• Total Fourth-Quarter Revenue: $83 million, an 11% increase year over year.
• Full-Year Revenue: $336 million, an 18% increase year over year.
• Canadian Cannabis Net Sales Growth: 31% for 2024.
• Inventory Write-Down: $10.5 million non-cash write-down in Canadian cannabis.
• Adjusted EBITDA (Excluding Write-Down): $7 million for Q4, highest in four years.
• Net Loss: $8.6 million or $0.08 per share, including the inventory write-down.
• Fresh Produce Q4 Sales: $43.3 million, a 17% increase year over year.
• International Cannabis Sales: CAD8.4 million for the year, with strong growth in early 2025.
• Cash Flow from Operations: $10.5 million for the full year, with $400,000 in Q4.
• Cash Position: $24.6 million at the end of Q4.
• Net Debt Level: $15.9 million.

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

Release Date: March 13, 2025

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 strong fourth quarter with total revenues increasing by 11% year over year to $83 million.
• The Canadian cannabis segment saw a 31% growth in net sales for 2024, driven entirely by organic growth without acquisitions.
• The company achieved significant market share gains in the Canadian cannabis market, holding the number three position overall and expanding its number one position in the Dried Flower category.
• International cannabis sales increased significantly, with exports to international medical markets up 113% year over year, and the company expects to triple its international medicinal export sales in 2025.
• The Fresh Produce business showed improvement with a 17% increase in sales year over year, driven by higher volumes and operational efficiencies, resulting in positive adjusted EBITDA of $4.1 million.

Negative Points

• Village Farms International Inc (NASDAQ:VFF) took a $10.5 million non-cash write-down of non-flower manufactured inventory in Canadian cannabis due to quality issues, impacting the fourth-quarter performance.
• The company reported a net loss of $8.6 million for the fourth quarter, which includes the inventory write-down.
• The Canadian cannabis segment faced challenges with excise taxes, which are one of the largest single expenses, impacting profitability.
• The US cannabis business continues to face regulatory headwinds, affecting sales, although there was a sequential improvement in revenues.
• Potential tariffs on Canadian and Mexican imports could impact the Fresh Produce business, although the company plans to mitigate this by relocating resources to its Texas operations.

Q & A Highlights

Q: Was there a top-line impact due to the inventory impairment for vapes, or was it more about exiting lower-tier products? A: Ann Gillin Lefever, Chief Operating Officer, stated that the decision to not sell the inventory was due to quality concerns, not impacting revenue. Stephen Ruffini, CFO, added that the decision was to write down or destroy suboptimal products rather than sell them at a loss, focusing on quality and cash flow.

Q: How does Village Farms plan to allocate capacity between Canadian and international markets? A: Michael DeGiglio, CEO, emphasized that Canada remains a foundational market, but there is high demand for their high-quality flower internationally. Orville Bovenschen, President of Pure Sunfarms & Leli Holland Divisions, assured that domestic demand will always be prioritized.

Q: What is the status of the Dutch market and the pilot program with coffee shops? A: Michael DeGiglio explained that out of 10 licensed producers, only seven are operational. The Dutch government has set a deadline of April 7 for coffee shops to buy exclusively from licensed producers. Orville Bovenschen added that demand for their product is high due to its superior quality.

Q: How does Village Farms plan to achieve the projected tripling of international sales in 2025? A: Michael DeGiglio clarified that the tripling pertains to medicinal exports and does not include the Netherlands. The focus is on expanding sales in existing international medicinal markets.

Q: What are the risks of oversupply in the Canadian cannabis market with new cultivation expansions? A: Michael DeGiglio noted that while some expansion is occurring, it is likely aimed at international markets rather than solely for Canadian B2B. He believes the market has stabilized and does not foresee a return to previous oversupply levels.

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