Village Farms International Reports Q3 2021 Financial Results
- Consolidated EPS of $0.01 per share and Consolidated Adjusted EBITDA of $6.8 Million, Driven by 12th Consecutive Quarter of Pure Sunfarms’ Positive Adjusted EBITDA
- Pure Sunfarms Remains Top-Selling Dried Flower Brand in Ontario, Alberta and British Columbia
- Completed the Acquisition of Balanced Health Botanicals: Combined North American Cannabis Operations Comprised 43% of Total Village Farms Sales
- Village Farms Fresh Produce Delivered Positive Adjusted EBITDA
VANCOUVER, BC, Nov. 9, 2021 /PRNewswire/ – Village Farms International, Inc. (“Village Farms” or the “Company”) (NASDAQ: VFF) (TSX: VFF) today announced its financial results for the third quarter ended September 30, 2021. All figures are in U.S. dollars unless otherwise indicated. For Consolidated Results see below.
Management Commentary
“Our strong third quarter results were driven by another record performance from our Canadian cannabis business, Pure Sunfarms, as well as a partial quarter’s contribution from the acquisition of Balanced Health Botanicals, and improved results in our Village Farms Fresh Produce business,” said Michael DeGiglio, CEO, Village Farms. “Pure Sunfarms achieved record net sales and adjusted EBITDA since launching its retail branded products two years ago, with a healthy 44% gross margin, driven by our focus on profitable market share, leading cost of production and leadership in premium quality flower. We are especially proud of this performance during a period that saw aggressive price reductions by certain competitors in what appears to be an attempt to “buy” market share, dispose of inventory, and/or generate needed cash, while we have maintained the same “Everyday Premium” pricing strategy we launched with two years ago, while enhancing our gross margin.”
Related: Why is VFF a strong buy?
“We are proud to have achieved what we have to date organically, and look forward to continuing to build on our leading market share performance in the expanding Canadian market, while additionally pursuing international sales. To address anticipated demand, we began planting out in half of our second 1.1 million square foot production facility (Delta 2) in September. Internationally, Pure Sunfarms completed its first export shipment and saw the completion of the EU-GMP certification inspection, a critical step towards EU-GMP certification and future sales into the European medical market. Upon receipt, we plan to aggressively pursue exports to EU-GMP jurisdictions, including Israel, with the same “Everyday Premium” strategy that has been so successful in Canada.”
Related: Village Farms International Reports Q2 2021 Financial Results
“With the acquisition of 100% of Balanced Health Botanicals during the quarter, our combined Canadian and U.S. cannabis operations generated $31.2 million in sales, comprising 43% of Village Farms’ total sales, and $9.3 million in adjusted EBITDA, with only a partial quarter’s contribution from Balanced Health. Balanced Health not only provides a growing and profitable platform with exceptional cannabis experience for the U.S. CBD market opportunity but also the potential for expansion across all cannabinoid products, including high-THC products, as permissible under currently evolving legislation. We continue to monitor developments in cannabis legislation for this opportunity, as well as the opportunity to leverage our exceptional U.S. greenhouse operations for the U.S. high-THC market, when permitted to do so.”
Related: Village Farms International’s Pure Sunfarms Receives Cannabis Cultivation License Amendment
“Village Farms Fresh Produce business saw improved financial results during the third quarter as tomato pricing recovered due to more stable retail demand amidst industry supply constraints. We continue to manage this business with a focus on profitability and enhancing our market share and product offerings to our retail customers, as we are increasingly encouraged about the future prospects for the Controlled Environment Agriculture produce industry and our opportunities in it.”
