Village Farms International, Inc. Q3 FY2025 earnings call

• Third quarter was another record for Village Farms International with consolidated net sales up 21% y/y, net income from continuing operations $10.8 million, adjusted EBITDA $20.7 million (31% margin). - Canadian cannabis had 29% y/y net sales growth, 56% gross margin, and 309% increase in adjusted EBITDA to $19.3 million. - The Netherlands facility reached full production capacity in Q3 with sales up 44% sequentially. - U.S. Cannabis faced regulatory headwinds but initiatives to invigorate sales. - Produce segment had net income up and adjusted EBITDA improved. - Strong cash flow generation with $88 million cash on balance sheet, and share repurchase program approved in September.

Canadian cannabis: Net sales grew 29% year over year to $64.1 million in Q3, with gross margin at 56%, adjusted EBITDA of $19.3 million (41% of sales). The Netherlands recreational cannabis: Q3 sales were $3.6 million with adjusted EBITDA of $1.3 million, and Phase I facility at full capacity. U.S. Cannabis: Q3 sales were $3.3 million, gross margin 60% with small negative adjusted EBITDA. Produce: Sales decreased 10% year over year to $12.8 million, but net income from continuing operations was $1.3 million and adjusted EBITDA was $2.5 million.

• 40 metric ton capacity expansion project in Canada underway, expected to increase annual production capacity by ~33% with incremental capacity coming online in Q2 2026 and fully ramped in early 2027. - Anticipate Village Farms International to continue growing profitably and scaling global cannabis enterprise in 2026 and beyond. - Share repurchase program approved in September for up to nearly 5.7 million common shares.

• Regulatory uncertainties in various markets. - Supply chain risks, such as avoiding Portugal due to compliance concerns. - Market share competition in international markets.

Q: Talk about cannabis gross margin 56% sequentially, drivers and sustainability.

A: Drivers include improved efficiency, higher crop yields, favorable pricing, lower packaging inputs, and international export. Gross margin sweet spot is 30-40%, but they aim to exceed.

Q: Competitive environment in international markets, share gains.

A: Still an asset industry, focus on consistent quality, EU GMP certification, and execution of the team. Believes they are well-positioned with strong execution.

Q: The Netherlands gross margin decline and long-term target.

A: The Netherlands is a start-up, some lumpiness expected, but long-term gross margin target is same as Canadian cannabis (30-40%).

Q: Market share in Germany and momentum.

A: Believes they are likely number one in Germany, but no specific share numbers given as statistics are unclear.

Q: Texas M&A activity and Nasdaq listing.

A: Anticipating Texas license issuance on December 1, working on suitable structure for Nasdaq listing.

Q: Quebec outlook and relevance.

A: Quebec is important, vape is a big change, participating in new form factors.

Q: Competitive landscape in Netherlands production.

A: Some competitors have issues, focus on getting next facility (fivefold capacity expansion) up and running.