• Fresh Produce Sales: Increased 20% to nearly $43 million.
• Fresh Produce Gross Margin: Improved 400 basis points year over year to 8%.
• Fresh Produce Adjusted EBITDA: Positive $2.3 million.
• Fresh Produce Net Income: $0.4 million.
• Canadian Cannabis Total Net Sales: Grew 29% year over year to roughly $50 million CAD.
• Canadian Cannabis Adjusted EBITDA: Positive $6.5 million CAD.
• Canadian Cannabis Cash Flow from Operations: $6.1 million CAD.
• International Medical Sales: Doubled year over year.
• Consolidated Total Sales: Grew 20% year over year to $83.4 million.
• Consolidated Net Loss: Narrowed to $800,000 or 1 per share.
• Consolidated Adjusted EBITDA: Positive $5.3 million, up 65% from last year.
• Canadian Cannabis Gross Margin: 26%, impacted by non-branded spec sales.
• US Cannabis Sales: $3.9 million with a gross margin of 63%.
• Cash and Working Capital: Ended Q3 with $28.7 million in cash and $65.4 million in working capital.
• Total Term Debt: $43 million.

• Warning! GuruFocus has detected 2 Warning Signs with VFF.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Village Farms International Inc (NASDAQ:VFF) reported a 20% increase in fresh produce sales, reaching nearly $43 million, with a gross margin improvement of 400 basis points year over year.
• The Canadian cannabis segment saw a 29% year-over-year growth in total net sales, reaching approximately $50 million, with positive adjusted EBITDA of $6.5 million.
• International medical cannabis sales doubled year over year, with significant growth in Germany, Australia, and the UK.
• Village Farms International Inc (NASDAQ:VFF) maintained the number one market share in Ontario and achieved the top position in Quebec, Canada's two most populous provinces.
• The company began cultivation in its Netherlands facility, with first sales expected in the first quarter of next year, indicating a strong potential for international expansion.

Negative Points

• The Canadian cannabis industry faces significant overcapacity, leading to inventory accumulation and pricing pressure.
• Village Farms International Inc (NASDAQ:VFF) experienced out-of-stock issues for several popular SKUs, impacting sales by approximately $2.5 million in the third quarter.
• The company is exposed to challenges in the US cannabis market due to the proliferation of unregulated hemp-derived products.
• The Canadian cannabis segment's gross margin decreased to 26% from 35% last year due to increased non-branded spec sales.
• The egregious excise tax in Canada remains a significant financial burden, with the company paying over $100 million in excise tax this year alone.

Q & A Highlights

Q: Can you elaborate on the decision not to expand the Delta 2 facility and how you plan to allocate products between Canada and international markets? A: Michael DeGiglio, CEO: We are focusing on profitability and have decided to allocate more resources to higher-margin international markets, particularly in Europe. We are cautious with capital expenditure in Canada due to high excise taxes and regulatory challenges. However, we have the capacity to quickly convert space in Canada if needed.

Q: What caused the out-of-stock issues in Canada, and when do you expect to resolve them? A: Ann Gillin-Lefever, COO: The out-of-stock issues were entirely internal, due to higher-than-expected demand. We are working to align our growing cycles with demand and expect to be back to normal stock levels by Q1 2025.

Q: Can you provide more details on your pricing strategy, especially regarding international markets? A: Ann Gillin-Lefever, COO: We are focusing on skew-by-skew and brand-by-brand pricing opportunities. Retail market pricing in Canada has stabilized, and we are looking at international markets for higher average pricing, particularly in Europe.

Q: How confident are you in the cost structure and profitability of the new indoor facility in Holland? A: Michael DeGiglio, CEO: We are very confident. Indoor growing is more controlled than greenhouse, and despite higher costs, the selling price in Europe is significantly higher, with no excise tax. We expect strong profitability from this facility.

Q: Are your non-branded sales in Canada opportunistic, or do you have ongoing relationships with larger operators? A: Stephen Ruffini, CFO: The non-branded sales have been opportunistic, driven by favorable B2B pricing. There is no excise tax on B2B or international sales, which makes them attractive.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.