Adjusted EBITDA Margin from continuing operations of CAD 20.7 million and 31% of sales. We continue to see excellent Cash Conversion with Consolidated Cash Flow from operations of CAD 24.4 million, another record for Village Farms.

[Michael DeGiglio, President and CEO at Village Farms International]

Our Canadian Cannabis Business delivered 29% year-over-year growth in Net Sales, reaching a new high of CAD 64.1 million in Q3, driven by strong performance in our targeted channels, improving sales mix, which has led to higher average pricing, and continued momentum in the International Medical Export Division, which we were up more than 750% year-over-year. What is enabling us to deliver these levels of performance? We believe it comes from three Critical Factors. First is our capabilities as a premier provider of quality and consistent Cannabis Flower at scale and at the lowest cost. Second is our commitment to manufacturing excellence and our EU GMP Capabilities. Finally, it is a tremendous execution of our Global Team. Our execution on all fronts has been paramount to our success, and all the Village Farms Team Members are worthy of considerable praise.

[Michael DeGiglio, President and CEO at Village Farms International]

Canadian Cannabis Retail Sales were in line with our expectations, with stronger contribution margin from Retail Branded Sales in Q3, driven by our recent success in aligning our Product Portfolio towards higher Margin SKUs. As a reminder, we first began discussing our plan to realign our Product Offerings towards the end of last year, as our Analysis and Consumer Feedback suggested the quality of our flower should command a higher price point. Since that time, we've observed significant improvements in profitability, and because of our deliberate move away from some value-oriented tiers of the market, our core Pure Sunfarms Brand has experienced steady growth in Market Share since last December.

[Michael DeGiglio, President and CEO at Village Farms International]

We're pleased to be seeing relative stability in overall Share Performance as we begin to anniversary the implementation of these changes, and we're looking forward to benefiting from expanded production capacity next year, which will enable us to continue supporting growth in the Canadian Market. Our non-branded Wholesale Channel in Canada continued to show consistent top-line performance as we've observed the past seven quarters. As mentioned previously, our International Medical Business continued to expand rapidly during the third quarter with over 750% sales growth year-over-year. Germany continues to be a driver of increasing international demand, and we believe we've expanded market share sequentially in this market during each of the past four quarters.

[Michael DeGiglio, President and CEO at Village Farms International]

Based on Local Government Data and Internal Estimates, we believe Village Farms is now the largest exporter of Medical Cannabis to Europe, and that we're well positioned long-term to continue expanding into New Markets as additional countries around the world embrace the many benefits of regulated Cannabis. I also want to make clear that international business did not experience any disruptions to deliveries or order flow during the third quarter. In fact, the German Government recently increased its import limit of Medical Cannabis by an additional 70 metric tons. As a reminder, our Delta British Columbia facility has been EU GMP Certified since 2022. This Certification was recently renewed, which underscores our rigorous commitment to our operational excellence and enables us to ship directly to partners across the world who are seeking GMP Flower.

[Michael DeGiglio, President and CEO at Village Farms International]

We have never shipped through Portugal, having identified this as a compliance and supply chain risk some time ago. Our consistent product quality, potency, and reliability of on-time delivery of our products continues to differentiate Village Farms from our competitors on the Global Stage, and we expect to expand to multiple new InternationalJurisdictions during the first half of next year. As a reminder to investors who may be new to our story, we are only using approximately 35% of our nearly 5 million sq ft of Advanced Greenhouses in Canada for Cannabis Production today. We have proven our playbook in scaling our Delta BC Production Campus, partly thanks to our nearly 40-year track record in highly intensive agriculture, and we have a strong labor force that knows how to execute and operate these facilities efficiently.

[Michael DeGiglio, President and CEO at Village Farms International]

To support continued growth in Canada and abroad, the 40 metric ton capacity expansion project we announced last quarter is now underway, and we anticipate it will increase our Annual Production Capacity in Canada by approximately 33%. The incremental capacity is expected to begin coming online in Q2 of next year and be fully ramped in early 2027. At that time, 45% of our greenhouse capacity in Canada will be in full Cannabis production, leaving our largest 60-acre Delta 1 Greenhouse Facility available for future phase conversion to Cannabis beginning as early as 2027 if we deem necessary. As many of you know, increasing global demand for Cannabis has currently resulted in a relatively supply-constrained environment in the Domestic Canadian Market for much of the past year.

