Village Farms International, Inc. Q4 FY2025 earnings call

• Full-Year Highlights: 2025 delivered record profitability, gross margin, and cash flow from operations. Global cannabis sales grew 17% year-over-year, international export sales increased more than six-fold. Net income from continuing operations: $21 million, adjusted EBITDA from continuing operations: $50 million, cash flow from continuing operations: $58 million.
• Fourth Quarter Highlights: Third consecutive quarter of positive consolidated net income from continuing operations, adjusted EBITDA, and cash flow from operations. Net sales grew 9% to just shy of $50 million. Canadian cannabis sales led the way, with Q4 sales up 10%, international export sales up nearly 400%. Gross margin in Canada 43%, above target range.
• Capacity Expansion Projects: Delta II facility expansion in Canada on track, began planting first half on March 2nd, expects early contributions in late Q2, full capacity by mid-27 to add 40 metric tons annual production (33% increase from 2025). Netherlands phase one facility in Drockton at full capacity, phase two facility nearing completion, first grow rooms to be printed end of month, full capacity expected in Q2.
• Product Innovations: Leveraging Canada experience to lead new product innovations in Netherlands, launched 10 new product offerings, well positioned to capture market share in premium categories as phase two capacity comes online.

Canadian Cannabis

• Total net sales for Q4: 52.7 million Canadian dollars, a 10% increase vs Q4 2024. Year-on-year improvement driven by 384% increase in international medicinal exports. Full-year Canadian cannabis net sales up 12% to 228 million. Q4 retail branded sales: $55.6 million, essentially flat with Q4 2024, impacted by BC labor strike (-$2.5 million). Gross margin: 43% in Q4, full-year 44%, both above 30 - 40% target range. Adjusted EBITDA for Q4: $14.3 million, margin 27%. Full-year adjusted EBITDA: $67 million, margin 29%. Cash flow from operations for Q4: $21.5 million, full-year: $77.5 million.

Netherlands Recreational Cannabis

• Q4 sales: 3.3 million. Adjusted EBITDA: $700,000. Includes sequential increase in operating expenses as ramping up staffing for Phase II facility. Phase II facility nearing completion, first grow rooms to be printed end of month, full capacity completion expected in Q2, total annual production capacity to be ~10 metric tons.

U.S. Cannabis Business

• Q4 sales: $3.4 million. Gross margin: 60%, slightly down year-over-year, resulting in small negative adjust to EBITDA.

Continuing Produce Operations

• Q4 sales: $4.9 million, 21% lower than Q4 2024. Net loss from continuing produce operations: $1.6 million. Adjusted EBITDA: -$462,000. Moving forward, reflects contributions from Delta I greenhouse and operating costs of Monahans facility in Texas (idle).

• Expect to return to sequential growth in international exports in Q1 and begin shipping to multiple new jurisdictions over the next several months.
• The capacity expansion products coming online in Canada and Netherlands will allow continued scaling profitably and increasing demand.
• Intend to utilize incremental debt financing to make additional enhancements to existing operations, beginning with $3 million investment to expand EU GMP capabilities in 2026.
• Remain active in share repurchase program, with board-approved program for purchase of up to just under 5.1 million common shares.

• Near-term supply constraints in cannabis flow in British Columbia impacted Q4 sales by ~$2.5 million due to labor strike.
• Nature of international export sales introduces variability in quarterly performance due to timing of shipments, order flows, and profitability.
• Regulatory uncertainties in international markets, such as in Germany, can impact inventory levels and import volumes.

Q: Regarding share purchases, from a capital allocation standpoint, what does it tell investors in regards to how you view current valuation, business trajectory, and opportunities for additional investments and M&A?

A: The business comes first, confident in cash generation reported. Share purchases approved by board of 10 million won't meaningfully impact running the business or opportunities for internal investment or growth. Taken a balanced approach, will reevaluate as execute going forward.

Q: On Germany, sequential decline in import volumes in Q4. Should investors be worried about growth there?

A: Official stats show German imports fell 4%, Canadian imports down 11% due to regulatory uncertainty causing inventories to lower. Concerns have abated, expect return to growth in Q1. Had orders in Q4 delayed to Q1, if not delayed, Q4 performance in Germany would have outperformed market. Continuing to see increasing demand as regulators apply more stringent restrictions on quality and routes to market.

Q: How to utilize Delta II capacity for international vs Canada, and Canadian market share aspirations?

A: Canada is first and foremost, balancing demand from international and meeting commitments in Canada. Regained number one flower share position in January, expect to continue in 2026. Had significant restocks and new launches in Q4 showing up in Q1. Pure Sun Farms brand grew dried flower share for 12 consecutive months in 2025, Fraser Valley brand grew share consecutively between January and September (recovered by December), successful launch of Super Toast Liquid Diamonds 510 Bates in Q4. With current assets, have capability of more than doubling 2027 forecast.

Q: Color on initiatives to further lower cost of production, leveraging produce segments and Delta II savings?

A: Continuing to improve costs, exceeding target of cost improvement. Seasonality affects costs, but on annual basis, driving costs lower.