Canadian Cannabis (Pure Sunfarms) Third Quarter and Other Recent Highlights
(Dollar Amounts are Before Village Farms’ Proportionate Share in the year ago period)
- Achieved record revenue, gross margin and adjusted EBITDA since the launch of its retail branded products in late 2019:
- 53% year-over-year growth and 13% sequential growth in total net sales to C$34.5 million (US$27.4 million);
- 44% gross margin, above the Company’s stated target range of 30 to 40%;
- 93% year-over-year and 20% sequential growth in Adjusted EBITDA to C$10.9 million (US$8.6 million), the 12th consecutive quarter of positive Adjusted EBITDA;
- Maintained the leading market share positions in key markets:
- Remained the top-selling brand* of dried flower products:
- In Ontario (by kilograms sold and dollars sold) for the third quarter 2021 and for the period since Retail Branded sales launch in October 2019;
- In Alberta** for the third quarter 2021 and monthly since October 2020 (by dollars sold);
- In British Columbia** for the third quarter 2021 and monthly since October 2020 (by dollars sold);
- Remained the top-selling Licensed Producer*** of dried flower products in Ontario (by kilograms sold and dollars sold) for the quarter ended September 30, 2021;
- Remained the top-selling brand* of dried flower products:
- Launched 31 new SKUs across four product categories;
- Completed its first export shipment of cannabis, supplying a variety of high-quality, high-THC dried flower products to Village Farms’ minority interest investee, Australia-based Altum International Pty Ltd. for the Australian medicinal cannabis market;
- Commenced cannabis cultivation in the completed half of its second 1.1 million square foot greenhouse facility, Delta 2; and,
- The certifying body of European Union Good Manufacturing Practices (EU-GMP), EUDRA, completed inspection of the Delta 3 facility.
|
* |
Based on OCS market data for the quarter ended September 30, 2021. |
|
** |
Market share performance data cited has been calculated by Pure Sunfarms from sales information provided by Buddi retail store data from over 300 retailers across Alberta and British Columbia as of September 30, 2021. |
|
*** |
Market share performance and data cited has been calculated by Pure Sunfarms from sales information provided by OCS as of September 30, 2021. |
Canadian Cannabis (Pure Sunfarms) Financial Summary for the Three and Nine Months Ended September 30, 2021 and September 30, 2020 (Before Village Farms’ Proportionate Share)
|
(millions except % metrics) |
Three Months Ended September 30, |
||||
|
2021 |
2020 |
Change of C$ |
|||
|
C$ |
US$ |
C$ |
US$ |
||
|
Total Gross Sales |
$45.6 |
$36.2 |
$28.8 |
$21.6 |
+59% |
|
Total Net Sales |
$34.5 |
$27.4 |
$22.6 |
$17.1 |
+53% |
|
Gross Margin 1 |
44% |
44% |
34% |
34% |
+26% |
|
SG&A |
$6.7 |
$5.4 |
$3.3 |
$2.4 |
-106% |
|
Share-based compensation |
$0.3 |
$0.2 |
$0.0 |
$0.0 |
N/A |
|
Net income |
$6.7 |
$5.3 |
$2.8 |
$2.0 |
+140% |
|
Adjusted EBITDA 3 |
$10.9 |
$8.6 |
$5.7 |
$4.3 |
+93% |
|
Adjusted EBITDA Margin 3 |
32% |
31% |
25% |
25% |
+26% |
|
(millions except % metrics) |
Nine Months Ended September 30, |
||||
|
2021 |
2020 |
Change of C$ |
|||
|
C$ |
US$ |
C$ |
US$ |
||
|
Total Gross Sales |
$118.1 |
$94.5 |
$69.6 |
$51.4 |
+70% |
|
Total Net Sales |
$87.0 |
$69.6 |
$53.5 |
$39.6 |
+63% |
|
Gross Margin 1 |
39% |
39% |
40% |
40% |
-3% |
|
SG&A |
$17.1 |
$13.7 |
$9.1 |
$6.7 |
-88% |
|
Share-based compensation |
$1.9 |
$1.5 |
$0.0 |
$0.0 |
N/A |
|
Net (loss) income 2 |
$7.1 |
$5.7 |
$12.4 |
$9.0 |
-43% |
|
Adjusted EBITDA 3 |
$23.1 |
$18.5 |
$14.9 |
$11.0 |
+55% |
|
Adjusted EBITDA Margin 3 |
27% |
27% |
28% |
28% |
-4% |
|
1. |
Gross margin for the three months ended September 30, 2021 excludes the (C$1,534) (US$1,217) reduction in cost of sales and for the nine months ended September 30, 2021 excludes the C$2,291 (US$1,841) charge, respectively, inventory adjustment from the revaluation of inventory to fair value at the acquisition date of November 2, 2020. |