[Michael DeGiglio, President and CEO at Village Farms International]

These dynamics have supported an improved pricing environment in Canada, and along with improvements in our operating efficiency, helped us achieve record Gross Margin with improved profitability in all our various sales channels during the third quarter. Canadian Cannabis Gross Margin of 56% was above the high end of our targeted range due to a variety of factors, which Steve will discuss momentarily. Our Q3 sales growth, improved Gross Margin performance, and continued course discipline resulted in a 309% increase in Adjusted EBITDA in Canadian Cannabis to CAD 19.3 million, or 41% of sales. We believe this sets an all-time quarterly record in profitability from continuing operations of any Public Canadian Cannabis Company. In the Netherlands, our first facility in Drachten reached full production capacity during Q3, and sales increased 44% sequentially with healthy Profitability and Cash Generation.

[Michael DeGiglio, President and CEO at Village Farms International]

We also expanded our market penetration in Coffee Shops sequentially, with our products now in 91% of participating Coffee Shops, and we are continuing to introduce new products, including several hash offerings and pre-rolls that we anticipate will enjoy popularity in one of the world's most famed Cannabis Markets. Construction of our second and large Dutch Facility, which will increase our Total Production Capacity in the Netherlands fivefold, is progressing on schedule and remains on track to begin operating in late Q1 of next year. We have been increasing headcount in the Netherlands during the fall to prepare for this expansion, and we anticipate incremental Operating Expenses at Leli Holland over the course of the next few quarters to support this growth.

[Michael DeGiglio, President and CEO at Village Farms International]

However, as the phase two facility comes online through the first half of next year, we expect our Netherlands business to be a strong driver of revenue growth for us in 2026 and to help us maintain relative strength in our overall Margin Performance as compared to a majority of our Public Cannabis Company peers. In our produce business, sales were roughly flat after accounting for sales commissions paid to Vanguard Foods LP. Our ongoing produce segment is now comprised almost entirely of our Delta 1 Greenhouse Operations, which historically has generated positive Net Income and cash flow and can still be converted to a Cannabis facility in the future. Our second and third quarters will always be our seasonally strongest quarters for produce. Net Income improved more than fourfold in Q3 to CAD 1.3 million, and Adjusted EBITDA improved nearly 50% to CAD 2.5 million from CAD 1.7 million.

[Michael DeGiglio, President and CEO at Village Farms International]

Our U.S. Cannabis and Clean Energy segments also performed in line with our expectations during the quarter. We are pleased with the incremental Net Income that Clean Energy contributes to the company, and we continue to believe that these segments, despite being small portions of our business today, there is meaningful potential for both of these businesses to provide investors with additional upside, which we further believe differentiates Village Farms as an attractive investment opportunity. As a reminder, for anyone new to our story, we still have certain Greenhouse Assets in West Texas that we believe offer us a clear opportunity to replicate our success in Canada if and when U.S. Regulations allow.

[Michael DeGiglio, President and CEO at Village Farms International]

Finally, as noted this morning's earnings call, we closed the quarter with approximately CAD 88 million in cash on our balance sheet, reflecting an increase of nearly CAD 23 million since the end of Q2, following another quarter of strong free cash flow generation. Finally, our significantly improved cash flow generation profile and Balance Sheet strength gave our board of directors confidence to implement a share repurchase program at the end of September as part of our balanced approach to capital allocation to drive Shareholder Returns. We believe we are in an excellent position to continue growing and investing behind our business, and we see significant opportunities for us to continue profitably scaling our Global Cannabis Enterprise in 2026 and beyond. I'll turn the call over to Steve to review the financials now. Steve?

[Stephen Ruffini, Executive VP and CFO at Village Farms International]

Thanks, Mike. As a reminder, as of May 30th, some of our Produce Assets were privatized and are now classified as discontinued operations. Reported Financial Results for comparative prior periods have been adjusted accordingly. I'll start with a review of our Consolidated Results. Consolidated Net Sales increased 21% to CAD 66.7 million, driven by growth in our Canadian Cannabis segment, as well as the second full quarter of contribution from our recreational Cannabis Sales in the Netherlands. Net Income from continuing operations improved to CAD 10.8 million, or CAD 0.09 per share, compared to a net loss of CAD 800,000, or CAD 0.01 per share in Q3 of last year. Consolidated Adjusted EBITDA from continuing operations was CAD 20.7 million, compared with CAD 4.7 million in Q3 of last year, resulting in an Adjusted EBITDA Margin of 31% in the quarter, compared to 8.5% in Q3 of last year.

