NASDAQ:VFF Village Farms International Q1 2025 Earnings Report $1.26 +0.05 (+4.13%) Closing price 04:00 PM EasternExtended Trading$1.22 -0.04 (-3.17%) As of 07:26 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Village Farms International EPS ResultsActual EPS-$0.06Consensus EPS -$0.01Beat/MissMissed by -$0.05One Year Ago EPSN/AVillage Farms International Revenue ResultsActual Revenue$77.07 millionExpected Revenue$78.44 millionBeat/MissMissed by -$1.37 millionYoY Revenue GrowthN/AVillage Farms International Announcement DetailsQuarterQ1 2025Date5/12/2025TimeAfter Market ClosesConference Call DateTuesday, May 13, 2025Conference Call Time8:30AM ETUpcoming EarningsVillage Farms International's Q2 2025 earnings is scheduled for Thursday, August 14, 2025, with a conference call scheduled on Thursday, August 7, 2025 at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress ReleaseQuarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Village Farms International Q1 2025 Earnings Call TranscriptProvided by QuartrMay 13, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Good morning, ladies and gentlemen. Welcome to Village Farms International's First Quarter twenty twenty five Financial Results Conference Call. Yesterday, Village Farms issued a news release reporting its financial results for the first quarter ended 03/31/2025. 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 the completion of this Details of how to access the replays are available in today's news release. Operator00:00:49Before 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 material assumptions were applied in providing these statements, many of which are beyond our control. 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 regulations, including its Form 10 ks and MD and A for the year ended 12/31/2024, and the 10 Q for the quarter ended 03/31/2025, which will be available on EDGAR and SEDAR. Plus, these forward looking statements are made as of today's date, for as required by applicable securities law. Operator00:01:59We undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DiGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DiGiglio. Michael A. DeGiglioPresident & CEO at Village Farms International00:02:15Thank you, Jonathan, and good morning and thank you for joining us today. With me today are Steve Ruffini, our Chief Financial Officer Anne Gillen LaFeva, our Chief Operating Officer Patty Smith, our Corporate Controller and Sam Gibbons, our Senior Vice President of Corporate Affairs. Before we get into the details of our Q1 results, I'd like to spend a few minutes discussing our announcement yesterday that we have signed a definitive agreement to execute a transformative transaction for our company. Under that agreement, we will privatize the majority of our fresh produce division into a new joint venture backed by private investment firms, including Sweat Equities to be called Vanguard Foods LP. We will retain a 37.9% ownership interest in Vanguard and receive $40,000,000 in cash proceeds. Michael A. DeGiglioPresident & CEO at Village Farms International00:03:10We believe this transaction will unlock tremendous long term value for both our cannabis and produce businesses and allow each of them to flourish independently. This transaction will drastically improve the upside potential for our thirty six year legacy in the produce business as a private company with committed experienced industry partners who have created significant value for their shareholders in the past. We are extremely excited about this joint venture and to partner with Charlie Sweat from Sweat Equities to transform the trajectory of our produce business and create a premier branded CPG foods company supporting healthy lifestyles and sustainable farming practices. For those of you who are less familiar with the produce industry, Charlie Sweatt completely revolutionized the organic salad category during his tenure at Earthbound Farms, an organic produce company that he grew from $10,000,000 to over $540,000,000 in revenues during his fifteen year tenure before selling the business for $600,000,000 Charlie knows our industry inside and out and together we see tremendous potential to build a new private produce company that will provide a wider array of products for our customers and complete effectively with our largest competitors in the marketplace. Vanguard is a holding company and will become part of the new parent of our Fresh division. Michael A. DeGiglioPresident & CEO at Village Farms International00:04:44Our Fresh division will serve as the cornerstone of Vanguard's commercial operations and growth strategy and Vanguard will be backstopped by additional capital support from our private equity partners to execute a roll up strategy of other leading produce brands and assets in North America. Under the terms of the agreement, we will contribute our Texas based 40 acre Martha II and our 40 acre Fort Davis facility, all of our fresh produce related intellectual property except for the Village Farms name and transfer all of our produce distribution facilities, employees and operational control of these facilities to Vanguard. I will represent Village Farms' interest on Vanguard's board and initially serve as interim CEO. Village Farms' CFO, Steve Ruffini, will also be appointed to Vanguard's board. We will retain full ownership of all our Canadian greenhouse assets at Delta British Columbia, as well as our Marfa One and Permian Basin Monahan's facility for future cannabis market optionality. Michael A. DeGiglioPresident & CEO at Village Farms International00:05:54These assets represent an incremental near 5,000,000 square feet of future expansion potential for cannabis, providing a clear runway to expand cannabis cultivation by more than 220% compared to our operational capacity today through our own greenhouse assets. In addition to drastically improving the long term upside potential of our produce business, this split of produce and cannabis business acknowledges the strength of our cannabis business as one of the largest and most respected scaled cultivators and marketers of cannabis on the planet. This success grew from the lessons learned and expertise shared from our thirty six years in controlled environmental agriculture, which we carefully applied to the launch of the cannabis business some eight years ago now. Now is the time to focus on executing our global cannabis growth strategy and invest our improved cash flow to continue supporting this growth while ensuring that we maintain substantial future expansion potential as markets continue opening up to cannabis. By privatizing one third of our greenhouse assets and operations, we've generated $40,000,000 in cash, created a greater upside potential for our ownership interest in the produce industry with committed private equity partners, significantly improved the forward visibility into our financial performance and transformed our company into one of the most attractive platforms for revenue growth and margin expansion across the global cannabis industry. Michael A. DeGiglioPresident & CEO at Village Farms International00:07:30For comparative purposes, our market cap was less than $80,000,000 as of the market close yesterday. We expect this transaction to close during the second quarter, at which time we plan to provide the investment community with additional details surrounding our pro form a financial performance and outlook. Now let's move to a summary of our Q1 performance, which reflects an excellent start in 2025 of our pro form a operations. Canadian cannabis had one of the strongest quarters over the last three years as we continue to successfully execute on our strategy to leverage our experience and leadership in Canada into other international markets as we remain focused on profitability. Importantly, our focus on prioritizing more profitable sales over competing for low margin business to drive volume is reflected meaningful in our results. Michael A. DeGiglioPresident & CEO at Village Farms International00:08:26Higher margin medical export sales from Canada for Q1 grew 285% year over year as the business continues to gain momentum. We continue to benefit from the addition of our fifth market, New Zealand, as well as continued growth in existing markets in Germany, The UK and Australia, placing us firmly on track to achieve our stated goal of at least tripling our medical export sales this year. Lower retail branded sales in Q1 were expected and also reflect our focus on improving profitability, specifically our conscious decision to move away from lower tier categories that don't align with the quality of our flower and longer term global strategic objectives. We also continue to be optimistic about our wholesale channel in Canada, again with a focus on profitability. While sales have been relatively steady for the last four quarters, gross margin on those sales for Q1 was up dramatically compared to Q1 of last year. Michael A. DeGiglioPresident & CEO at Village Farms International00:09:27As we discussed on last quarter's call, we felt we were entering 2025 with a very healthy inventory position, which would enable our teams to focus on quality and profitability and we are seeing the impact meaningfully in Q1 results and we expect this trend to continue. All of this contributed to the expansion of our gross margin for Canadian cannabis from 25% in Q1 of last year to 36% in