|
2. |
Net income includes C$6,044 (US$4,348) of debt forgiveness income as an outcome of the “Settlement Agreement” in March 2020 between Pure Sunfarms, Emerald Health Therapeutics and the Company. |
|
3. |
Adjusted EBITDA is not a recognized earnings measure and does not have a standard meaning prescribed in by GAAP. See “Non-GAAP Measures” below. |
Canadian Cannabis (Pure Sunfarms) Sales Composition by Product Group
|
Three months ended |
Nine months ended |
|||
|
Channel |
2021 |
2020 |
2021 |
2020 |
|
Retail, Flower |
59% |
49% |
64% |
52% |
|
Retail, Oil & 2.0 Product |
7% |
4% |
9% |
2% |
|
Wholesale, Flower and Trim |
34% |
47% |
27% |
46% |
Village Farms’ Third Quarter and Other Recent Highlights
- Total cannabis sales (Pure Sunfarms and Balanced Health Botanicals combined) were $31.2 million, which included Pure Sunfarms sales of $27.4 million and Balanced Health sales of $3.8 million;
- Total Canada and U.S. cannabis adjusted EBITDA (Pure Sunfarms and Balanced Health Botanicals combined) was $9.3 million, which included Pure Sunfarms Adjusted EBITDA of $8.6 million and Balanced Health Adjusted EBITDA of $0.7 million;
- Improved financial results from Village Farms Fresh Produce, with positive Adjusted EBITDA of $1.4 million as pricing trended upward toward historical levels following one of the lowest pricing environments for tomatoes-on-the-vine and beefsteak varieties in the past ten years during the first half of 2021;
- Acquired 100% interest of profitable Colorado-based CBD-platform Balanced Health Botanicals, which owns and operates one of the leading brands in the U.S. CBD market, providing immediate entry into that market in a consumer products category adjacent to the high-THC cannabis market, as well as the broader consumer packaged goods (CPG) wellness arena;
- Balanced Health Botanicals expanded its product portfolio with the launch of its innovative Synergy Collection, developed to enhance the multitude of benefits offered by the hemp plant and other ingredients beyond CBD alone;
- Entered into an option agreement whereby the Company has the right to acquire an 80% ownership interest in Netherlands-based Leli Holland B.V., one of ten applicants selected by lottery to receive a license (subject to customary government approval) to legally cultivate and distribute cannabis to retailers under the Dutch government’s Experiment to Investigate Closed Cannabis Supply Chains; and,
- Unveiled new corporate branding embodies the Company’s evolution over the last four years to a vertically integrated plant-based consumer products company, targeting high-growth, large-market opportunities in North America and around the world, including cannabinoids, related wellness products and fresh produce.
The Company’s financial statements for the three and nine months ended September 30, 2021, as well as the comparative periods for 2020, have been prepared and presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”). On September 30, 2021, Village Farms owned 100% of Pure Sunfarms Corp. (“Pure Sunfarms”), after the acquisition was completed on November 2, 2020. Accordingly, for the three and nine months ended September 30, 2021, Pure Sunfarms’ financial results are presented in the Cannabis sector and consolidated with Village Farms’ results. For the three and nine months ended September 30, 2020, Pure Sunfarms is accounted for on a proportionate basis within “Equity Earnings from Unconsolidated Entities”. Village Farms acquired 100% of Balanced Health on August 16, 2021 and their financial results for August 16, 2021 through September 30, 2021 are presented within the Cannabis sector and consolidated with Village Farms’ financial results for the three and nine months ended September 30, 2021.
Village Farms International Reports Q3 2021 Financial Results
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