[Stephen Ruffini, Executive VP and CFO at Village Farms International]

Our cash flow from operations improved to CAD 24.4 million, compared with CAD 6.1 million in Q3 of last year. Turning now to our segmented results, I will start with Canadian Cannabis, which I will discuss in CAD for comparative purposes. Total Net Sales were CAD 64.1 million for a 29% increase versus Q3 last year. The year-on-year improvement was driven by strong performances in our targeted channels, improved pricing, and continued momentum in our international medical exports, which increased 758% from Q3 last year to CAD 16.3 million. Canadian retail branded sales were CAD 37 million, in line with our expectations following the realignment of our product portfolio to higher Margin SKUs. Canadian Cannabis Gross Margin was 56%, up from 26% in Q3 last year, and well above the high end of our target range of 30%-40%.

[Stephen Ruffini, Executive VP and CFO at Village Farms International]

As Mike mentioned earlier, our improved Gross Margin was helped by favorable pricing as compared to the prior year, and we also benefited from increased International Export Sales, lower Packaging Inputs, improved Productivity, and higher Crop Yields during the past summer growing season. SG&A Expenses as a percentage of sales were 20%, an improvement from 22% last year as we continue to drive efficiencies throughout our Canadian Cannabis Operations. Q3 Adjusted EBITDA for Canadian Cannabis improved 309% year-over-year to our strongest performance ever at CAD 26.6 million, resulting in an Adjusted EBITDA Margin of 41%, which was more than triple the 13% of last year. Cash flow from operations increased 339% to CAD 26.8 million, our strongest quarter of operating cash flow since we expanded into Canadian Cannabis in 2017.

[Stephen Ruffini, Executive VP and CFO at Village Farms International]

Finally, as we do each quarter, I will point out that in Q3 we paid Canadian Excise Taxes on our Retail Branded Sales CAD 21.6 million, nearly 40% of Retail Branded Sales and almost double our SG&A Costs. Turning now to our recreational Cannabis Business in the Netherlands. Q3 saw our second full quarter of sales from our Leli Holland operations. Sales were CAD 3.6 million, with Adjusted EBITDA of CAD 1.3 million. Both meaningful increases quarter over quarter and firmly in line with our expectations. With our phase one facility now operating at full capacity, we expect our Netherlands Sales Performance in Q4 to be similar to Q3, although with increased Operating Expenses, which Mike mentioned, will be rising into Q1 as we get ahead of our larger phase two facility.

[Stephen Ruffini, Executive VP and CFO at Village Farms International]

Turning now to our U.S. Cannabis business, Q3 sales of CAD 3.3 million continues to reflect the impact of various state actions dealing with the ongoing proliferation of unregulated hemp products. Gross Margin was down slightly year-over-year at 60%, resulting in a small negative Adjusted EBITDA for the quarter. Having stabilized this business amidst strong regulatory headwinds, we are working on a number of initiatives to invigorate sales of our responsible GMP-produced Natural Hemp Products. In our continuing produce operations, sales decreased 10% year-over-year to CAD 12.8 million, although this is a result of incurring a sales commission in 2025 to our Privatized Produce Business. In previous years, we were the exclusive sales agent for our produce, as well as for others. However, our Net Income from continuing operations was up CAD 1 million to CAD 1.3 million, with our Adjusted EBITDA Margin improving to CAD 2.5 million.

[Stephen Ruffini, Executive VP and CFO at Village Farms International]

I will remind investors that our produce operations in Q3 and through the remainder of this year reflect contributions from our Delta 1 Greenhouse and half of our Delta 2 Greenhouse. The Delta 2 tomato crop is being pulled this week for us to commence the conversion to Cannabis production, which will bring our total operational square footage of Cannabis production in Delta to 2.2 million sq ft. Turning to consolidated cash flows in the balance sheet, total cash flow from operations was CAD 46.7 million through the first nine months of the year. We ended Q3 with cash of nearly CAD 88 million, which includes restricted cash of CAD 5 million, with a net cash position of CAD 53 million. Our Total Debt at the end of Q3 was CAD 35 million.