line with our targeted range of 30% to 40% gross margin. And given the more favorable margin profile of our international medical sales, we anticipate that we'll be able to sustain this range for the foreseeable future. These favorable impacts drove strong increases in adjusted EBITDA and net income of 75291% respectively to CAD9.6 million and CAD4.3 million with another quarter of positive cash flow from operations. Q1 also marked the first quarter of revenue contribution from our Lely Holland subsidiary in The Netherlands, which you will now see broken out as a separate segment in our reporting financials. Michael A. DeGiglioPresident & CEO at Village Farms International00:10:43Sales of nearly $05,000,000 reflected approximately one month of revenue. Importantly, pricing, which is very attractive relative to Canada continues to be in line with our expectations. Adjusted EBITDA was essentially breakeven with just one month of revenue. We are now well underway on construction of Phase two of our Netherlands operation, a brand new state of the art indoor facility in the town of Groggenin. This facility, which we expect will be completed in Q1 of next year will quadruple our annual production capacity. Michael A. DeGiglioPresident & CEO at Village Farms International00:11:18Given the more favorable margin profile of our Netherlands recreational sales, the completion of our Phase two facility is expected to enable us to drive a strong year of profitable growth in 2026. In summary, we feel very good about our start to the fiscal year of 2025. We are seeing our prioritization of more profitable sales reflected in our financial results across our cannabis business with continued momentum in international export sales in Lely Hall. Our joint venture for Fresh Produce will afford us greater focus and resources to execute our global cannabis strategy and enable us to generate stronger cash flows to continue to fuel that growth, all while retaining a meaningful ownership position, what we believe is a very attractive opportunity to realize significant long term value with the support of outstanding private equity partners. So this concludes my prepared remarks and I'll now turn the call over to Steve to review the financials before I make some last closing comments. Michael A. DeGiglioPresident & CEO at Village Farms International00:12:24Steve? Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:12:25Thanks, Mike. I'll start with a review of our consolidated results. We appreciate the substantive nature of the Vanguard transaction we'll have on our financial results. And after closing, we will provide pro form a results for the full year 2024 and the first quarter of twenty twenty five. As our Canadian produce assets do not generate much operational activity due to seasonality in Q1, while not official, one could eliminate the BF Fresh column in our reported segmented results and ascertain the substantive nature, improvement in our reported results. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:13:04Consolidated revenues US77 million dollars were roughly in line with our prior year first quarter revenues of US78 million dollars The slight decrease of 1% is due to lower Canadian cannabis revenues, which were negatively impacted by a stronger US dollar in Q1 twenty twenty five versus Q1 twenty twenty four. Our net loss of $6,700,000 or $06 per share was lower than our prior year first quarter loss of $2,900,000 or $03 per share solely due to our weaker year on year performance in VFresh. Our VFresh and consolidated results were negatively impacted by a $4,300,000 incremental non cash accounting charge to our VFresh cost of sales due to the impact of dust storms that occurred at our Texas facilities in March and April. Our actual cultivation costs were in line with our budget and prior year expenditures. As a reminder, our tomato crops are annual crops and we harvest them once a year. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:14:09In our Texas greenhouse, that crop season runs from September to June. As we produce and sell tomatoes, we charge the estimated full crop cost against the sale of crops from each facility. The collective damage of these dust storms puts tremendous stress on our plants and we lost a good portion of our expected full crop yield, which requires us to take an incremental charge to our cost of sales to catch up our full crop cost through March 31, based on our latest crop forecast. The dust storms were a first for Village Farms and had a significant impact at our Fort Davis facility, resulting in a 31 increase in our cost per pound from just that one facility. This obviously had a disappointing impact on our first quarter performance. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:14:58Consolidated EBITDA was essentially flat at $81,000 compared to $3,600,000 in Q1 of last year. The decrease in our adjusted EBITDA was driven entirely by our fresh produce segment. Turning now to our cannabis businesses, I will start with Canadian cannabis, which I will discuss the Canadian dollars. I will add here that the change in the exchange rate compared to Q1 of last year did have an impact on reported results, which are reported in U. S. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:15:27Dollars. Net sales were 50,000,000 which was roughly in line with Q1 last year, driven mainly by the strong growth in international sales. We benefited from the continued momentum in our international medicinal export sales, particularly in the German market as we expanded our customer base as that market continues to grow, as well as adding new markets like New Zealand, resulting in the 285% increase in exports in Q1 last year from last year. In fact, our international first quarter sales of $7,700,000 were nearly as much as our entire 2024 international sales of $8,400,000 Non branded sales were up 3% year over year to $9,000,000 as we continue to be opportunistic where possible to align supply with demand, notably as Mike mentioned, at much higher margins. As a reminder that up until this quarter, for most of the past two years, we have been selling off lower margin SKUs and non spec inventory at unfavorable margins to convert inventory to cash. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:16:33Consistent with our focus on profitable growth, retail branded sales were 22% lower than Q1 last year at 32,700,000.0 with the decrease reflecting a shift away from value offerings, I. E. Lower margin value brands with a stricter focus on higher margin branded sales as well as the international medicinal market. Canadian cannabis gross margin was 36%, up from 25% in Q1 last year, well within our target range of 30% to 40% and demonstrating the positive result of our expanded medicinal export sales as well as a focus on higher margin the higher margin business in Canada as well as continued progress in realizing production efficiencies. SG and A expense as a percentage of sales for Q1 was 25% compared to 21% in Q1 last year. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:17:30The increase being primarily key account spends, which while it is an SG and A cost is tied to branded sales. Q1 adjusted EBITDA for Canadian cannabis was $9,600,000 or as a percentage of net sales over 19%, up a very healthy 75% from Q1 of last year, due mainly to improved margins. Finally, as we do each quarter, I will highlight that in Q1 we paid excise taxes on retail branded sales of $20,000,000 another direct cost of branded sales or nearly 40% of branded retail revenues and more than double our SG and A. With the recent Canadian election behind us, we renew our call in favor of excise tax reform to support the many benefits of the sustainable legal domestic Canadian cannabis industry. This quarter also saw the initial contribution from our first international recreational cannabis sales through our Lely Holland operations in The Netherlands, which started partway through the quarter in late February. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:18:38Sales were $485,000 and adjusted EBITDA was $77,000 reflecting an adjusted EBITDA margin of 15.8%. Not many start up operations have such nice margins, which is a testament to our ability to bring our cannabis knowledge and cultivation expertise into new markets. Turning to our U. S. Cannabis business, although Q1 sales of $3,900,000 continued to trend lower due to continuing state level actions to deal with unregulated hemp products, which in some states has resulted in all intoxicating hemp based products being banned, we continue to generate a healthy gross margin of 66% and return this segment back to positive adjusted EBITDA. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:19:22We believe we have stabilized this business segment even with the regulatory headwinds and we're looking and we're working on a number of initiatives to reinvigorate sales on our responsible GMP produced natural hemp products as we await improved regulations with some states now requiring GMP standards, which is a welcome regulatory change as one of the few hemp based GMP producers. Finally, Village Farms Clean Energy generated $300,000 in net income from royalty payments we received from our RNG partner providing a healthy stream of incremental profits for the company. Turning to consolidated cash flows and the balance sheet. Total cash flow from operations was negative $6,400,000 in Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:20:09the first Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:20:09quarter, partially due to the timing of government payments, which will normalize over the full year. We ended Q1 with a cash $15,000,000 and working capital of $50,000,000 We remain comfortable with our net debt level of $19,300,000 when the Vanguard transaction closes, which will require us to at least pay off our operating produce line of $5,000,000 we will be in a net cash position. Total term debt at the end of Q1 was 34,000,000 Subsequent to quarter end, we amended our loan with Farm Credit Canada to improve financial covenants. These changes reflect the considerable expansion and growth of our business since entering into the original agreement in 2013. The FCC loan matures on May 2027. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:21:03We also refinanced our three Canadian cannabis term loans, consolidating them into a single facility with two of our existing lenders with a 50 basis point decrease in the interest rate, more attractive financial covenants and a new maturity date of February 2028. In closing, we feel very good about our financial position and performance of our cannabis businesses and believe the new ownership structure of our fresh produce business will allow us to realize more meaningful long term value creation as we focus more of our human capital and financial resources on our cannabis businesses. I will now turn Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:21:41the call back to Mike. Mike? Michael A. DeGiglioPresident & CEO at Village Farms International00:21:42Thanks, Steve. To reiterate, Van Gogh's transaction monetizes one third of our greenhouse assets, positions our produce business to thrive as an independent private entity and maintains a significant expansion potential for us to continue building our leadership position and reputation in one of the largest and most respected scale cultivators and marketers of cannabis on the planet. Village Farms is all in on the future of cannabis globally and we're excited to write this next chapter. Michael A. DeGiglioPresident & CEO at Village Farms International00:22:10We have never had a clearer path to drive stronger revenue growth, margin expansion and cash flow generation, which we believe will drive very strong returns for shareholders in the future. Thank you, operator. We'll take questions now. Operator00:22:24Certainly. And our first question comes from the line of Federico Gomes from ATB Capital Markets. Your question please. Frederico GomesDirector, Institutional Research, Life Sciences at ATB Capital Markets00:22:34Hi, good morning. Thanks for taking my questions. Congratulations on the transaction and the results as well. I guess the first question, talking about balance sheet, as you mentioned, Steve, with the transaction here, you would be in a net cash position, really strong balance sheet and really focused on your cannabis platform. So I'm curious about what are you thinking about capital allocation here, in addition to the expansion that is already undergoing in The Frederico GomesDirector, Institutional Research, Life Sciences at ATB Capital Markets00:23:05Netherlands? Thanks. Michael A. DeGiglioPresident & CEO at Village Farms International00:23:09Well, right now, we are very happy building our war chest, so to speak, continue to monitor The US market for optionality going forward. We think it's going to be exciting when and if that day occurs and hopefully it will be in the next couple of years. So that's the market we really want to eyeball and keep close to. Michael A. DeGiglioPresident & CEO at Village Farms International00:23:31So I think, you know, we're very happy with organic growth as opposed to non organic growth. Non organic growth is tough, bringing in companies that maybe not don't have tremendous value, creative value for us. So I think, you know, we're going to see where we go build our infrastructure for the rest of the year and wait and see what happens. I think, we started this year sort of very balanced on our inventories levels and in fact, we are short of capacity. So I think we'll look at further expansion that's on our radar screen of producing cannabis in Canada at our current facilities for 2026 and beyond and we'll make that decision here probably in the next quarter. Michael A. DeGiglioPresident & CEO at Village Farms International00:24:23And then we want to get Lely Phase two as they sit up and running. So I think we're in a good position and we'll just leave it at that Fred. Frederico GomesDirector, Institutional Research, Life Sciences at ATB Capital Markets00:24:34Great, appreciate that color. Second question on your non branded segments, you mentioned the financials here, you saw a good average selling price increase here in both flower and on both trim, pretty strong prices. Do you continue to see prices improving in Canada on the non branded channel? You know, do you think that there's further upside here for wholesale? Ann Gillin LefeverCOO at Village Farms International00:25:05Good morning, it's Anne. We are seeing continued improvement in pricing. Certainly on a year over year basis, the curve can shorten a little bit in terms of month to month or prior period comparisons. But overall, year over year, B2B is strengthening. We do think that's a function of both a reduction in excess supply from some reduction of growing, as well as the demand that we're seeing and others are seeing from international markets. Ann Gillin LefeverCOO at Village Farms International00:25:41So supply has tightened up, and that helps pricing. Frederico GomesDirector, Institutional Research, Life Sciences at ATB Capital Markets00:25:47Perfect. Thanks for that. I'll hop back in the queue. Thanks. Michael A. DeGiglioPresident & CEO at Village Farms International00:25:50Thank you. Operator00:25:51Thank you. And our next question comes from the line of Douglas Cooper from Beacon Securities. Your question please. Doug CooperManaging Director at Beacon Securities00:25:59Hey, good morning guys and congratulations on the transaction. It looks fantastic. Just to be clear, what are you left with after you move some stuff into Vanguard? So you'd be left with D1 and Delta. I'm just talking about Produce side, right? Doug CooperManaging Director at Beacon Securities00:26:14And then a couple of assets in Texas? Michael A. DeGiglioPresident & CEO at Village Farms International00:26:19Yeah, D1 and Delta, which will continue to produce produce for the foreseeable future. As you know, D2 is half produce and half cannabis. I just mentioned that we're looking at that full conversion of D2 that decision will be made and if that occurs then really D1 will really be only cannabis producing facility. However, that being said, we continue to own the asset of Marfa One, which will be lease triple net lease to Vanguard and continue to own our Monahan's facility, which won't be producing produce anytime soon. So I hope that answers your question. Doug CooperManaging Director at Beacon Securities00:27:02So yes, so the only produce that we'll see on the financial statements post the transaction with Vanguard will be coming out of double one. Michael A. DeGiglioPresident & CEO at Village Farms International00:27:12Correct. Doug CooperManaging Director at Beacon Securities00:27:13Is that like is that profitable at that segment or the D1 is that profitable? Michael A. DeGiglioPresident & CEO at Village Farms International00:27:19Yes, it's always been profitable. It's our most profitable facility. Okay. Doug CooperManaging Director at Beacon Securities00:27:27And so I know Steve, you guys talked about pro form a, you'll release those in Q2 sometime. But ballpark figure, I've got Canadian cannabis, U. S. Cannabis, then The Netherlands just correct me if these numbers are right, US39 million in revenue and US6.9 million dollars of EBITDA in the quarter. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:27:53Yes, that's correct. Doug CooperManaging Director at Beacon Securities00:27:55Okay. What would be in the actual net and it's net that just those three groups, they're profitable on a net income basis. Right? Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:09Yes. This this quarter, they are. I mean, obviously, accounting charges can impact net income, but yes. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:14I Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:15look at operating. They're all positive operating income. Look that line. Doug CooperManaging Director at Beacon Securities00:28:20Okay. And then you'll be in a net cash position, as you talked about, to the tune of about 15,000,000 Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:30We'll be higher than that. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:32I don't think we gave a number. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:33We didn't give a number, but it's higher than that number. Doug CooperManaging Director at Beacon Securities00:28:36Okay. And then what's the do you have so you focus on the Canadian or the the cannabis segment of operation, you know, to as per the question earlier, I guess, the focus is in The Netherlands. Are you seeing any m and a opportunities in Canada, however, or are just gonna focus on primarily the wholesale and then the internationalNetherlands? Michael A. DeGiglioPresident & CEO at Village Farms International00:29:01Yes, for the foreseeable future, that's what we're going to do, focus on our organic growth in Canada, continue our export, driving our export sales and focus on building out The Netherlands. Doug CooperManaging Director at Beacon Securities00:29:13Okay. And just my last one, Netherlands, the Knitosmarinas Phase one, what the capacity or potential sales there? And then you talked about phase two, I think was four times the capacity once it's up and running. Is that can you just sort of Michael A. DeGiglioPresident & CEO at Village Farms International00:29:33It's quadrupling our current footprint, almost five times actually. Doug CooperManaging Director at Beacon Securities00:29:38And what would be the footprint post in phase one and what is it post phase two? Michael A. DeGiglioPresident & CEO at Village Farms International00:29:46Post phase two will be producing at around 10,000 to 12,000 kilos on an annualized basis. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:29:56Doug, the current facility is 2,000. Doug CooperManaging Director at Beacon Securities00:29:58Two thousand. Can you talk pricing pricing in The Netherlands, how is it stable, Just talk a little bit about pricing. Michael A. DeGiglioPresident & CEO at Village Farms International00:30:06It's very stable, but we'd rather say it. Ann Gillin LefeverCOO at Village Farms International00:30:10It's in line with what we have expected and modeled. So far, team's done a great job of delivering against that expectation producing great quality flour already. Doug CooperManaging Director at Beacon Securities00:30:24Okay and in terms of coffee houses who are on the program are they all just maybe talk about the demand the size of the market and how it's progressing with the coffee houses coming online. Michael A. DeGiglioPresident & CEO at Village Farms International00:30:34Yeah, it's really good. So there's five ninety coffee shops, about 80 are in phase one legalization and as of April 7 last month, it's mandated they can only buy legal product and of the 10 licenses that were issued, only seven are producing, so three aren't. So yeah, there's a need for additional capacity for sure. Doug CooperManaging Director at Beacon Securities00:30:57Okay, excellent work. Thanks guys. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:31:02Thanks, Doug. Thank Operator00:31:04you. Our next question comes from the line of Pablo Zuanic from Zuanic and Associates. Your question please. Pablo ZuanicManaging Partner at Zuanic & Associates00:31:17Yes, good morning, everyone. And of course, congratulations on the Produce spin. Can I just ask a couple of questions there? How did you determine the $40,000,000 I mean, what valuation metric was used for that? And then, bigger picture, why not spin everything, all the produce division? Pablo ZuanicManaging Partner at Zuanic & Associates00:31:39I realize that you want to give the Texas optionality, but maybe if you can discuss your thought process in terms of why these assets specifically and not the rest? Thank you. Michael A. DeGiglioPresident & CEO at Village Farms International00:31:49Well, the transaction actually, Pablo, was at $80,000,000 with $40,000,000 in cash, that's what we're reporting for those assets. And I'm not going get into the details, I could talk to you separately offline about it. But in the end, the company did have a fairness opinion on it. So it was really structured as an $80,000,000 deal, and I'll explain that to you separately with 40,000,000 in cash, 40,000,000 in equity of those assets. And you have to understand, this was a very important structure for us because we wanted to maintain optionality for cannabis and more importantly, the right operating partners to work with. Michael A. DeGiglioPresident & CEO at Village Farms International00:32:28Those two is what we were focused on for the last couple of years and in the end, we are very pleased with how the structure is, again giving us optionality both in Canada and The U. S. For the future of cannabis and having great partners that can continue to roll up the produce industry and hopefully that equity will be worth a great deal to shareholders in the future. Pablo ZuanicManaging Partner at Zuanic & Associates00:32:54No, of course. And then just to clarify, I know you said it's about one third of the produce assets, but in terms of revenue, it's a little more than that, right? I think the press release says the Canadian revenue is 25,000,000 but the total is 169,000,000 so it's like 84% of the revenue is being spun. Michael A. DeGiglioPresident & CEO at Village Farms International00:33:10Yes, all the revenue is going over to Vanguard with the exception of the revenue that's generated out of Delta One. So Delta One, we tied up exclusive marketing agreement with Vanguard, just like we've one of our existing revenues prior to the steal comes from third party partners in Mexico and Canada. So we've entered into a marketing agreement. So we will book those revenues going to and Vanguard will be selling that to our retail customers to the retail customers based on a marketing agreement and we'll book those revenues. But we are in a minority position. Pablo ZuanicManaging Partner at Zuanic & Associates00:33:47Okay, thank you. And then just two more quick questions. One in the case of Holland, have the coffee shops in the pilot begun to buy only exclusively from the licensed producers? Or are they still being allowed to buy from the gray market? Because that date keeps on moving, it seems, right? Pablo ZuanicManaging Partner at Zuanic & Associates00:34:07If you can clarify that. And then maybe for Pablo ZuanicManaging Partner at Zuanic & Associates00:34:09Steve, go on. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:34:13Only from the legal market as of April 7. Pablo ZuanicManaging Partner at Zuanic & Associates00:34:16Okay, Pablo ZuanicManaging Partner at Zuanic & Associates00:34:21thank you. And then the last one, Steve, in terms of what you talked about GMP in terms of hemp, you are manufacturing all the gummies in Could you offer that? Could you offer co manufacturing services to other companies out there? I know it's a very volatile industry. We don't know what's going happen at the state level, but it seems that you have a unique opportunity there to use your capacity not to make just your own gummies, but also to co manufacture for other people. Pablo ZuanicManaging Partner at Zuanic & Associates00:34:45Is that an opportunity? Thanks. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:34:48Yes, it's an opportunity. We've had discussions with others about that. Pablo ZuanicManaging Partner at Zuanic & Associates00:34:53Thank you. Doug CooperManaging Director at Beacon Securities00:34:56Thanks, Bob. Operator00:34:58Thank you. And our next question comes from the line of John Chapman from Alliance Global Partners. Your question please. John Chapman, your line is open. John Chapman, your line is open. Operator00:35:40And this does conclude the question and answer session of today's program. I'd like to hand the program back to Mike for any further remarks. Michael A. DeGiglioPresident & CEO at Village Farms International00:35:50Thank you, Jonathan. I just want to once again thank everybody for attending today's call and look forward to reporting our second quarter in August. Thank you. Operator00:35:59Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.Read moreParticipantsExecutivesMichael A. DeGiglioPresident & CEOStephen RuffiniExecutive Vice President & Chief Financial OfficerAnn Gillin LefeverCOOAnalystsFrederico GomesDirector, Institutional Research, Life Sciences at ATB Capital MarketsDoug CooperManaging Director at Beacon SecuritiesPablo ZuanicManaging Partner at Zuanic & AssociatesPowered by Key Takeaways Village Farms will privatize its fresh produce division into a new joint venture, Vanguard Foods LP, retaining a 37.9% stake and receiving US$40 million to unlock long-term value and allow each business to operate independently. Post-transaction, the company will focus exclusively on its global cannabis strategy, leveraging near 5 million sq ft of greenhouse assets to expand cultivation capacity by over 220% and support margin expansion. First quarter adjusted EBITDA surged 752% to CAD 9.6 million and net income climbed 75,291% to CAD 4.3 million, driven by a 285% increase in higher-margin international medical cannabis export sales and a Canadian cannabis gross margin improvement from 25% to 36%. The Lely Holland subsidiary contributed US$0.5 million in Q1 sales with a positive adjusted EBITDA margin of 15.8%, and construction of a phase 2 indoor facility will quadruple annual production capacity by Q1 2026. The U.S. hemp business returned to positive adjusted EBITDA with a 66% gross margin despite regulatory headwinds, while the clean energy segment added US$0.3 million in net income from royalty payments. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallVillage Farms International Q1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsPress ReleaseQuarterly report(10-Q) Village Farms International Earnings HeadlinesVillage Farms International, Inc. Completes Transaction, Transitions to Net Cash Position and Focuses on Global Cannabis ExpansionJune 2 at 7:19 AM | quiverquant.comVanguard Food LP Announces Closing of Transaction to Create Emerging Leader in North American Produce IndustryJune 2 at 7:00 AM | globenewswire.comBanks aren’t ready for this altcoin—are you?Donald Trump just fast-tracked TWO major crypto bills with an August deadline! Your window of opportunity is closing soon… Act now and get ready for what could be the most lucrative investment of your life.June 3, 2025 | Crypto 101 Media (Ad)Village Farms International Announces Closing of Transaction to Privatize its Fresh Produce BusinessJune 2 at 7:00 AM | globenewswire.comVillage Farms International (NASDAQ:VFF) Stock Rating Lowered by Wall Street ZenMay 25, 2025 | americanbankingnews.comHead-To-Head Contrast: Village Farms International (NASDAQ:VFF) and Green Thumb Industries (OTC:GTBIF)May 24, 2025 | americanbankingnews.comSee More Village Farms International Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Village Farms International? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Village Farms International and other key companies, straight to your email. Email Address About Village Farms InternationalVillage Farms International (NASDAQ:VFF), together with its subsidiaries, produces, markets, and sells greenhouse-grown tomatoes, bell peppers, and cucumbers in North America. It operates through four segments: Produce, Cannabis-Canada, Cannabis-U.S., and Energy. The company also produces and supplies cannabis products to other licensed providers and provincial governments in Canada and internationally; develops and sells cannabinoid-based health and wellness products, including ingestible, edibles, and topical applications; and produces power. It markets and distributes its products under the Village Farms brand name to retail supermarkets and fresh food distribution companies, as well as products produced under exclusive and non-exclusive arrangements from greenhouse supply partners. The company was formerly known as Village Farms Canada Inc. and changed its name to Village Farms International, Inc. in December 2009. Village Farms International, Inc. was founded in 1989 and is headquartered in Delta, Canada.View Village Farms International ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Ollie’s Q1 Earnings: The Good, the Bad, and What’s NextBroadcom Earnings Preview: AVGO Stock Near Record HighsUlta’s Beautiful Q1 Earnings Report Points to More Gains Aheade.l.f. Beauty Sees Record Surge After Earnings, Rhode DealCrowdStrike Stock Slips: Analyst Downgrades Before Earnings Bullish NVIDIA Market Set to Surge 50% Ahead of Q1 EarningsAdvance Auto Parts: Did Earnings Defuse Tariff Concerns? 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PresentationSkip to Participants Operator00:00:00Good morning, ladies and gentlemen. Welcome to Village Farms International's First Quarter twenty twenty five Financial Results Conference Call. Yesterday, Village Farms issued a news release reporting its financial results for the first quarter ended 03/31/2025. 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 the completion of this Details of how to access the replays are available in today's news release. Operator00:00:49Before 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 material assumptions were applied in providing these statements, many of which are beyond our control. 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 regulations, including its Form 10 ks and MD and A for the year ended 12/31/2024, and the 10 Q for the quarter ended 03/31/2025, which will be available on EDGAR and SEDAR. Plus, these forward looking statements are made as of today's date, for as required by applicable securities law. Operator00:01:59We undertake no obligation to publicly update or revise any such statements. I would now like to turn the call over to Michael DiGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DiGiglio. Michael A. DeGiglioPresident & CEO at Village Farms International00:02:15Thank you, Jonathan, and good morning and thank you for joining us today. With me today are Steve Ruffini, our Chief Financial Officer Anne Gillen LaFeva, our Chief Operating Officer Patty Smith, our Corporate Controller and Sam Gibbons, our Senior Vice President of Corporate Affairs. Before we get into the details of our Q1 results, I'd like to spend a few minutes discussing our announcement yesterday that we have signed a definitive agreement to execute a transformative transaction for our company. Under that agreement, we will privatize the majority of our fresh produce division into a new joint venture backed by private investment firms, including Sweat Equities to be called Vanguard Foods LP. We will retain a 37.9% ownership interest in Vanguard and receive $40,000,000 in cash proceeds. Michael A. DeGiglioPresident & CEO at Village Farms International00:03:10We believe this transaction will unlock tremendous long term value for both our cannabis and produce businesses and allow each of them to flourish independently. This transaction will drastically improve the upside potential for our thirty six year legacy in the produce business as a private company with committed experienced industry partners who have created significant value for their shareholders in the past. We are extremely excited about this joint venture and to partner with Charlie Sweat from Sweat Equities to transform the trajectory of our produce business and create a premier branded CPG foods company supporting healthy lifestyles and sustainable farming practices. For those of you who are less familiar with the produce industry, Charlie Sweatt completely revolutionized the organic salad category during his tenure at Earthbound Farms, an organic produce company that he grew from $10,000,000 to over $540,000,000 in revenues during his fifteen year tenure before selling the business for $600,000,000 Charlie knows our industry inside and out and together we see tremendous potential to build a new private produce company that will provide a wider array of products for our customers and complete effectively with our largest competitors in the marketplace. Vanguard is a holding company and will become part of the new parent of our Fresh division. Michael A. DeGiglioPresident & CEO at Village Farms International00:04:44Our Fresh division will serve as the cornerstone of Vanguard's commercial operations and growth strategy and Vanguard will be backstopped by additional capital support from our private equity partners to execute a roll up strategy of other leading produce brands and assets in North America. Under the terms of the agreement, we will contribute our Texas based 40 acre Martha II and our 40 acre Fort Davis facility, all of our fresh produce related intellectual property except for the Village Farms name and transfer all of our produce distribution facilities, employees and operational control of these facilities to Vanguard. I will represent Village Farms' interest on Vanguard's board and initially serve as interim CEO. Village Farms' CFO, Steve Ruffini, will also be appointed to Vanguard's board. We will retain full ownership of all our Canadian greenhouse assets at Delta British Columbia, as well as our Marfa One and Permian Basin Monahan's facility for future cannabis market optionality. Michael A. DeGiglioPresident & CEO at Village Farms International00:05:54These assets represent an incremental near 5,000,000 square feet of future expansion potential for cannabis, providing a clear runway to expand cannabis cultivation by more than 220% compared to our operational capacity today through our own greenhouse assets. In addition to drastically improving the long term upside potential of our produce business, this split of produce and cannabis business acknowledges the strength of our cannabis business as one of the largest and most respected scaled cultivators and marketers of cannabis on the planet. This success grew from the lessons learned and expertise shared from our thirty six years in controlled environmental agriculture, which we carefully applied to the launch of the cannabis business some eight years ago now. Now is the time to focus on executing our global cannabis growth strategy and invest our improved cash flow to continue supporting this growth while ensuring that we maintain substantial future expansion potential as markets continue opening up to cannabis. By privatizing one third of our greenhouse assets and operations, we've generated $40,000,000 in cash, created a greater upside potential for our ownership interest in the produce industry with committed private equity partners, significantly improved the forward visibility into our financial performance and transformed our company into one of the most attractive platforms for revenue growth and margin expansion across the global cannabis industry. Michael A. DeGiglioPresident & CEO at Village Farms International00:07:30For comparative purposes, our market cap was less than $80,000,000 as of the market close yesterday. We expect this transaction to close during the second quarter, at which time we plan to provide the investment community with additional details surrounding our pro form a financial performance and outlook. Now let's move to a summary of our Q1 performance, which reflects an excellent start in 2025 of our pro form a operations. Canadian cannabis had one of the strongest quarters over the last three years as we continue to successfully execute on our strategy to leverage our experience and leadership in Canada into other international markets as we remain focused on profitability. Importantly, our focus