[Stephen Ruffini, Executive VP and CFO at Village Farms International]

As noted in our Form 10-Q this morning, in August, we paid down CAD 3 million of US term debt as part of the produce privatization transaction. We had a blended borrowing rate of approximately 6.5% at the end of the quarter, with additional debt capacity as we evaluate the most efficient ways to fund our growth. Our healthy cash flow and strengthening balance sheet will enable us to continue supporting future expansion projects. As Mike mentioned, we will also support the CAD 10 million share repurchase program that our board approved at the end of September. The program provides for the purchase of up to just under 5.7 million common shares, or 5% of our issued and outstanding shares as of the date of the announcement. Our management team and board believe this reflects a prudent and balanced approach to Capital Allocation to drive returns to shareholders. I will now turn the call back to Mike for some closing comments.

[Michael DeGiglio, President and CEO at Village Farms International]

Thank you, Steve. Thanks and congratulations to all the Village Team Members around the world whose hard work, tenacity, and integrity are continuing to raise the bar for ourselves and our industry. In addition to delivering record profitability in the Canadian Cannabis Industry, our performance this quarter also surpasses the profitability of any U.S. Operators who have reported thus far in these current earnings seasons. Village Farms is now one of the most Profitable Cannabis businesses on planet Earth, and we remain highly motivated to exceed our own expectations. We are growing our business organically, funding our growth with our own cash generated from operations, and we believe we still have a considerable amount of future organic growth catalysts on our horizon.

[Michael DeGiglio, President and CEO at Village Farms International]

We are confident in our ability to continue driving growth in revenue and EBITDA, supported by our proven operational and manufacturing expertise, our culture of cost discipline, and continuous improvement. Of course, through the continued excellence and leadership of our people. I'm incredibly proud of all the progress our teams have made together this year and know that we are all looking forward to another strong year of growth in 2026. Operator, that includes our prepared remarks, and we'll take questions now.

[Operator]

Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. You may then return to the queue. Please stand by while we compile the Q&A roster. Our first question will come from the line of Aaron Grey with Alliance Global Partners. Your line is open.

[Aaron Grey, Managing Director and Head of Consumer Research at Alliance Global Partners]

Hi, good morning. Thank you for the questions and congrats on the strong quarter here. First question for me, I want to talk a bit about Cannabis Gross Margin, 56%. You talked about some of the year-over-year improvement, but I want to talk even sequentially, right? Some very strong improvement. Some of the drivers you saw there, when we think about international mix, it is pretty similar quarter over quarter, but still saw some pretty meaningful expansion there. Was there some improvements in pricing and mix within international? Was it some of the more meaningful operating efficiency? Just some of the specific drivers in terms of some of the sequential trends there. Then how best to think about that Gross Margin going forward and how sustainable Gross Margins more close to these levels are. Thank you.

[Michael DeGiglio, President and CEO at Village Farms International]

Thanks, Aaron. Overall, we had improved efficiency. One of our DNA KPIs is continuous improvement on cost and efficiency. That improved efficiency and productivity. We had higher crop yields than we normally do in the summer than the winter. Favorable pricing, as I mentioned, compared to the prior year, tied to mostly a function of SKU mix, which I mentioned on the call. Lower packaging inputs and improved margins. Of course, international export, which has solid margins. Those were key drivers to those results. Ann, you want to add some color?

[Ann Gillin Lefever, COO at Village Farms International]

I think you covered it. Thank you.

[Michael DeGiglio, President and CEO at Village Farms International]

As far as Gross Margin, as we said, our sweet spot is always 30-40% because you have to look long-term.

[Michael DeGiglio, President and CEO at Village Farms International]

There's always different ebb and flows in the market, but we are always trying to exceed that, but we're not really changing that guidance between 30 and 40. This was a strong quarter for us, and we're certainly taking it. We're going to always strive to exceed, but we're going to stick to that sweet spot we mentioned consistently over the last few years.

[Aaron Grey, Managing Director and Head of Consumer Research at Alliance Global Partners]

Okay, great. Appreciate that. Then on the international front, more thinking about the top line, can you mention in terms of the competitive environment, maybe some of the—you mentioned that you haven't had as many issues, but have some of the supply challenges from some of your peers you're hearing about, or some of the quality issues? Has that provided you more of an opportunity to take meaningful share gains within the past two quarters?

[Aaron Grey, Managing Director and Head of Consumer Research at Alliance Global Partners]

It seems like you think that's pretty sustainable over the near to medium term, with second half of Delta 2 coming online and even some emphasis to potential for Delta 1 coming online in 2027. Maybe talking about some of the dynamics you're seeing internationally and what's making you so constructive, at least in the near to medium term, for some continued opportunities there. Thanks.