on prioritizing more profitable sales over competing for low margin business to drive volume is reflected meaningful in our results. Michael A. DeGiglioPresident & CEO at Village Farms International00:08:26Higher margin medical export sales from Canada for Q1 grew 285% year over year as the business continues to gain momentum. We continue to benefit from the addition of our fifth market, New Zealand, as well as continued growth in existing markets in Germany, The UK and Australia, placing us firmly on track to achieve our stated goal of at least tripling our medical export sales this year. Lower retail branded sales in Q1 were expected and also reflect our focus on improving profitability, specifically our conscious decision to move away from lower tier categories that don't align with the quality of our flower and longer term global strategic objectives. We also continue to be optimistic about our wholesale channel in Canada, again with a focus on profitability. While sales have been relatively steady for the last four quarters, gross margin on those sales for Q1 was up dramatically compared to Q1 of last year. Michael A. DeGiglioPresident & CEO at Village Farms International00:09:27As we discussed on last quarter's call, we felt we were entering 2025 with a very healthy inventory position, which would enable our teams to focus on quality and profitability and we are seeing the impact meaningfully in Q1 results and we expect this trend to continue. All of this contributed to the expansion of our gross margin for Canadian cannabis from 25% in Q1 of last year to 36% in line with our targeted range of 30% to 40% gross margin. And given the more favorable margin profile of our international medical sales, we anticipate that we'll be able to sustain this range for the foreseeable future. These favorable impacts drove strong increases in adjusted EBITDA and net income of 75291% respectively to CAD9.6 million and CAD4.3 million with another quarter of positive cash flow from operations. Q1 also marked the first quarter of revenue contribution from our Lely Holland subsidiary in The Netherlands, which you will now see broken out as a separate segment in our reporting financials. Michael A. DeGiglioPresident & CEO at Village Farms International00:10:43Sales of nearly $05,000,000 reflected approximately one month of revenue. Importantly, pricing, which is very attractive relative to Canada continues to be in line with our expectations. Adjusted EBITDA was essentially breakeven with just one month of revenue. We are now well underway on construction of Phase two of our Netherlands operation, a brand new state of the art indoor facility in the town of Groggenin. This facility, which we expect will be completed in Q1 of next year will quadruple our annual production capacity. Michael A. DeGiglioPresident & CEO at Village Farms International00:11:18Given the more favorable margin profile of our Netherlands recreational sales, the completion of our Phase two facility is expected to enable us to drive a strong year of profitable growth in 2026. In summary, we feel very good about our start to the fiscal year of 2025. We are seeing our prioritization of more profitable sales reflected in our financial results across our cannabis business with continued momentum in international export sales in Lely Hall. Our joint venture for Fresh Produce will afford us greater focus and resources to execute our global cannabis strategy and enable us to generate stronger cash flows to continue to fuel that growth, all while retaining a meaningful ownership position, what we believe is a very attractive opportunity to realize significant long term value with the support of outstanding private equity partners. So this concludes my prepared remarks and I'll now turn the call over to Steve to review the financials before I make some last closing comments. Michael A. DeGiglioPresident & CEO at Village Farms International00:12:24Steve? Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:12:25Thanks, Mike. I'll start with a review of our consolidated results. We appreciate the substantive nature of the Vanguard transaction we'll have on our financial results. And after closing, we will provide pro form a results for the full year 2024 and the first quarter of twenty twenty five. As our Canadian produce assets do not generate much operational activity due to seasonality in Q1, while not official, one could eliminate the BF Fresh column in our reported segmented results and ascertain the substantive nature, improvement in our reported results. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:13:04Consolidated revenues US77 million dollars were roughly in line with our prior year first quarter revenues of US78 million dollars The slight decrease of 1% is due to lower Canadian cannabis revenues, which were negatively impacted by a stronger US dollar in Q1 twenty twenty five versus Q1 twenty twenty four. Our net loss of $6,700,000 or $06 per share was lower than our prior year first quarter loss of $2,900,000 or $03 per share solely due to our weaker year on year performance in VFresh. Our VFresh and consolidated results were negatively impacted by a $4,300,000 incremental non cash accounting charge to our VFresh cost of sales due to the impact of dust storms that occurred at our Texas facilities in March and April. Our actual cultivation costs were in line with our budget and prior year expenditures. As a reminder, our tomato crops are annual crops and we harvest them once a year. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:14:09In our Texas greenhouse, that crop season runs from September to June. As we produce and sell tomatoes, we charge the estimated full crop cost against the sale of crops from each facility. The collective damage of these dust storms puts tremendous stress on our plants and we lost a good portion of our expected full crop yield, which requires us to take an incremental charge to our cost of sales to catch up our full crop cost through March 31, based on our latest crop forecast. The dust storms were a first for Village Farms and had a significant impact at our Fort Davis facility, resulting in a 31 increase in our cost per pound from just that one facility. This obviously had a disappointing impact on our first quarter performance. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:14:58Consolidated EBITDA was essentially flat at $81,000 compared to $3,600,000 in Q1 of last year. The decrease in our adjusted EBITDA was driven entirely by our fresh produce segment. Turning now to our cannabis businesses, I will start with Canadian cannabis, which I will discuss the Canadian dollars. I will add here that the change in the exchange rate compared to Q1 of last year did have an impact on reported results, which are reported in U. S. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:15:27Dollars. Net sales were 50,000,000 which was roughly in line with Q1 last year, driven mainly by the strong growth in international sales. We benefited from the continued momentum in our international medicinal export sales, particularly in the German market as we expanded our customer base as that market continues to grow, as well as adding new markets like New Zealand, resulting in the 285% increase in exports in Q1 last year from last year. In fact, our international first quarter sales of $7,700,000 were nearly as much as our entire 2024 international sales of $8,400,000 Non branded sales were up 3% year over year to $9,000,000 as we continue to be opportunistic where possible to align supply with demand, notably as Mike mentioned, at much higher margins. As a reminder that up until this quarter, for most of the past two years, we have been selling off lower margin SKUs and non spec inventory at unfavorable margins to convert inventory to cash. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:16:33Consistent with our focus on profitable growth, retail branded sales were 22% lower than Q1 last year at 32,700,000.0 with the decrease reflecting a shift away from value offerings, I. E. Lower margin value brands with a stricter focus on higher margin branded sales as well as the international medicinal market. Canadian cannabis gross margin was 36%, up from 25% in Q1 last year, well within our target range of 30% to 40% and demonstrating the positive result of our expanded medicinal export sales as well as a focus on higher margin the higher margin business in Canada as well as continued progress in realizing production efficiencies. SG and A expense as a percentage of sales for Q1 was 25% compared to 21% in Q1 last year. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:17:30The increase being primarily key account spends, which while it is an SG and A cost is tied to branded sales. Q1 adjusted EBITDA for Canadian cannabis was $9,600,000 or as a percentage of net sales over 19%, up a very healthy 75% from Q1 of last year, due mainly to improved margins. Finally, as we do each quarter, I will highlight that in Q1 we paid excise taxes on retail branded sales of $20,000,000 another direct cost of branded sales or nearly 40% of branded retail revenues and more than double our SG and A. With the recent Canadian election behind us, we renew our call in favor of excise tax reform to support the many benefits of the sustainable legal domestic Canadian cannabis industry. This quarter also saw the initial contribution from our first international recreational cannabis sales through our Lely Holland operations in The Netherlands, which started partway through the quarter in late February. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:18:38Sales were $485,000 and adjusted EBITDA was $77,000 reflecting an adjusted EBITDA margin of 15.8%. Not many start up operations have such nice margins, which is a testament to our ability to bring our cannabis knowledge and cultivation expertise into new markets. Turning to our U. S. Cannabis business, although Q1 sales of $3,900,000 continued to trend lower due to continuing state level actions to deal with unregulated hemp products, which in some states has resulted in all intoxicating hemp based products being banned, we continue to generate a healthy gross margin of 66% and return this segment back to positive adjusted EBITDA. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:19:22We believe we have stabilized this business segment even with the regulatory headwinds and we're looking and we're working on a number of initiatives to reinvigorate sales on our responsible GMP produced natural hemp products as we await improved regulations with some states now requiring GMP standards, which is a welcome regulatory change as one of the few hemp based GMP producers. Finally, Village Farms Clean Energy generated $300,000 in net income from royalty payments we received from our RNG partner providing a healthy stream of incremental profits for the company. Turning to consolidated cash flows and the balance sheet. Total cash flow from operations was negative $6,400,000 in Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:20:09the first Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:20:09quarter, partially due to the timing of government payments, which will normalize over the full year. We ended Q1 with a cash $15,000,000 and working capital of $50,000,000 We remain comfortable with our net debt level of $19,300,000 when the Vanguard transaction closes, which will require us to at least pay off our operating produce line of $5,000,000 we will be in a net cash position. Total term debt at the end of Q1 was 34,000,000 Subsequent to quarter end, we amended our loan with Farm Credit Canada to improve financial covenants. These changes reflect the considerable expansion and growth of our business since entering into the original agreement in 2013. The FCC loan matures on May 2027. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:21:03We also refinanced our three Canadian cannabis term loans, consolidating them into a single facility with two of our existing lenders with a 50 basis point decrease in the interest rate, more attractive financial covenants and a new maturity date of February 2028. In closing, we feel very good about our financial position and performance of our cannabis businesses and believe the new ownership structure of our fresh produce business will allow us to realize more meaningful long term value creation as we focus more of our human capital and financial resources on our cannabis businesses. I will now turn Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:21:41the call back to Mike. Mike? Michael A. DeGiglioPresident & CEO at Village Farms International00:21:42Thanks, Steve. To reiterate, Van Gogh's transaction monetizes one third of our greenhouse assets, positions our produce business to thrive as an independent private entity and maintains a significant expansion potential for us to continue building our leadership position and reputation in one of the largest and most respected scale cultivators and marketers of cannabis on the planet. Village Farms is all in on the future of cannabis globally and we're excited to write this next chapter. Michael A. DeGiglioPresident & CEO at Village Farms International00:22:10We have never had a clearer path to drive stronger revenue growth, margin expansion and cash flow generation, which we believe will drive very strong returns for shareholders in the future. Thank you, operator. We'll take questions now. Operator00:22:24Certainly. And our first question comes from the line of Federico Gomes from ATB Capital Markets. Your question please. Frederico GomesDirector, Institutional Research, Life Sciences at ATB Capital Markets00:22:34Hi, good morning. Thanks for taking my questions. Congratulations on the transaction and the results as well. I guess the first question, talking about balance sheet, as you mentioned, Steve, with the transaction here, you would be in a net cash position, really strong balance sheet and really focused on your cannabis platform. So I'm curious about what are you thinking about capital allocation here, in addition to the expansion that is already undergoing in The Frederico GomesDirector, Institutional Research, Life Sciences at ATB Capital Markets00:23:05Netherlands? Thanks. Michael A. DeGiglioPresident & CEO at Village Farms International00:23:09Well, right now, we are very happy building our war chest, so to speak, continue to monitor The US market for optionality going forward. We think it's going to be exciting when and if that day occurs and hopefully it will be in the next couple of years. So that's the market we really want to eyeball and keep close to. Michael A. DeGiglioPresident & CEO at Village Farms International00:23:31So I think, you know, we're very happy with organic growth as opposed to non organic growth. Non organic growth is tough, bringing in companies that maybe not don't have tremendous value, creative value for us. So I think, you know, we're going to see where we go build our infrastructure for the rest of the year and wait and see what happens. I think, we started this year sort of very balanced on our inventories levels and in fact, we are short of capacity. So I think we'll look at further expansion that's on our radar screen of producing cannabis in Canada at our current facilities for 2026 and beyond and we'll make that decision here probably in the next quarter. Michael A. DeGiglioPresident & CEO at Village Farms International00:24:23And then we want to get Lely Phase two as they sit up and running. So I think we're in a good position and we'll just leave it at that Fred. Frederico GomesDirector, Institutional Research, Life Sciences at ATB Capital Markets00:24:34Great, appreciate that color. Second question on your non branded segments, you mentioned the financials here, you saw a good average selling price increase here in both flower and on both trim, pretty strong prices. Do you continue to see prices improving in Canada on the non branded channel? You know, do you think that there's further upside here for wholesale? Ann Gillin LefeverCOO at Village Farms International00:25:05Good morning, it's Anne. We are seeing continued improvement in pricing. Certainly on a year over year basis, the curve can shorten a little bit in terms of month to month or prior period comparisons. But overall, year over year, B2B is strengthening. We do think that's a function of both a reduction in excess supply from some reduction of growing, as well as the demand that we're seeing and others are seeing from international markets. Ann Gillin LefeverCOO at Village Farms International00:25:41So supply has tightened up, and that helps pricing. Frederico GomesDirector, Institutional Research, Life Sciences at ATB Capital Markets00:25:47Perfect. Thanks for that. I'll hop back in the queue. Thanks. Michael A. DeGiglioPresident & CEO at Village Farms International00:25:50Thank you. Operator00:25:51Thank you. And our next question comes from the line of Douglas Cooper from Beacon Securities. Your question please. Doug CooperManaging Director at Beacon Securities00:25:59Hey, good morning guys and congratulations on the transaction. It looks fantastic. Just to be clear, what are you left with after you move some stuff into Vanguard? So you'd be left with D1 and Delta. I'm just talking about Produce side, right? Doug CooperManaging Director at Beacon Securities00:26:14And then a couple of assets in Texas? Michael A. DeGiglioPresident & CEO at Village Farms International00:26:19Yeah, D1 and Delta, which will continue to produce produce for the foreseeable future. As you know, D2 is half produce and half cannabis. I just mentioned that we're looking at that full conversion of D2 that decision will be made and if that occurs then really D1 will really be only cannabis producing facility. However, that being said, we continue to own the asset of Marfa One, which will be lease triple net lease to Vanguard and continue to own our Monahan's facility, which won't be producing produce anytime soon. So I hope that answers your question. Doug CooperManaging Director at Beacon Securities00:27:02So yes, so the only produce that we'll see on the financial statements post the transaction with Vanguard will be coming out of double one. Michael A. DeGiglioPresident & CEO at Village Farms International00:27:12Correct. Doug CooperManaging Director at Beacon Securities00:27:13Is that like is that profitable at that segment or the D1 is that profitable? Michael A. DeGiglioPresident & CEO at Village Farms International00:27:19Yes, it's always been profitable. It's our most profitable facility. Okay. Doug CooperManaging Director at Beacon Securities00:27:27And so I know Steve, you guys talked about pro form a, you'll release those in Q2 sometime. But ballpark figure, I've got Canadian cannabis, U. S. Cannabis, then The Netherlands just correct me if these numbers are right, US39 million in revenue and US6.9 million dollars of EBITDA in the quarter. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:27:53Yes, that's correct. Doug CooperManaging Director at Beacon Securities00:27:55Okay. What would be in the actual net and it's net that just those three groups, they're profitable on a net income basis. Right? Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:09Yes. This this quarter, they are. I mean, obviously, accounting charges can impact net income, but yes. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:14I Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:15look at operating. They're all positive operating income. Look that line. Doug CooperManaging Director at Beacon Securities00:28:20Okay. And then you'll be in a net cash position, as you talked about, to the tune of about 15,000,000 Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:30We'll be higher than that. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:32I don't think we gave a number. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:28:33We didn't give a number, but it's higher than that number. Doug CooperManaging Director at Beacon Securities00:28:36Okay. And then what's the do you have so you focus on the Canadian or the the cannabis segment of operation, you know, to as per the question earlier, I guess, the focus is in The Netherlands. Are you seeing any m and a opportunities in Canada, however, or are just gonna focus on primarily the wholesale and then the internationalNetherlands? Michael A. DeGiglioPresident & CEO at Village Farms International00:29:01Yes, for the foreseeable future, that's what we're going to do, focus on our organic growth in Canada, continue our export, driving our export sales and focus on building out The Netherlands. Doug CooperManaging Director at Beacon Securities00:29:13Okay. And just my last one, Netherlands, the Knitosmarinas Phase one, what the capacity or potential sales there? And then you talked about phase two, I think was four times the capacity once it's up and running. Is that can you just sort of Michael A. DeGiglioPresident & CEO at Village Farms International00:29:33It's quadrupling our current footprint, almost five times actually. Doug CooperManaging Director at Beacon Securities00:29:38And what would be the footprint post in phase one and what is it post phase two? Michael A. DeGiglioPresident & CEO at Village Farms International00:29:46Post phase two will be producing at around 10,000 to 12,000 kilos on an annualized basis. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:29:56Doug, the current facility is 2,000. Doug CooperManaging Director at Beacon Securities00:29:58Two thousand. Can you talk pricing pricing in The Netherlands, how is it stable, Just talk a little bit about pricing. Michael A. DeGiglioPresident & CEO at Village Farms International00:30:06It's very stable, but we'd rather say it. Ann Gillin LefeverCOO at Village Farms International00:30:10It's in line with what we have expected and modeled. So far, team's done a great job of delivering against that expectation producing great quality flour already. Doug CooperManaging Director at Beacon Securities00:30:24Okay and in terms of coffee houses who are on the program are they all just maybe talk about the demand the size of the market and how it's progressing with the coffee houses coming online. Michael A. DeGiglioPresident & CEO at Village Farms International00:30:34Yeah, it's really good. So there's five ninety coffee shops, about 80 are in phase one legalization and as of April 7 last month, it's mandated they can only buy legal product and of the 10 licenses that were issued, only seven are producing, so three aren't. So yeah, there's a need for additional capacity for sure. Doug CooperManaging Director at Beacon Securities00:30:57Okay, excellent work. Thanks guys. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:31:02Thanks, Doug. Thank Operator00:31:04you. Our next question comes from the line of Pablo Zuanic from Zuanic and Associates. Your question please. Pablo ZuanicManaging Partner at Zuanic & Associates00:31:17Yes, good morning, everyone. And of course, congratulations on the Produce spin. Can I just ask a couple of questions there? How did you determine the $40,000,000 I mean, what valuation metric was used for that? And then, bigger picture, why not spin everything, all the produce division? Pablo ZuanicManaging Partner at Zuanic & Associates00:31:39I realize that you want to give the Texas optionality, but maybe if you can discuss your thought process in terms of why these assets specifically and not the rest? Thank you. Michael A. DeGiglioPresident & CEO at Village Farms International00:31:49Well, the transaction actually, Pablo, was at $80,000,000 with $40,000,000 in cash, that's what we're reporting for those assets. And I'm not going get into the details, I could talk to you separately offline about it. But in the end, the company did have a fairness opinion on it. So it was really structured as an $80,000,000 deal, and I'll explain that to you separately with 40,000,000 in cash, 40,000,000 in equity of those assets. And you have to understand, this was a very important structure for us because we wanted to maintain optionality for cannabis and more importantly, the right operating partners to work with. Michael A. DeGiglioPresident & CEO at Village Farms International00:32:28Those two is what we were focused on for the last couple of years and in the end, we are very pleased with how the structure is, again giving us optionality both in Canada and The U. S. For the future of cannabis and having great partners that can continue to roll up the produce industry and hopefully that equity will be worth a great deal to shareholders in the future. Pablo ZuanicManaging Partner at Zuanic & Associates00:32:54No, of course. And then just to clarify, I know you said it's about one third of the produce assets, but in terms of revenue, it's a little more than that, right? I think the press release says the Canadian revenue is 25,000,000 but the total is 169,000,000 so it's like 84% of the revenue is being spun. Michael A. DeGiglioPresident & CEO at Village Farms International00:33:10Yes, all the revenue is going over to Vanguard with the exception of the revenue that's generated out of Delta One. So Delta One, we tied up exclusive marketing agreement with Vanguard, just like we've one of our existing revenues prior to the steal comes from third party partners in Mexico and Canada. So we've entered into a marketing agreement. So we will book those revenues going to and Vanguard will be selling that to our retail customers to the retail customers based on a marketing agreement and we'll book those revenues. But we are in a minority position. Pablo ZuanicManaging Partner at Zuanic & Associates00:33:47Okay, thank you. And then just two more quick questions. One in the case of Holland, have the coffee shops in the pilot begun to buy only exclusively from the licensed producers? Or are they still being allowed to buy from the gray market? Because that date keeps on moving, it seems, right? Pablo ZuanicManaging Partner at Zuanic & Associates00:34:07If you can clarify that. And then maybe for Pablo ZuanicManaging Partner at Zuanic & Associates00:34:09Steve, go on. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:34:13Only from the legal market as of April 7. Pablo ZuanicManaging Partner at Zuanic & Associates00:34:16Okay, Pablo ZuanicManaging Partner at Zuanic & Associates00:34:21thank you. And then the last one, Steve, in terms of what you talked about GMP in terms of hemp, you are manufacturing all the gummies in Could you offer that? Could you offer co manufacturing services to other companies out there? I know it's a very volatile industry. We don't know what's going happen at the state level, but it seems that you have a unique opportunity there to use your capacity not to make just your own gummies, but also to co manufacture for other people. Pablo ZuanicManaging Partner at Zuanic & Associates00:34:45Is that an opportunity? Thanks. Stephen RuffiniExecutive Vice President & Chief Financial Officer at Village Farms International00:34:48Yes, it's an opportunity. We've had discussions with others about that. Pablo ZuanicManaging Partner at Zuanic & Associates00:34:53Thank you. Doug CooperManaging Director at Beacon Securities00:34:56Thanks, Bob. Operator00:34:58Thank you. And our next question comes from the line of John Chapman from Alliance Global Partners. Your question please. John Chapman, your line is open. John Chapman, your line is open. Operator00:35:40And this does conclude the question and answer session of today's program. I'd like to hand the program back to Mike for any further remarks. Michael A. DeGiglioPresident & CEO at Village Farms International00:35:50Thank you, Jonathan. I just want to once again thank everybody for attending today's call and look forward to reporting our second quarter in August. Thank you. Operator00:35:59Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.Read moreParticipantsExecutivesMichael A. DeGiglioPresident & CEOStephen RuffiniExecutive Vice President & Chief Financial OfficerAnn Gillin LefeverCOOAnalystsFrederico GomesDirector, Institutional Research, Life Sciences at ATB Capital MarketsDoug CooperManaging Director at Beacon SecuritiesPablo ZuanicManaging Partner at Zuanic & AssociatesPowered by