[Michael DeGiglio, President and CEO at Village Farms International]

Yeah, I think it's still a nascent industry. I mean, when I look at the Cannabis business 10 or 15 years from now, it's going to be interesting to see how it segments from Commercial Side, Innovation Side, to Cultivation. At this stage, Cultivation Rules. I mean, at the end of the day, you have to be able to consistently perform super high quality every single day. We always strive to do that at the lowest possible cost.

[Michael DeGiglio, President and CEO at Village Farms International]

Our original Business Model was based on that, and the team is executing. Without having consistent, solid, good quality, nothing else really matters. That coupled with EU GMP, the team has executed brilliantly. We had a renewal after our first three years with flying colors, and we are actually expanding that whole EU GMP processing side for the future. Coupled with—it is not so much of, as I said in my comments, one, two, three, you have to have all three. It is sort of like a three-legged stool. If one of those legs falls off, you topple over. The final one is the execution of the team, both on the commercial international side and on our cultivation manufacturing side. I think that is what we have communicated from day one when we got into Cannabis. It is a matter of how well you can execute.

[Aaron Grey, Managing Director and Head of Consumer Research at Alliance Global Partners]

Okay, great. Appreciate the call. I'll go ahead and jump back in the queue.

[Operator]

One moment for our next question. That will come from the line of Frederico Gomes with ATB Capital Markets. Your line is open.

[Frederico Gomes, Director of Institutional Equity Research at ATB Capital Markets]

Hi, good morning. Congrats on the outstanding quarter here. Thanks for taking the questions. First question on the Netherlands, very strong performance and adjusted out there. I guess just two questions there. One is Gross Margin declined a bit sequentially. Could you talk about what drove that decline, if it's related to mix or investment or something else? Then second question on the Netherlands as well. I know that you have a 30%-40% Gross Margin target for Canadian Cannabis, but I'm curious about if you have the same sort of target for the Netherlands long term. Thanks.

[Michael DeGiglio, President and CEO at Village Farms International]

Hi, Frederico.Yeah, we absolutely have the same goals on the Gross Margin long term for the Netherlands. It's a startup. I mean, we just started producing in the end of the first second quarter. When you really look at some of the competitors and taking years, if not decades, to ramp up their business, I think we've done pretty well within the first year. It hasn't even been a year of cultivation. You'll definitely see some lumpiness as we get stable going forward. I think that shouldn't reflect that we're coming off on Gross Margin in any given quarter over the long term.

[Frederico Gomes, Director of Institutional Equity Research at ATB Capital Markets]

Thank you. Then second question on Germany. You mentioned you gained Market Share sequentially there in each of the past four quarters.

[Frederico Gomes, Director of Institutional Equity Research at ATB Capital Markets]

Could you provide maybe a number in terms of where you think your market share is right now and whether you think that market share momentum is going to continue in terms of gaining share sequentially over the next few quarters?

[Michael DeGiglio, President and CEO at Village Farms International]

I'm never going to—first of all, we're not putting out what we think the market share is, but I wouldn't be surprised if we're number one in whatever that market share number is. The reason I don't want to comment is because there really are no clear statistics as of yet. I would be just surmising it at this point. I believe we're by far the number one market share in Germany.

[Michael DeGiglio, President and CEO at Village Farms International]

I think for the reasons I mentioned earlier and in my remarks to answer Aaron's question as well, I think that we took an approach in let's control what we can control. That's where we believe we differentiate ourselves. We didn't look at Portugal. We thought Portugal was a risk and a liability both in supply chain regulatory side. We just built our business for Europe based on our own production, our own people direct to our customers. I think that seems to be a winning formula at this point in time. I believe the German market's going to continue to grow as well going forward.

[Frederico Gomes, Director of Institutional Equity Research at ATB Capital Markets]

Thank you very much.

[Operator]

One moment for our next question. That will come from the line of Pablo Zuanic with Zuanic & Associates. Your line is now open.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

Thank you. Good morning, everyone.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

Look, my question is really a three-part question on Texas. I mean, obviously, in my interpretation, the regulatory changes in the medical program there are quite favorable, especially for the three incumbents there, right? There may be 15 more licenses issued, but there will be a bit of a lag, a time lag for those new licenses, not even clear when they will be issued. I just want to have a sense of how aggressive is Village Farms willing to be in Texas in terms of M&A Activity? What could that mean for your NASDAQ Listing? How would you think about that? Because when we look at Cannabis growth or SNDL, it seems that other companies have not been willing to give up their NASDAQ Listing. I mean, what can you say publicly on this topic? Thank you.

[Michael DeGiglio, President and CEO at Village Farms International]

Good morning, Pablo. I'm going to first let Steve answer a couple of the first points on Texas, and then we could kind of come back to some others. Regarding the Republic of Texas, Steve, comments?

[Stephen Ruffini, Executive VP and CFO at Village Farms International]

Yeah, we're certainly anticipating and excited and understand that the Department of Public Safety is still online to issue its licenses on December 1. We should hopefully know something, but that would be 12 additional, not. Yeah, 12 additional. We'll see if they keep on their timeline. We've heard nothing to the contrary of that. Texas has improved its medicinal definition and expanded the illnesses that can access the system. That being said, it's not quite as open as something like Florida, but we are certainly excited about the opportunity.

[Michael DeGiglio, President and CEO at Village Farms International]

Yeah. I think regarding NASDAQ, we feel very confident that we can find a suitable structure going forward.

[Michael DeGiglio, President and CEO at Village Farms International]

We've been working on that for a couple of years. So when and if we'll probably move forward, but we're not going to jeopardize at any time our NASDAQ Listing, Pablo.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

Okay. No, that's good. Thank you. Understood. The second question, just regarding Quebec, the province of Quebec, I think you've said in the past it's about 40% of your revenues. I don't know if it's 40% of your Canadian domestic earnings on the Cannabis side. There's been some regulatory changes there. Vape is allowed now. I think there were other regulatory changes on caps, maybe more stores. What's your outlook for Quebec Province and how are you positioned to benefit? If you can correct me if I'm wrong in terms of the relevance of Quebec to your business on the recreational side. Thank you.

[Ann Gillin Lefever, COO at Village Farms International]

Pablo, good morning. It's Ann.

[Ann Gillin Lefever, COO at Village Farms International]

Quebec's very important, but your number's on the high side. It's not 40% of Total Cannabis. We've traditionally been a little bit higher than the spread of revenue across provinces, just to give you some sense of that. There are some changes coming. Vape is one of the big changes. We think the SQDC has done a great job of assessing where they're not able to grab the elicit or legacy market share. This is going to be a big form factor to move into the private market or, sorry, the Legal Market. We are participating in that as we go forward.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

Right. Thank you. Look, I'm going to ask another third one. I know it's only two, but let me break the rule this one time. On the Dutch side, I know that there's 10 Licensees on the production side, but it seems that not all of them are up and running. Some of them have had problems. It seems that you are one of the few that's actually expanding capacity, in this case, what, five times. It seems that you're in a very good position, right? There are other people that maybe started first, but in a weaker position now. Do you want to comment on the competitive landscape on the production side in Holland right now?

[Michael DeGiglio, President and CEO at Village Farms International]

Sure. I think eight are in production. Two more will be coming on in the next quarter or so. I think of the 10, one will probably be more of a light Asset Model. There are issues with others, quite a few that I've heard of. That can always be an opportunity for us.

[Michael DeGiglio, President and CEO at Village Farms International]

But we're very focused on getting, as I said, this next facility will increase our capacity fivefold. Our focus is getting it up and running, crawl, walk, run. Then we'll see what opportunities lie ahead. We're very excited about those opportunities in the future in the Netherlands for us as well, Pablo.

[Pablo Zuanic, Managing Partner at Zuanic & Associates]

Okay. All right. Thank you.

[Operator]

I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. DeGiglio for any closing remarks.

[Michael DeGiglio, President and CEO at Village Farms International]

Thank you. Okay. Thank you again for joining us today. We hope you have a wonderful holiday season. We look forward to our next update for year-end in March. Wishing everybody a Happy New Year as well. Thank you, operator.

[Operator]

This concludes today's program. Thank you all for participating. You may now disconnect.

Participants

Executives

• Stephen Ruffini, Executive VP and CFO
• Ann Gillin Lefever, COO
• Michael DeGiglio, President and CEO

Analysts

• Frederico Gomes, Director of Institutional Equity Research at ATB Capital Markets
• Pablo Zuanic, Managing Partner at Zuanic & Associates
• Aaron Grey, Managing Director and Head of Consumer Research at Alliance Global Partners